CFD Trading UK - 2021 Market Outlook
STOCKHOLM, June 1, 2021 / PRNewswire / - CFD Trading grew 33% with 550,000 active users in 2020. Meme stocks cryptocurrencies like GME and Dogecoin have sparked interest. Skilling, eToro and Plus500 are leaders in the UK CFD market.
About CFD trading
CFD trading is defined as "buying and selling CFDs", where "CFD" means "contract for difference". CFDs serve as a tool that allows the investor to speculate on the price of the underlying assets without actually becoming the owner of the stocks, forex, ETFs or crypto. The online trading platforms offer retailers access to an opportunity to invest exclusively for professionals.
Fastest Growing UK CFD Broker in 2021
Qualification - new entrant in the UK market with an intuitive platform and no commission trading app, has grown rapidly since COVID with a top of the line product with +800 instruments regulated by FCA and CySEC. Started in 2016 with multinational offices in the UK Malta, Spainand Cyprus.
eToro - is a soon to be listed company with roots in Israelwith large +800 stocks and is regulated by the FCA, CySEC and ASIC. eToro is an established platform that started in 2010 and is mostly characterized by its social trading.
Plus500 - a leading CFD trading platform listed in London, +2000 shares, regulated by FCA, CySEC and ASIC. Plus 500 has been in operation since 2008 and subsidiaries are regulated in several countries around the world including the UK. Singapore and Australia.
UK CFD trading
The United Kingdom are now considered mature markets in CFD & FX trading. The UK population has had access to CFDs since the late 1990s but has become really popular in recent years. By the first quarter of 2022, GDP could have fully recovered to pre-COVID-19 levels. At the same time, the growth outlook for the markets from 2023 to 2025 appears to be more optimistic.
Almost 560,000 customers traded CFD products every month in 2020, an increase of 32% over the previous year.
We estimate that number will reach 720,000 in the second half of 2021.
In 2020 there were over 1,000,000 CFD-funded retail customer accounts.
There are 110 different CFD trading platforms that have been licensed by the FCA.
Why has CFD trading soared?
The story goes on
"The main reason is that Covid has provoked volatility in the markets. CFD trading offers the opportunity to make profits in both market swings. From early last year, when many stocks fell 60-70%, to the impressive rebound , in which growth stocks and cryptocurrencies rose up to 6x, traders have benefited both ways.
Adrian Reading, Head of Research, Trade Authority
Product Reasons For The Rise In CFD Trading:
Limit leverage between 30: 1 and 2: 1 for retailers and up to 500: 1 for professional traders
Low capital requirements
Stocks, trading indices, commodities, forex
No direct funding fees
Access to global trade on one platform
New Generation of Traders - "Meme Stocks"
"The quarantines and rising popularity of tech and meme stocks have fueled the popularity of short-term speculation, often accelerated by the power of social media and forums like reddit. Twitter has been a useful tool for detecting sentiment in the markets platforms like reddit.com and Discord have emerged as new trade information centers for retailers. "
"Communities like Wallstreetbets, popularized by traders on RobinHood (US online broker), have taken the rise of Gamestop (GME) to an unprecedented level through crowdsourced investment theses, memes and print screens with extraordinary profits. You originated in the US only to spread quickly across global borders. Leveraged retail is just one of them. "
Europe and Great Britain has long been served by the traditional online platforms of the banks and trading houses, but since the beginning of the new millennia we can see a new generation of online platforms that are at home in the digital space, platforms like Skilling, eToro and Plus500 are having Platforms were created that offer convenience, new UX and a portfolio of trend-sensitive underlyings. These platforms have been a natural destination for a new generation of retailers used to sophisticated digital products.
New destination for retail investors, CFD trading for the masses
At the other end of the spectrum, the older generations have found CFD trading after being limited to a limited number of investment options that traditional banks offer. The new marketing reach and familiarity of CFDs have diversified the portfolio and shifted capital away from banks. Low interest rates were an added factor in finding new investments.
The new retailers are well protected by the FCA, the increasing regulations to mitigate the high loss percentage. Around 70% of retail accounts are losing money, but there is still a need for training for the average retailer.
UK crypto derivatives ban
The FCA banned the sale of crypto derivatives in late 2020 because cryptocurrency valuations were unreliable. "The FCA believes that these products are unsuitable for retail customers because of the harm they cause."
