While the number of retail FX/CFD traders is declining in other parts of the world, the United Arab Emirates (UAE) continues to experience a positive trend. This growth is influenced by two key factors: the thriving cryptocurrency market and the significant impact of recommendations from family and friends. According to a recent survey, nearly one in two respondents claim that they decided to try their hand at trading in this market due to the encouragement of their relatives.

UAE Trading Market Demonstrates Resilience amidst Global Headwinds

The UAE retail leverage trading market has shown resilience and stability, according to the latest findings from the 3rd edition of the 2024 UAE Leverage Trading Report by financial services research firm Investment Trends.

Despite a 6% decline in active traders over the past year, primarily due to a drop in new-to-market traders, the UAE market has witnessed a notable increase in the number of reactivated and ongoing FX/CFD traders. This trend reflects the market's strength and the confidence of existing traders in the UAE's trading environment.

For comparison, according to a similar report from April concerning Hong Kong, the investor base there had significantly contracted.

"The dedication of existing FX/CFD traders reflects the UAE's stable and robust trading environment, and the confidence traders have in it," said Lorenzo Vignati, Associate Research Director at Investment Trends. "The increase in reactivated traders suggests a renewed interest and optimism in the market's future potential."

Investment Trends last published a report on the FX/CFD space in the UAE almost a year ago. At that time, the study indicated that the number of retail traders in this space had reached a record high of 49,000, surpassing countries such as Spain, Singapore, and France.

One in Four Traders Enters CFD Market through Crypto

The report also highlights the crucial role of digital assets in FX/CFD trading in the UAE. Despite the impact of last year's “crypto winter” on new trader acquisition, cryptocurrency remains an important gateway to CFD trading, with 24% of new traders starting their investment journey with crypto.

"The UAE's crypto-friendly environment continues to attract leading players and support market growth," Vignati noted. "CFD/FX traders are leveraging these assets to diversify and enhance their trading strategies, highlighting the forward-thinking nature of the UAE trading community."

The latest data also show that not only retail investors are keen on crypto CFDs, but institutional investors are as well. Due to the growing interest in this space, Wintermute Asia, the digital asset trading division of the algorithmic trading firm Wintermute Group, launched crypto CFDs in February as part of its existing OTC derivatives suite.

The Power of Word-of-Mouth in the UAE

One of the report's most striking findings is the uniquely powerful influence of word-of-mouth recommendations in driving client signups in the UAE's retail FX/CFD market.

Personal recommendations account for 42% of new account openings, significantly higher than in other regions, particularly Europe. Additionally, advocacy levels in the UAE are exceptionally high, with 83% of traders recommending their provider to others, compared to just 48% in France and 42% in Germany.

"Personal recommendations are a cornerstone of client acquisition in the UAE's CFD/FX trading market, showcasing an influence that is unmatched globally," Vignati emphasized. "Providers who focus on enhancing customer experience and satisfaction will continue to drive brand loyalty and benefit from this powerful referral dynamic."

This study is particularly interesting because it contrasts with the findings of a study conducted by the British FCA in the UK. According to that survey, retail investors in the UK market tend to trust internet personas, including financial influencers, more than their family and friends when making investment decisions.