Report on CFDs in Germany published

A study by Investment Trends shows that Germany is the world's second largest market in terms of the trading of contracts for difference (CFD).

Experienced traders are now the typical CFD traders, they have an average of 3.3 years' experience. Which is essential with these highly speculative financial products. With CFDs, traders can speculate on the rise or fall of price indices, equities, commodities and currencies with a very high level of leverage, but this is also very dangerous for beginners. Profits and losses can be enormous with trading CFDs.

CFD trader profiles have changed considerably in recent years. Two or three years ago, we saw many small unsuspecting investors, but now traders are more experienced. Australian company Investment Trends published a report on this segment. Each year, the research company asks investors worldwide about their trading behaviour. In Germany, 8,500 active traders out of 50,000 were interviewed. In this country, 57% of trading volume is generated by investors who have experience of at least five years with CFDs. A quarter of the volume comes from speculators who trade from three to five years.

Globally, Germany is an important market for the industry, the country has over 50,000 active traders, an increase of 3,000 compared to last year. Germany is the second largest market for CFDs behind the United Kingdom which has 80,000 active traders. By comparison, the German market is larger than the Spanish and French markets combined together. It is also very attractive for CFD brokers with its high growth rate of 6% per year.

In the middle of 2017, over 13,000 new traders might consider start to trade CFDs. Industry leaders also benefit from the fact that the experience of traders and their positions sizes on the rise. The two largest brokers in the country are CMC Markets (16%) and IG Markets (9%). Customers with 1 year of experience maximum use average position sizes of 8,200 euros, those with experience ranging from 3 to 5 years use an average size of 11,600 euros and traders with over 5 years' experience 53,000 euros.

Overall, traders are satisfied with the tools and services offered by brokers. Satisfaction increased steadily in recent years. 90% of traders believe that their broker is "good" or "very good". However, 20% of investors believe that the quality of teaching materials and tools, as well as webinars and seminars could be improved.

But that's not the reason why at least 10,000 traders have changed broker this year. High fees, spreads and financing costs were responsible for this migration. The stability and reliability of the trading platform or poor service also lead to dropouts. However, the number of customers switching brokers declined since 2014, after rising steadily in previous years. It is also a sign that the performance of CFD brokers is improving.

Only 69% of German traders use smartphones or tablets, versus 90% in Singapore, 83% in Spain and 79% in the UK. This figure is probably due to demographic changes, because German traders are generally older, the average age of CFD traders in Germany is 46 years of age, compared with 41 years in Singapore and 43 in Spain.

In the near future, the German financial regulator (BaFin) might tighten regulations with leverage limits and funding obligations. These limits could lead to the departure of some brokers whose business model relies heavily on leverage. Craig Inglis, director of CMC Markets in Germany, said "The real problem with CFDs isn't risk but misleading advertising and the high returns promised by unscrupulous brokers."