Risk Disclosure: Leveraged Forex and CFD Trading
What you should understand before you trade leveraged products, and what this site does and does not do for you.
Licences of our partnerStart With What You Can Lose
If you are reading this because you are thinking about opening a trading account, the first question is not which market to trade or how much you might make. The first question is how much money you can afford to lose without changing how you live. Leveraged forex and CFD trading can lose that money quickly, and in some circumstances it can lose more than the amount you put in.
Treat any money set aside for trading as money already spent. Do not fund an account with rent, savings you rely on, emergency funds, borrowed money or money that belongs to someone else. Do not treat trading as a way to solve a financial problem. If a loss on your first few trades would push you into debt or force you to change your plans, the amount at risk is too large for you.
This site is an independent editorial resource. It reviews a broker for readers in Australia. It is not the broker, it is not affiliated with the broker, and it does not provide financial services, accounts, deposits or advice. Nothing published here is a personal recommendation, and no one here knows your circumstances.
Gaps, Slippage And Fast Markets
Leverage magnifies the effect of every price movement on your account, but the price you see is not always the price you get. In fast markets, prices can jump from one level to another with little or no trading in between. A stop-loss order is not a guarantee of a exit at a chosen level. It becomes a market order once triggered, and it fills at the next available price, which may be well past the level you set.
Slippage works the same way in ordinary conditions. Liquidity thins out around major economic announcements, central bank decisions, weekends and market opens, and the gap between the price you expected and the price you received can widen sharply. News-driven volatility can move a position against you within seconds, before you have a chance to react. In these moments, losses can exceed the margin you posted.
Some brokers apply protections such as negative balance protection in certain jurisdictions and account types, and some do not. You should read the broker's own product documents and client agreement to understand which protections apply to you and which do not. This site does not provide those documents and cannot confirm what terms apply to any individual account.
The Odds Retail Traders Face
Regulators in several markets require brokers to publish the share of retail client accounts that lose money when trading contracts for difference. Those published figures are usually high, and in many cases they show that most retail accounts lose money over the period measured. The figure is not a prediction about you, but it is a useful starting point: it tells you that the typical outcome for a retail trader is a loss, not a gain.
Leverage is a large part of the reason. It allows you to control a position far larger than your deposit, so a small adverse move in the underlying market can wipe out a large share of your account. Costs add to this. Spreads, commissions, financing charges on positions held overnight and currency conversion all reduce your balance whether or not the trade is profitable.
Past results, whether yours or anyone else's, say little about what will happen next. A run of winning trades does not mean the strategy is sound, and a run of losses does not mean the next trade will recover them. Markets change, and a method that worked in one period may fail in another. Be sceptical of anyone who presents a track record as evidence of future performance, including any commentary you read on this site.
Margin Calls And Forced Closure
Leveraged positions are held against margin. When the equity in your account falls below the level your broker requires, you may receive a margin call asking you to deposit more funds or reduce your exposure. A margin call is not a warning you can ignore. If you do not act, or if the market moves too quickly for you to act, the broker can close your positions automatically, without asking you and at whatever price is available.
Automatic closure can lock in losses at the worst possible moment, and it can happen at prices far from the level you would have chosen. Closing positions may also incur costs. Because these events often occur during fast or illiquid markets, the outcome can be worse than the margin calculation suggests.
This site does not hold client money, does not open accounts and does not execute orders. If you need to contact the broker about an account, use the contact routes published on the broker's own website. If you need to reach this site, use the contact form on this site. Before trading, read the broker's product disclosure documents in full, and consider seeking advice from a licensed adviser who can assess your situation.
