Trading platforms sell the dream of making big money fast. The reality can be far more brutal

theguardian.com:

W ho doesn’t want some extra cash – especially when prices are soaring and inflation is eating away at people’s savings? Over a decade ago, the answer to increasing earnings might have been to work more hours or train for a better-paid job, but these days work no longer pays. Workers in the UK are £11,000 a year worse off after 15 years of wage stagnation.

Over the same period, financial tech companies (fintech for short) began to offer a tantalising alternative to the drudgery of work. Those who were otherwise uninitiated into the world of finance could make big money fast by trading in something called contracts for difference (CFDs) on online platforms.

If this all sounds too good to be true, that’s because it may be. By law, trading apps that offer CFDs such as eToro, Trading 212, IG and others have to issue disclaimers to any new customer warning that retail investors – people who trade using their own cash rather than institutional investors, who invest on behalf of clients – lose money when trading CFDs. Depending on the platform that could be between 71% and 87% of investors.

If you’re speculating in the financial markets through your pension or by buying shares there’s an element of risk involved, but CFDs are complicated and risky products – so much so that they are illegal in the US. When you trade CFDs you don’t own the stock, commodity or currency as you do in a straightforward investment. Instead, you speculate on how the future price of that asset may change.

The similarities between trading and gambling are hard to ignore. In 2022, the industry regulator, the Financial Conduct Authority (FCA), found that a fifth of retail investment app users were at risk of problem gambling. In the past two years, 250