Risk Disclosure for Leveraged Forex and CFD Trading
Read this before you open any leveraged trade, because the risks are real and the losses can be total.
Open an account at our partnerUnderstand That Past Results Do Not Predict Future Outcomes
When you look at a broker's website or a trading platform, you will often see charts showing how a strategy or a market has performed in the past. Those charts can be useful for understanding how markets behave, but they tell you nothing about what will happen next. Market conditions change, and a method that worked in one period may fail completely in another. The fact that a currency pair moved in a certain direction last month does not mean it will move the same way this month.
Past performance is not a reliable indicator of future results. This is not a legal formality; it is a practical warning. Many traders lose money because they assume that recent success will continue. Instead, treat every trade as uncertain and focus on managing risk rather than predicting outcomes.
Recognise How Gaps, Slippage and News Volatility Affect Your Orders
Leveraged forex and CFD markets can move quickly, especially around major news events such as interest rate decisions, employment reports or political announcements. When the market gaps, the price jumps from one level to another without trading in between. If you have an open position, your stop-loss order may not be filled at the price you set. This is called slippage, and it can result in a larger loss than you planned.
Slippage can also occur in fast-moving markets even without a gap. Your order might be executed at the next available price, which could be significantly worse than the price you saw on your screen. News-driven volatility makes these risks more common, so be aware that you may lose more than your initial margin if the market moves sharply against you.
See How Leverage Magnifies Both Gains and Losses
Leverage allows you to control a large position with a relatively small amount of money. For example, with a leverage ratio of 1:30, a deposit of $100 can control a position worth $3,000. This means that a small move in the market can produce a large profit or a large loss relative to your deposit. Leverage works in both directions equally.
While leverage can amplify gains, it also amplifies losses. A move of just a few percentage points against your position can wipe out your entire margin and even lead to a negative balance if the market moves far enough. You should never use leverage without fully understanding how it affects your exposure. The higher the leverage, the greater the potential for rapid and substantial losses.
Know the Share of Retail Accounts That Lose Money
Regulators in many countries require brokers to publish the percentage of retail investor accounts that lose money when trading CFDs. These figures often show that a majority of retail accounts lose money. For example, some brokers report that 70% to 80% of retail accounts lose money. This is a strong indication of the difficulty of leveraged trading.
You should consider this statistic carefully. It means that most individual traders do not achieve consistent profits. The reasons include lack of experience, poor risk management, emotional decision-making and the costs of trading. Before you trade, ask yourself whether you are prepared to be part of that majority. If you are not comfortable with that possibility, you should not trade with leverage.
Trade Only With Money You Can Afford to Lose
Leveraged trading is not a savings product or an investment with guaranteed returns. You should only use money that you can afford to lose entirely without affecting your financial security or your ability to meet your everyday obligations. Do not use money set aside for rent, food, education, medical expenses or debt repayment.
If you are using borrowed money or funds that you cannot easily replace, the pressure of potential losses can lead to poor decisions. Trading with money you cannot afford to lose increases the risk of emotional trading and can have serious financial consequences. Treat any money you deposit as risk capital that you are prepared to lose.
Account for Spreads, Overnight Financing and Other Running Costs
Every trade involves costs that can add up over time. The spread is the difference between the buy and sell price, and it is effectively a cost you pay on each trade. Overnight financing charges apply when you hold a leveraged position open past the end of the trading day. These charges can be significant, especially if you hold positions for extended periods.
Other costs may include commissions, inactivity fees and currency conversion fees. These running costs reduce your potential profits and increase your losses. You should review the fee schedule carefully and factor these costs into your trading strategy. Frequent trading or holding positions overnight can erode your account balance even if the market moves in your favour.
Finally, be aware of margin calls and automatic closure. If your account equity falls below the required margin level, the broker may issue a margin call requiring you to deposit more funds. If you do not meet the margin call, the broker may automatically close your positions at a loss. This can happen quickly and without prior notice, so you should monitor your margin levels closely and understand the broker's policies.
