Risk Disclosure for Leveraged Forex and CFD Trading
This page explains the main risks that apply when you trade leveraged forex and contracts for difference, so you can judge whether such trading fits your circumstances.
Have a look at our partnerProtection Depends on Your Jurisdiction
If you are reading this from the United Arab Emirates, start by checking where the broker's entity that would hold your account is established and which regulator supervises it. Investor protection schemes, compensation arrangements and dispute procedures are set at the level of the jurisdiction and the specific legal entity, and they differ from one country to another. An arrangement available to a client of one entity may not extend to a client of another entity in the same group.
This site is an independent editorial resource. It is not the broker, it is not affiliated with the broker, and it does not provide financial services, accounts, deposits or advice. Nothing here should be read as a statement that any particular protection applies to you. Before opening an account, confirm the identity of the contracting entity and the protections that attach to it directly with the broker through the contact form on this site or the channels the broker publishes.
Margin Calls and Automatic Closure
Leverage lets you open a position far larger than the money you commit. That magnifies both gains and losses, and it means a small adverse move in the market can consume a large part of your account balance. When the equity in your account falls toward the required margin level, the broker may issue a margin call requiring you to add funds.
If the market continues to move against you and the required level is breached, the broker may close some or all of your positions automatically, without further notice and at the prevailing market price. Automatic closure is a risk control, not a guarantee: in fast conditions the closing price may be worse than the level that triggered it, and you may end up owing more than you deposited where the terms of the account allow that outcome.
You should read the broker's margin and stop-out terms carefully and understand that you cannot rely on being contacted before positions are liquidated.
Spreads and Running Costs
Every position carries costs that accrue while it stays open. These include the spread between the bid and the ask price, which is wider in volatile or less liquid conditions, and overnight financing charged or credited when a position is held past the daily cut-off. Commissions may apply on some account types, and currency conversion costs can arise when your account currency differs from the instrument's.
Running costs are easy to overlook because they are small in relation to a single trade, but they accumulate over time and can turn a modestly profitable strategy into a losing one. Financing charges are also sensitive to interest rate changes and to the size and direction of your position.
Before trading, obtain the current schedule of spreads, financing rates and any other charges from the broker and calculate how these costs would affect the size and duration of the positions you intend to take.
Most Retail Accounts Lose Money
Regulators in several markets require brokers to publish the proportion of retail client accounts that lose money when trading contracts for difference. Those published figures have consistently shown that a majority of retail accounts end the relevant period at a loss, and in many cases the share is well above half.
This site does not reproduce a specific percentage, because the figure depends on the entity, the product and the period, and it should be verified with the broker directly. The point is general and important: leveraged trading is a difficult activity in which most individual participants lose money over time.
You should treat any expectation of profit as unproven and consider whether you can afford to lose the funds you intend to commit.
Past Results Do Not Predict
Historical price data, backtests and the recent performance of any strategy describe what happened under conditions that no longer exist. Markets change regime, liquidity shifts, and a method that worked in one period may fail in the next. Past results say little about future outcomes.
Leverage interacts with this uncertainty in a harsh way. A strategy with a long record of small gains can be erased by a single adverse episode, and the order in which gains and losses arrive matters as much as their average.
Gaps, slippage and news-driven volatility make the picture harder still. Prices can jump between the close and the next open, orders can be filled at levels well away from the requested price, and major announcements can produce swings that overwhelm any risk limit set in calm conditions. Size positions on the assumption that the worst available price, not the expected one, is what you may receive.
