UK CFD trading market matures
The United Kingdom is now considered a mature market in the contracts for difference (CFD) and foreign exchange (FX) trading space, with Trading Authority - a privately owned financial services industry research company based in London - recording 560,000 customers trading CFD products each month in 2020, a year-over-year increase of 32%.
Covid-19 accounts for provoked volatility in markets
That customer number is expected to reach 720,000 in the second half of 2021, the main reason ascribed to an uptick in the Covid-19-provoked volatility in the markets, according to Adrian Reading, Trading Authority Head of Research. "CFD trading presents an opportunity to generate profits in both swings of the market. From the beginning of last year when many shares sank 60-70%, to the impressive recovery where growth shares and crypto currencies saw a surge of up to six times, traders have been able to profit both ways," he says.
Low capital requirements have boosted forex trading in the UK and CFD-funded retail client accounts counted at 1M in 2020, with 110 CFD trading platforms licensed by the FCA. The quarantines and increasing popularity of tech and "meme" stocks fuelled the popularity of short-term speculation, often accelerated by the power of social media and forums such as Reddit. Twitter has been a useful tool for detecting sentiments in the markets and Discord has emerged as new trading information hubs for retail traders.
"Communities such as Wallstreetbets, popularised by traders on RobinHood—a US online broker—drove the surge on Gamestop stock up to never previously seen levels. As many other trends nowadays, they originate in the US then spread quickly across global borders. Leveraged retail trading is just one of them," says Reading.
New generation of online platforms native in digital space
Europe and the UK has long been serviced by the traditional banks and trading houses' online platforms; the new millennia seeing in a new generation of online platforms that are native in the digital space. Skilling, eToro, and Plus500 have emerged as natural destinations for a new generation of traders comfortable with sophisticated digital products.
An older generation has discovered CFD trading, having previously been restricted to a limited range of investment opportunities provided by traditional banks. The new marketing reach and familiarity of CFDs have diversified portfolios and shifted capital away from banks. Low interest rates have been an additional factor to the search for new investments.