Who doesn’t want some extra cash – especially when prices are soaring and inflation is eating away at people’s savings? Over a decade ago, the answer to increasing earnings might have been to work more hours or train for a better-paid job, but these days work no longer pays. Workers in the UK are £11,000 a year worse off after 15 years of wage stagnation.

Over the same period, financial tech companies (fintech for short) began to offer a tantalising alternative to the drudgery of work. Those who were otherwise uninitiated into the world of finance could make big money fast by trading in something called contracts for difference (CFDs) on online platforms.

If this all sounds too good to be true, that’s because it may be. By law, trading apps that offer CFDs such as eToro, Trading 212, IG and others have to issue disclaimers to any new customer warning that retail investors – people who trade using their own cash rather than institutional investors, who invest on behalf of clients – lose money when trading CFDs. Depending on the platform that could be between 71% and 87% of investors.

If you’re speculating in the financial markets through your pension or by buying shares there’s an element of risk involved, but CFDs are complicated and risky products – so much so that they are illegal in the US. When you trade CFDs you don’t own the stock, commodity or currency as you do in a straightforward investment. Instead, you speculate on how the future price of that asset may change.

The similarities between trading and gambling are hard to ignore. In 2022, the industry regulator, the Financial Conduct Authority (FCA), found that a fifth of retail investment app users were at risk of problem gambling. In the past two years, 250 investors have reached out to GamCare, the gambling charity, for support. Callers reported getting a “high” from trading online, often trading throughout the night. Some wanted to leave their jobs so that they could trade full time. According to one user: “I was looking at the trading apps nearly 16 hours a day. I kept putting my money in and chasing losses … That’s when I realised it was no longer trading – it was a gambling problem.”

What makes CFDs so hazardous – and the comparison with gambling even more important – is that you can “leverage” your trade. Imagine you have £100, exactly the amount needed to buy one share. You could leverage this amount by five and buy a CFD on £500 worth of shares. The broker essentially lends you some money – the “margin” – to make a bigger trade. If the share price goes up by 20% you gain an extra £100 and double your initial investment but if it goes down, you could lose the entire £100 – perhaps more. Your wins and by turn your losses are amplified.

According to one CFD retail investor writing anonymously online, each loss made him more determined to chase a win, resulting in more and more losses. Retail investors believe that if they land on the right strategy, they’ll be able to make money, but unlike institutional investors, many do not have the level of understanding of historical market data that comes from years of studying and working in finance. Instead, trading is more of a side hustle and investors make decisions based on piecemeal research or even gut feeling. The latter is especially risky – any fluctuation in price movements can lead to feelings of panic or elation, resulting in rash decisions.

Compared with gambling, problem trading is more likely to be seen as a socially acceptable activity. Search for “passive income” on any social media platform, and you’ll see account after account offering tips on how to make money from assets rather than work. As one viral sound clip on TikTok puts it: “Darling, I’ve told you several times before, I have no dream job – I do not dream of labour.”

The FCA has taken steps to limit how much risk retail investors are exposed to by requiring firms to limit leverage amounts and ensure that funds don’t fall beneath a certain threshold. In addition to these measures, some companies also ask users to fill out a questionnaire to judge their financial knowledge in order to warn them if they are not experienced enough to trade in CFDs, and allow users to set an amount of money that they are willing to lose on a trade.

However, some apps send push notifications on market developments and marketing emails encouraging users to learn about this type of trading. Outside the apps, retail investors can access YouTube tutorials on how to get into investing with the standard caveat that they are not accredited financial advisers and CFDs carry the risk of losses. At the same time, these same creators make money from embedding affiliate links to the trading platforms when viewers click through. YouTubers may be offering warnings, but they are also making money from referring people to the platforms.

There will of course be users who have the knowledge and trading experience – as well as the spare cash – to use these platforms without issue, and in full knowledge of the risks. But better measures are needed to protect the users at risk of losing their savings and developing gambling problems.

There is a case for trading apps to build in features used by gambling apps, such as periods of self-exclusion whereby users ask a provider to block their access for a certain length of time.

Gamban, a gambling blocking software, is ahead of the industry and regulators and has added trading apps to its list. The FCA could go one step further than the gambling industry and recommend that advertising be banned. From football hoardings to taxi wraps to online advertising, trading apps are advertising to customers knowing that the majority of them will lose money. Whether users win or lose, trading companies take a fee.

These measures would no doubt help, but there is no quick fix, just as there is no quick way to get rich. That people would rather take a small chance of winning money on a trading app rather than trust in work providing them with a robust financial safety net is damning. Until work pays, there will always be someone willing to take a chance elsewhere.

• Kirsty Major is a deputy Opinion editor for the Guardian