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The Size and Scope of the CFD Market: A Comprehensive Guide

The Size and Scope of the CFD Market: A Comprehensive Guide

CFD Market

Contracts for Difference (CFDs) is a significant and steadily growing sector of the global financial market. Given the popularity of CFD trading, many investors are curious about the size of this market. Despite the challenges of quantifying the exact size due to its decentralized nature, we can estimate the CFD market’s worth by looking at the overall trading volume, the number of CFD traders, and the revenue of some of the biggest CFD brokers.

Understanding CFDs

Before we dive into the figures, let’s quickly understand what a CFD is. CFDs are derivatives that allow traders to speculate on price movements of financial assets without owning the underlying asset. The assets could be commodities, indices, currencies, stocks, among others.

The Growth of the CFD Market

The CFD market has seen exponential growth since its inception in the 1990s. This can be attributed to the availability of online trading platforms, lower entry barriers, and the ability to leverage, which can amplify profits (and losses).

Market Size Estimation

Due to its over-the-counter (OTC) nature, an accurate estimation of the CFD market’s size can be challenging. However, individual broker reports and industry analysis can provide an idea of its scale.

For instance, IG Group, one of the largest CFD and spread betting providers globally, reported a net trading revenue of £649.2 million for the fiscal year 2020. Plus500, another leading CFD provider, had a revenue of $564.2 million in the same period. These figures highlight the massive revenue potential of the CFD market.

Moreover, the World Federation of Exchanges reports that the total value of share trading in derivative form reached an impressive $77.5 trillion in 2019. Although this includes all types of derivatives, not just CFDs, it certainly underscores the substantial size of the derivative market.

CFD Traders

Another way to estimate the CFD market’s size is by looking at the number of active CFD traders. According to a report from Finance Magnates, there were around 1.5 million CFD traders worldwide in 2020.

The CFD market has been witnessing several trends, including increased adoption of mobile trading and the use of artificial intelligence for predictive analysis, which are likely to fuel its growth further.

In conclusion, while it’s challenging to specify the exact size of the market due to its decentralized nature, its size is undoubtedly massive, and it’s on a consistent upward trajectory. Industry trends and the growing number of traders worldwide indicate that this market will only continue to expand in the future. Whether you’re a seasoned investor or a beginner, understanding the scale and potential of the CFD market is essential in formulating successful trading strategies.

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74-89% of retail investor accounts lose money when trading CFDs.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.