Why most clients lose on CFDs: costs, leverage and conflicts of interest
At the median broker in my comparison, 74.55% of retail clients lose money. That's not bad luck – it's the result of how the product is built, its costs and how people use it.
1. Costs that bite on every trade
With CFDs you pay the spread (the difference between the bid and the ask), often a commission, and an overnight financing charge (swap). In short-term leveraged trading these costs are calculated on the full position value, not on the margin you deposited. A small edge disappears fast.
2. Leverage that magnifies mistakes
Leverage lets you open a position much larger than your margin. Since 2018 the EU has had limits for retail clients: 30:1 for major currency pairs, 20:1 for major indices and gold, 10:1 for commodities, 5:1 for stocks and 2:1 for crypto. Even 20:1 means a 5% index move against you wipes out the whole margin.
3. The broker on the other side
With a CFD, the broker is your counterparty. Some brokers pass the risk on, others keep it. In the second model the client's loss is the broker's revenue. Regulations limit abuses but don't remove the conflict of interest itself.
4. One firm's price and volume
On a CFD platform you see one provider's prices and “volume”. You don't see the whole market's order book or who was really buying and selling. Order flow tools such as the footprint or delta make no sense on that data.
What the EU changed and what it didn't
- Changed: leverage limits, closing out positions when margin falls to 50% of the requirement, negative balance protection (you can't lose more than you deposited), a ban on bonuses and a mandatory banner showing the share of clients who lose.
- Didn't change: the costs, the conflict of interest and the fact that the product is designed for frequent, short-term leveraged trading.
- You can see the effect in the numbers: even after these changes, 51% to 89% of clients lose money at the brokers in my comparison.
What I do instead
I trade futures on the CME. There's leverage there too, and most active traders lose, so an exchange guarantees nothing. The difference is that everyone trades in one order book, and I see real data: every trade, the aggressor side and the liquidity. That's information a CFD platform doesn't have.
Frequently asked questions
Why do so many people lose on CFDs?
Because of costs calculated on the full position, leverage that magnifies mistakes, frequent short-term trading and the fact that the broker is sometimes the counterparty.
Can you lose more than you deposited on CFDs?
A retail client in the EU has negative balance protection, so they can't lose more than the funds in their CFD account. They can, however, lose the whole deposit.
What is the maximum CFD leverage in Poland?
For a retail client: 30:1 on major currency pairs, 20:1 on major indices and gold, 10:1 on commodities, 5:1 on stocks and 2:1 on crypto.
Educational content, not an investment recommendation or legal or tax advice. I name firms only to show public data from registers and from their own risk warnings.