Risk Disclosure: Leveraged Forex and CFD Trading
This disclosure explains the main risks of leveraged forex and CFD trading for readers of this independent editorial resource.
Proceed to the sponsorScope of This Disclosure
This document describes the risks that come with leveraged forex and CFD trading. It applies to the content published on this site, which reviews a broker for readers in India. It does not cover the terms of any account, the rules of any market, or the law of any country. It is not a substitute for the documents a broker must give you before you open an account.
This site is an independent editorial resource. It is not the broker it reviews, it is not affiliated with that broker, and it does not provide financial services, trading accounts, deposit facilities or investment advice. Nothing here is a recommendation to trade, to open an account, or to send money to anyone. If you need guidance on your own situation, speak to a qualified professional who knows your circumstances.
Leverage in Both Directions
Leverage lets you control a position larger than the money you set aside for it. That works in both directions. A small move in your favour produces a gain that is large relative to your deposit, and a small move against you produces a loss that is large relative to the same deposit. The size of the position, not the size of your deposit, sets the amount you gain or lose.
Because losses are calculated on the full position, they can reach and exceed your deposit in a short time. Many brokers close positions automatically when your available margin falls below a required level, and that closure can lock in a loss. Leverage does not raise your chance of being right. It only raises the amount at stake on each outcome.
Retail Loss Rates
Brokers in several markets are required to publish the share of retail accounts that lose money on their leveraged products. Those figures are usually well above half, and in some cases close to three quarters. The number is not a prediction about you, and it is not a promise that you will lose. It is a summary of how retail accounts have performed on those products.
A high loss rate reflects the combination of leverage, costs and the difficulty of predicting short-term price moves. Spreads, commissions and financing charges are taken from your account whether a trade wins or loses, and they add up over many trades. Reading the published figure for any broker before you deposit is a basic step, not a guarantee of any outcome.
Gaps, Slippage and Volatility
Prices do not always move in small steps. They can jump between one moment and the next, especially around scheduled data releases, central bank decisions, elections and unexpected news. When a price gaps, the level at which your order is filled can be far from the level you set. Stop-loss orders do not protect you from a gap, because they become market orders once triggered and are filled at the next available price.
Slippage works the same way in fast markets: the price you receive differs from the price you expected. In thin conditions, the difference can be large. Volatility that looks like an opportunity can also widen spreads and trigger margin calls at the worst moment. No risk tool removes these effects, and past results in calm or turbulent markets say little about what will happen next.
