Seventy-one percent of retail CFD accounts lose money. IG International warns investors to check how products work before trading.

Why the warning matters

Seventy-one percent is shockingly high — it means most retail CFD accounts lose money. The number appears in the provider's investor disclosure and refers to retail accounts trading CFDs. The firm stresses that CFDs are complex and that leverage can move gains and losses quickly. Because CFDs are complex and highly leveraged, anyone trading them should check how the product works or risk large losses.

The disclosure is short and direct. It tells retail clients that they can lose money rapidly because of leverage and that they should understand how the product works. Investors often sign up for trading platforms and start placing trades without a clear grasp of margin rules, overnight financing or how price moves translate into account equity. The warning aims to stop that.

Regulated trading platforms include these kinds of cautions as part of their legal duty. But the practical point for investors is simple: complexity and leverage raise the odds that a well-intentioned trade turns into a big loss.

That's the upshot of the message IG sets out.

A short warning won't absolve you — you still need to understand margin, fees and execution rules. They highlight where investors need to spend time — on product mechanics, costs and the ways platforms execute orders.

What 'look under the hood' should mean for investors

Begin by learning how the specific CFD is structured: contract size, settlement rules and how corporate actions are handled. Know how a CFD works: you're tracking the price difference in an underlying asset rather than buying the asset itself. That often sounds straightforward. But details matter: settlement, contract size, price feeds and how dividends or corporate actions are handled can all change outcomes.

Treat leverage on its own: know initial and maintenance margin levels, what triggers a margin call and what the platform will do then. Leverage multiplies exposure relative to capital. A small move in the underlying asset can wipe out more than the initial margin. Understand initial margin, maintenance margin and how a margin call is triggered. Understand what happens if markets gap and a platform can't close positions at your requested price.

Watch the fees: spreads, commissions and overnight financing can quietly erode returns. Platforms charge spreads, commissions and financing fees for holding leveraged positions overnight.

Those charges differ across instruments and providers. Over time they quietly eat into returns and can turn a profitable strategy into a losing one.

Don't ignore execution — slippage and order routing can mean you don't get the price you expect, especially in fast markets. Slippage, requotes and how a platform routes orders to liquidity providers affect whether your trade actually happens at the price you expect. For active traders, execution can be as important as strategy.

Practical checks before trading

Read the product documents. That's a basic step many skip. Key documents include the client agreement, product disclosure statement and the margin policy. They show how positions are priced, what fees apply and the firm's obligations to clients.

Know your counterparty. When you trade a CFD you're contracting with the provider, not buying on an exchange. That means you need to know the provider's regulatory status and how client money is handled. Regulatory oversight varies by jurisdiction; where a firm is authorised affects protections such as segregation of client funds.

Mastheads

Try your strategy on a demo account first, using the same trade sizes and leverage you plan to run. A simulated environment lets you see how order placement, margin calls and financing charges work without risking capital. Use it to replicate the trade sizes and leverage you plan to use. The feel of a demo account often exposes execution quirks you might miss on paper.

Run worst-case scenarios — big gaps, quick reversals and thin liquidity — to see whether your account survives them. Ask how your account would perform under different market moves. Calculate worst-case scenarios: sudden price gaps, rapid reversals and extended periods of low liquidity. Understand whether your platform closes positions automatically or whether it lets them run until manually closed.

Risk controls and managing losses

Use stop-loss orders, but don't assume they guarantee an exit price. In fast markets stops can be filled away from your instructed level. Think for risk bands rather than single price points: plan multiple exit levels and the capital you can afford to lose on any single trade.

Size positions to match your capital and risk tolerance. Many retail accounts are wiped out because position sizes are too large relative to account equity. A smaller position reduces the chance of a short-term move causing a permanent loss.

Consider how you will fund margin calls. If you can't top up quickly, positions may be closed at disadvantageous prices. Some platforms offer negative balance protection; check whether it's available and how it applies.

Keep records. Track your trades, fees and outcomes. Over time you can see whether a strategy is profitable after all costs. That record helps you adjust size and frequency to fit real-world costs and slippage.

Regulatory and market context

Regulators in different markets have tightened rules around retail leveraged products in recent years. Measures include leverage caps, mandatory risk warnings and restrictions on certain marketing practices. Those steps aim to curb fast losses among less-experienced investors.

Even with safeguards, the core message from platforms remains the same: don't trade money you can't afford to lose. Firms disclose risks because they're required to, but the practical effect for an investor depends on reading and acting on the information.

Markets themselves have changed. Automated liquidity, algorithmic trading and thin liquidity in some instruments can amplify moves. Retail orders can be executed against many counterparties, and that execution chain can introduce delays or price differences.

That means ordinary investors face more variables than a decade ago. They need to factor execution, costs and the provider's role into their decision-making.

What investors should ask a provider

Before opening an account, ask how client funds are held and whether they're segregated from the firm's operating cash. Ask about the provider's regulatory authorisations and where those licences apply. Request a clear breakdown of fees including spreads, commissions and financing costs.

Ask how the platform handles order routing and what venues provide liquidity. If you rely on guaranteed stop-loss orders, ask about the costs and the conditions under which they're honoured. Finally, ask whether the provider offers negative balance protection and how it would apply in stressed markets.

Answers to these questions won't eliminate risk. But they'll show where the risks live and where to focus monitoring and limits.

Investor education is part of the service

Many platforms supply educational materials, webinars and market commentary. Use them to learn about instrument mechanics and trading discipline. Education won't guarantee success, but it reduces the chance of being surprised by margin calls and financing charges.

Develop a plan for how you'll trade and when you'll stop. A written approach to position size, risk per trade and review intervals helps avoid emotional decisions when markets move fast.

The firm's warnings are a prompt. They remind investors that the tools on offer are powerful. Treat them with respect and prepare before you trade.

How advisers and experienced investors approach it

Experienced traders build systems that account for execution and costs. They backtest strategies with realistic fee and slippage assumptions. Advisers who recommend leveraged products typically assess suitability carefully: the client's knowledge, financial position and capacity to absorb losses.

For many retail investors, simpler alternatives may suit better. Direct ownership of assets, ETFs and longer-term investing reduce the complications tied to leverage and contract terms. That doesn't mean one approach is always correct, but it does mean investors should match products to goals and horizons.

Where leveraged products remain part of a plan, disciplined risk control is essential. The technology makes trading easier, but that ease doesn't change the maths of risk and reward.

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IG International states that 71% of retail client accounts lose money when trading CFDs with the firm.

This article was created with AI assistance.