Academy News Comparison of client’s profitability among European brokers 2021

Comparison of client’s profitability among European brokers in 2021

What our competition doesn't want you to see

The profitability of client accounts of European brokers is no longer a figure that you would have to decipher from a footnote written in fine print somewhere in the depths of the terms and conditions. All brokers operating within the EU follow ESMA (European Securities and Markets Authority) guidelines and must publish this number in a way that is as transparent as possible. Therefore, at Purple Trading, we decided to look at it in a more elaborate way and compare the profitability of our clients with that of our competition. And the result took our breath away!

Table comparing the profitability of clients of European brokers
- how did we do?

Because the loss rate of clients’ accounts is information that brokers are required to disclose publicly in the EU, we decided to venture to other broker’s websites in order to see how our competitors are doing. The result completely exceeded our expectations.

_{Table No.1: Comparison of the number of profitable client accounts of leading European brokers

*This number refers to CFD retail (client) accounts and is based on data for the period from 1 April 2021 to 31 March 2022)}
Broker	Number of profitable accounts in 2021*
	37 %
	32 %
	29,25 %
	29 %
	28,95 %
	28,76 %
	27,13 %
	26,97 %
	26,07 %
	26 %
	25,6 %
	24,8 %
	24 %
	23 %
	23 %
	22 %
	19,5 %

As you can see, Purple Trading is among the absolute top with more than 35% of client accounts ending up in profit. Which leaves behind a large part of the competition. To some, however, a third of profitable clients may seem like a low number. However, we must take this number in the overall context of the Forex industry.

Why a third of profitable clients are such a success?

It should be noted that Forex trading is one of the most challenging disciplines and as such has a very steep learning curve. In particular, beginning traders must initially go through a number of educational materials if they want to make money in this discipline. And even then, the task of the most difficult remains ahead of them - to deal with themselves and set strict rules of risk management and thus avoid the psychological pitfalls of trading.

How did we come up with this data?

This comparison is based on publicly available data on the percentage of retail CFD accounts that were in loss and was collected within a one year span (between 1. 4. 2021 and 31. 3. 2022). Publishing of this data is mandatory for brokerage companies operating in the EU and they have to include them as a part of so-called "disclaimers". These can be found on all marketing materials (online banners, emails, ebooks), but also in the footer on their website. One of the subchapters of this article focuses on how and where to find this data.

What does ESMA request?

Online Forex trading has come a long way since its wild unregulated beginnings, and while unregulated brokerage firms or those that are less tightly regulated can still be found, Forex traders of today can rely on a much greater degree of protection than their counterparts from the past.

The European Securities and Markets Authority (ESMA) provides guidelines to regulators, for example, the Cypriot CySEC, and thereafter each regulator provides guidelines and restrictions to regulated firms. EU regulations are considered to be one of the strictest, caring for the protection of clients (retail traders) and guaranteeing them a high standard of security and transparency compared to other (for example, off-shore) regulators.

How regulation protects traders?

For example CySEC requires a number of guarantees and client protection mechanisms from brokerage companies, below are some of the main ones.

Negative balance protection

If a trader loses more money than he had in his trading account due to an accident, adverse market fluctuations, or leverage, he/she does not have to worry about possible debt. Thanks to the new guidelines, retail traders cannot lose more money than they put into their account, if they get into the red, the debt incurred must be paid by the broker.

Segregation of client bank accounts

In the early days of online Forex trading, we could often witness many fraudulent brokerage companies using their clients’ funds to enrich themselves or pay for operating expenses. Brokerage companies operating in the EU must therefore deposit all client funds in bank accounts, segregated from the company's funds, and insured against bankruptcy. This way, traders have fewer things to worry about.

Disclosure of loss rate of client accounts

Every 3 months, brokerage companies must publish the loss rate of their clients' trading accounts. This is stated as a percentage and is placed in small print on each advertising banner, image, or other promotional material. You can also find it in the footer on the brokers' websites in the so-called "Disclaimer" (see picture).

_{Figure 1: Percentage of profitability of client accounts in the footer of Purple Trading websites}

What could be the secret behind the profitability of our clients?

Ability to respond immediately to trading opportunities

Thanks to LD4 Equinix servers in London, our traders can count on lightning-fast executions and thus adequately respond to trading opportunities. If you also want to start trading with a fair Forex broker who takes his clients seriously and provides them with all the means to be truly profitable, Purple Trading is here for you.

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Financial leverage

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A mechanism which enables traders to trade larger amounts even with smaller volume of free capital which would otherwise be insufficient for the trade, e.g., when trading 1 lot of currency pair EURUSD with leverage of 1:100, the client has to have at least 1,000 EUR of free capital on his/her trading account. Should the leverage not be used in this scenario, the client would need to have 100,000 USD on his/her trading account to cover the entire traded volume.