The FCA justified in detail:
inherent nature of the underlying assets, meaning that they do not have a reliable basis for valuation
Prevalence of market abuse and financial crime in the secondary market (e.g. cyber theft)
extreme volatility in Cryptoasset price movements
insufficient understanding of cryptoassets by retail customers
Lack of legitimate investment needs for retail customers to invest in these products
Investor protection under the leadership of the FCA
It is important to remember that all forms of trading involve both risks and potential rewards. Before you dive into the world of CFDs, you should do some thorough research.
COVID-19 and Brexit and the resulting threats to trade and supply chains could lead to a move away from just-in-time manufacturing and higher domestic demand. The FCA has taken a number of measures to protect retailers:
CFD brokers have limited leverage that they can offer CFD traders and must use a standardized close-out level of 50% of the required margin on a transaction.
CFD trading platforms must also offer negative balance protection, which means they cannot suffer losses greater than their deposits.
If the CFD trading platforms default, traders are protected by a financial compensation system of up to £ 85,000.
The final years of CFD trading in the UK
CFD brokers differentiate between available markets and instruments, interest rates, fees, trading app functions and customer support. After all market activity from 2008 to 2018, investors viewed CDFs as a strong investment option in 2019. The pattern has accelerated in 2020 so hopes for 2021 are high.
Traders can trade in any market climate so you can forecast a price that follows basic research in both the bear and bull markets.
Contracts for Difference, or CFDs, launched in the 1990s but grew in popularity in 2020. CFD trading is a beneficial tool for investors and allows them to take long and short positions without holding the underlying asset. You speculate about the price of an asset going up or down - without owning it. Margin trading or leveraged trading requires less capital investment than buying stocks.
CFD trading can be used for short-term trading profits due to trends and movements in the market or to hedge / compensate for losses in your stock portfolio.
The CFDs are offered for a wide range of financial assets, such as: B. Stocks, ETFs, Forex, ETFs, Commodities, Bitcoin, Dogecoin, Ethereum and many others. The financial regulations enforced by the FCA have limited leverage and risk for traders by setting a cap on leverage and providing negative balance protection.
The equation behind the profit on your position is based on the difference between the buying and selling prices minus any fees incurred in holding the position. Costs such as holding and opening the position are automatically deducted from your trading account. The buying price / selling price - initial buying / selling price - interest cost x days - transaction cost = profit or loss.
Trading on a margin means exponential gains based on the initial investment, but also the risk that losses will be magnified. To manage risk, traders should be aware of position size and the use of a stop loss.
CFD trading forecast for 2021:
The pandemic: The tragedy is forecast to be over by June thanks to a surge in vaccine production. According to experts, the vaccine will stop the spread in less than 100 days.
Bitcoin expansion: Outside the UK, almost all cryptocurrencies appreciated significantly in 2020, with Bitcoin tripling. Ethereum has seen a recent surge following the surge in popularity of NFTs. New altcoins like Dogecoin are enjoying a newfound popularity thanks to memes and internet forums. Fearing future inflation and uncertainty in the stock markets, many investors have hedged their portfolios with cryptocurrencies.
Bond prices have fallen: Bond yields are expected to fall in line with the high rate of inflation expected in 2021. If you look at negative UK interest rates, you will see the pattern.
The year 2021 will give us the most important answers to what awaits us by 2026. We don't know when the pandemic will end, whether Biden's policies will lead to economic crises, and so on. Nevertheless, CFDs are becoming increasingly popular as a tool for risk management and hedging.
Broker Considerations
When choosing which CFD trading platform to use, there are several key points that need to be examined to determine the right fit. These are prices, fees and commissions, market access, opening times, account balance and deposit security (FSCS etc.), functions, ordering platform, market tools and educational services.
Trading Authority is a privately held financial services industry research firm based in London, United Kingdom. We provide independent, in-depth insights into the behavior, preferences and needs of retail investors and intermediaries for the financial services companies they serve in all areas Australia, Singapore, Hong Kong, France, Germany, SpainFurther information on this country profile can be found at https://trading-authority.com
Research and Markets also offers custom research services that provide focused, comprehensive, and bespoke research.
Media contact:
Research and Markets
Mark Adams, Senior manager
press@trading-auhtority.com
+46704175171
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https://news.cision.com/trading-authority/r/cfd-trading-uk---2021-market-outlook,c3357622
SOURCE Trade Authority
https://thedailytradingnews.com/cfd-trading-uk-2021-market-outlook/
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