This is a question that most traders think about and yet seems unanswerable… How and why would brokers reveal this information?
Thanks to the ESMA (European Securities and Markets Authority), brokers are now bound to disclose their percentage of winning/losing traders. This increased transparency has the potential to disrupt the market for binary options, CFDs and FOREX. This article will explore these revelations and assess their impact on the future of retail trading.
In March 2018, the ESMA decided to ban the advertising and distribution of binary options to retail investors. It also restricted the advertising and sale of CFDs. These new changes came into force in July and August 2018. They were accompanied by transparency requirements such as the disclosure of the percentage of winning clients of each broker.
The Rise Of Social Trading
Of course, trading has both winners and losers. And as in real life, there are always fewer winners than losers. Winning traders usually spend a lot of time selecting a good broker, carrying out research on a given stock and studying high-performing strategies.
The main insight from the percentages of winning accounts is that platforms featuring social trading tools have the highest percentage of winning clients.
For instance, the star broker eToro can be proud of a dashing 35% of profitable accounts!
For interpretation purposes, the internet average is around 20%. Social or copy trading tools let users mirror the investments of the top performing traders.
Increased Transparency – Benefits?
Following these revelations, brokers will start using this number as a marketing device. In other words, retail investors will be more attracted by brokers with the highest percentage of winning accounts.
Therefore, trading platforms will start doing their best to increase this number, especially through the use of educational material and supplementary analytical tools. By providing traders with the necessary information to carry out profitable investments, brokers will be able to increase their percentage of winning accounts and attract more and more users. A win-win situation!