In the trading boom days of the 1980s, marketing for Forex, CFDs and similar financial instruments was purely aimed at financially sophisticated investors with serious amounts of money to spare. Brokerage services were generally conducted over the telephone by suited professionals carrying Filofaxes and oversized mobile phones.
However, electronic trading has all but eclipsed telephone trading and certainly open outcry. The new technology has resulted in online trading platforms booming. In fact, there are around 100 Financial Conduct Authority (FCA) authorised platforms in the UK with the main purpose of issuing CFDs to retail (not professional) customers1, and many more that are authorised by European regulators, taking advantage of passporting arrangements to offer their services to retail clients in the UK. So would-be traders have a vast number of options these days, restricted only by the need for an internet connection.
We carried out some analysis to discover how the demographics of the 9.6 million online traders can be broken down, and our report has revealed some interesting points about today’s average trader.
For the many, not the elite few
Rewind to 1992, and interbank Forex dealers were commonly earning a salary of £60,0002. Private individuals were able to speculate on the markets back then too, however this was rarely done by the individuals themselves, and was usually carried out through dealers who provided investment advice, as well as information about the latest prices and price movements. It required money to be able to pay advisers the best salaries for the best advice.
UK traders currently earn an average of £37,800 per annum. This is a relatively modest salary by today’s standards, and what’s more, the highest proportion of traders fall within the £20,000 to £24,999 annual income bracket, at 21%.
Whereas only the wealthy were once involved in trading, nowadays over 50% of UK online traders earn less than £35,000.
Modern traders are going places – in their Toyotas
Warren Buffet famously sarcastically joked about how original owning a Lamborghini was. They may well seem common to high-flying investors like him, but they are actually quite scarce amongst today’s modern trader. The average trader in the UK wouldn’t even come close to being able to afford one, and is more likely to be seen driving a Toyota.
In fact, 25% of traders in the UK today only drive a basic car, with a further 22% owning no car, and just 0.3% owning something as luxurious as a Lamborghini.
Why has the modern trader changed?
Many of today’s traders are part-time participants, making their own trading decisions without the need for professional advice. The advent of online forex platforms has enabled this, allowing people to conduct their trading around their day job.
There are also additional tools and services that online brokers have developed for retail traders to use that simplify the process. Platforms such as eToro offer opportunities for traders to copy the portfolios and strategies of traders who have historically demonstrated high rates of success. This allows them a way of trading with very little knowledge about the products and markets they are entering into, and very little time to spend studying those markets.
Social trading and copy trading are amongst the tools which have made online trading more accessible to your average Joe. And indeed, there are not just men engaging in trading activities, but women are also demonstrating an interest in modern trading styles and strategies. Our report found that of the 26,000 people questioned, 41.8% of female traders classified themselves as experienced, which is a surprisingly substantial figure. Also, because an internet connection is all that is required, people are signing up to trading accounts from just about anywhere in the world – there is no longer a need to be close to one of the world’s major financial centres to become a trader.
The conclusions that can be drawn from our report are therefore that there has been a significant shift in the stereotypical image of a trader, away from the slick, ambitious, shoulder-padded yuppie that could have been found pacing the Square Mile and Wall Street in the 1980s, or shouting ‘buy’ and ‘sell’ on a sweaty, overcrowded trading floor.
Nowadays, more traders who are average earners and who drive standard cars, if indeed they even own a car, are taking part than ever before – and many from the comfort of their own home.
Appendix A – UK Online Traders by Annual Income Bracket
|Annual Income||% of UK Traders|
* Data source: facebook.com
Appendix B – UK Online Traders by Car Type
|Car Type||% of UK Traders|
* Data source: facebook.com
According to the FCA, December 2016