Risk Disclosure for Leveraged Forex and CFD Trading
An independent editorial note on the risks that apply when you trade leveraged forex and contracts for difference, prepared for readers of this site.
Look at the sponsored brokerThe Limits of Past Performance
A trader opens a position on a currency pair, watches it move in the intended direction for three days, and concludes that the method works. Six weeks later the same approach has given back the gain and more. This sequence is common, and it illustrates a simple point: what happened before is a record of what happened before, not a forecast of what comes next.
Past results are shaped by conditions that do not repeat in the same form. Volatility rises and falls, liquidity shifts between sessions, and the events that move prices arrive without warning. A strategy that performed well in a quiet market may behave very differently when conditions change. Historical figures on any broker's website or in any review describe finished periods and cannot account for future decisions, future news or future market structure.
Leverage magnifies this problem. A method that produces small gains and small losses without leverage can produce large swings in an account that uses it. The percentage of retail accounts that lose money, where that figure is published, is a useful reminder that the base rate for short-term leveraged trading is not favourable. Treat any past return, including your own, as background information rather than evidence of what will follow.
Margin Calls and Automatic Closure
Leveraged trading requires the trader to post margin, which is a fraction of the position's notional value. When the market moves against an open position, the equity in the account falls relative to the margin required. If that equity drops below the level the broker sets, the account enters a margin call. A margin call is not a request for permission to continue; it is a warning that the account is close to the point where the broker may take action.
If the equity continues to fall, the broker may close positions automatically, without further notice and without waiting for the trader's instructions. Closure can happen at the worst possible moment, and it can happen across several positions at once. The price at which the broker closes may be worse than the level the trader was watching, because the market may be moving quickly.
Automatic closure does not guarantee that a loss stops at the margin level. In fast markets, the realised loss can exceed the amount originally posted, and the trader may owe the broker the difference. This is why the size of a position matters as much as the direction of the trade.
Gaps, Slippage and News Volatility
Prices do not always trade continuously. A market can close on Friday and reopen on Monday at a level well away from Friday's close, leaving a gap that skips over any stop order placed in between. Central bank announcements, inflation data, election results and geopolitical events can produce similar jumps within seconds. A stop-loss order becomes a request to close at the next available price, not a guarantee of the price chosen.
Slippage is the difference between the price a trader expected and the price actually received. It is usually small, but it can be large during volatile periods, around major data releases, and when liquidity is thin. In these conditions, spreads widen, order books thin out, and the cost of entering or exiting a position rises.
Traders who hold positions through scheduled news events should assume that the market may move further and faster than expected. Reducing position size, avoiding new entries immediately before major announcements, and accepting that some orders will fill at unfavourable levels are practical responses. None of them removes the risk.
Protection Varies by Jurisdiction and Entity
Client money protections, compensation schemes and dispute procedures are not the same everywhere. They depend on the jurisdiction in which the account is opened and on the legal entity that holds it. A firm may operate through several entities, and the protections attached to an account with one entity can differ substantially from those attached to an account with another, even where the brand name is identical.
Investor compensation schemes, where they exist, usually have caps and eligibility rules, and they do not cover every kind of loss. Segregation of client funds, negative balance protection and complaint-handling arrangements also vary. Before opening an account, a trader should identify the specific entity, its jurisdiction and the protections that apply, and should read the client agreement rather than relying on general impressions.
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. It cannot confirm the protections that apply to any particular account, and nothing published here should be read as a substitute for the broker's own legal documents.
Trading Capital and Running Costs
Leveraged forex and CFD trading should be conducted only with money that can be lost without affecting essential expenses, savings or obligations. Money needed for rent, school fees, medical costs or debt repayment does not belong in a trading account. Borrowing to trade, or using funds set aside for another purpose, increases the damage that a normal losing period can cause.
Costs accumulate even when the market is quiet. The spread is charged on entry and exit, and it widens when liquidity is thin. Overnight financing is applied to positions held past the daily cut-off, and it can be positive or negative depending on the instrument and the direction of the position. Commissions, currency conversion charges and inactivity fees may also apply. These costs are not always obvious in a single trade, but they reduce the account balance over time and can turn a modest gain into a loss.
A trader should calculate the total cost of a position before opening it, including the spread, the expected financing over the holding period and any other charges disclosed by the broker. A strategy that depends on frequent trading is especially sensitive to these running costs.
The Share of Losing Retail Accounts
Many brokers are required to publish the percentage of retail client accounts that lose money when trading CFDs. Where this figure is disclosed, it is often well above half, and sometimes close to three quarters. The figure is not a prediction about any individual, and it is calculated over a defined period using a defined method, but it is a useful starting point for expectations.
A high loss rate reflects several forces at once: leverage, the cost of trading, the difficulty of predicting short-term price movements, and the behaviour of traders under pressure. It does not mean that every trade loses or that no one ever profits. It does mean that the default outcome for retail leveraged trading is a loss, and that anyone considering it should plan for that possibility rather than assume it away.
Readers who want to verify the current disclosure for a specific entity should consult the broker's own website and legal documents, and should use the contact form on this site only for editorial questions about the content published here.
