Investing and trading are different jobs
Same screen, two jobs
Investing is buying something you understand, for a reason you’ve written down, with the events that would change your plan set out in advance. Trading is trying to profit from the moves themselves over days or hours. That means guessing what other people will do next, again and again, against firms whose machines do nothing else.
The app shows both of you the same chart, and that’s where the confusion starts. Your reasons tell you which job you’re doing, and the evidence below is about the second job.
What the firms are made to tell you
In Europe the record is printed on the firms’ own websites, by law. On 27 March 2018 the EU’s markets regulator, ESMA, published what national regulators had found about contracts for difference, or CFDs.
A CFD pays or costs you the change in a price without your owning the asset, usually on borrowed money.
ESMA capped borrowing for retail clients, at two to one for crypto, and made every firm print its own loss rate in a fixed form of words. Those were temporary measures, and by 31 July 2019 most national regulators had made permanent ones. The UK’s Financial Conduct Authority (FCA) wrote the same measures into its own rules from 1 August 2019.
On 6 November 2026, IG’s UK site read: “70% of retail investor accounts lose money when trading spread bets and CFDs with this provider.” XTB’s UK site read: “78% of retail investor accounts lose money when trading CFDs with this provider.”
Those are each firm’s own customers, counted by the firm, under a rule that gives it no choice.
The FCA went further for crypto. From 6 January 2021 it banned the sale of crypto derivatives, contracts like the CFDs above, to retail customers, giving among its reasons “no reliable basis for valuation”, the “prevalence of market abuse and financial crime”, “extreme volatility in cryptoasset price movements” and “inadequate understanding of cryptoassets by retail consumers”.
The part of that ban covering exchange-traded notes was lifted in October 2025, which Three Ways to Hold Crypto covers. The FCA’s own page still showed the derivatives ban on 30 June 2026.
What three studies found
These studies follow people for years.
Those are regulated exchanges, with opening hours, rules against printing fake trades and limits on borrowing. Crypto trades all night, a 2019 count found most of bitcoin’s reported volume fake (lesson 4), and platforms outside the UK and the EU can lend a hundred times what you put in.
What a trade costs, and what borrowing adds
Every trade has a bill attached before it can make a cent.
Three Ways to Hold Crypto lesson 4 has the detail on tax, which here is general information, not tax advice.
Barber and Odean found that the active and the inactive households earned about the same before costs. Almost the whole gap in their results was the bill.
A holder pays it rarely. A trader pays it every week, and has to beat it every week before the week counts for anything.
A Portfolio Built to Last lesson 3 worked the arithmetic: $1,000 of your own and $9,000 borrowed, and a 10 percent fall is the end of the $1,000. The platform sells before you can decide anything. A fast fall can leave you owing more than you put in.
Know who’s behind a tip
Some tips come with a hidden interest. Sometimes the sender is paid to say it.
Sometimes the sender sells a course, and the Brazilian study speaks to what those courses claim. Before you act on a tip, ask who’s paying the person who sent it, and whether there’s a public record you can check.
These lessons teach you to write your own reasons down while you’re calm and hold yourself to them later, which is lesson 5 of this course and the subject of A Portfolio Built to Last.
Last checked: 6 November 2026