Leveraged Forex and CFD Trading: Risk Disclosure
What you should understand before you open a leveraged position, written for readers of this independent editorial site.
Start at our partnerWhat happens when the market moves faster than your order?
You place an order, the price jumps past your level, and the fill you get is worse than the one you saw on screen. That is slippage, and in fast markets it is normal rather than exceptional. Gaps are the more serious version of the same problem: a market can close for the weekend or pause around a major announcement and reopen at a price well beyond your stop. Your stop-loss order is then triggered at the first available price, not the price you chose.
News-driven volatility makes both effects sharper. Central bank decisions, inflation releases, employment data and unexpected political events can move currency pairs and indices by amounts that dwarf the spread you were quoted minutes earlier. Thin liquidity around these moments widens spreads and reduces the depth available to fill your order.
The practical consequence is that the maximum loss you plan for and the loss you actually take can differ. On a leveraged position that difference can be large enough to matter to your finances.
Does a compensation scheme protect me if something goes wrong?
Protection arrangements differ by jurisdiction and by legal entity, even where the same brand name appears on different websites. A scheme that covers retail clients in one country may not extend to residents of another, and the entity that holds your account may sit in a jurisdiction with different rules on client money, dispute resolution and insolvency.
This site is an independent editorial resource. It reviews a broker for readers in India; it is not the broker, is not affiliated with the broker, and does not provide financial services, accounts, deposits or advice. Nothing here should be read as a statement about which protections apply to you.
Before you trade, establish which legal entity would hold your funds, where that entity is established, and what recourse you would have if it failed. If you cannot answer those questions from the broker's own documents, treat that as a reason to pause.
How many retail traders actually lose money?
Regulators in several markets require firms to publish the share of retail accounts that lose money on contracts for difference. Those figures commonly sit between roughly two-thirds and four-fifths of retail accounts, and the exact number varies by firm, by product and by period.
The figure is worth reading closely because it is not a marketing statistic. It is an aggregate outcome for people who opened accounts similar to the one you might open, trading products similar to the ones you might trade.
It does not predict your result. It does tell you that the base rate is unfavourable, and that survival in this market requires more than a plausible view on the direction of a currency pair.
How does leverage multiply gains and losses?
Leverage lets you control a position larger than the cash you put up. If you deposit a small margin and control a position many times that size, a one percent move in the underlying market produces a result equal to a large percentage of your margin. The same arithmetic works in the other direction.
A move against you of a few percent can consume most or all of your margin. With higher leverage, the market needs to move less to reach that point. There is no mechanism that caps the multiplication on the losing side.
Trade only with money you can afford to lose entirely. Money needed for rent, school fees, medical costs or debt repayment does not belong in a leveraged account, regardless of how confident you feel about a trade.
What does it cost to keep a position open?
The spread is only the first cost. It is the difference between the buying and selling price quoted to you, and it is charged on entry and effectively on exit. Wider spreads in volatile or illiquid conditions raise that cost.
Overnight financing is charged on positions held past the daily rollover, reflecting the cost of the leverage you are using. It accrues for as long as the position stays open, so a trade held for weeks can cost far more than the spread suggested at entry. Other charges may include commissions on certain account types and fees for inactivity or conversion.
Running costs do not care whether your trade is winning. They reduce your balance either way, and on a highly leveraged position held for a long time they can become the dominant factor in your result.
What happens if my margin runs short?
When losses reduce your account equity below the required margin, the broker issues a margin call. That is a notification, not a request for permission. If equity falls further and reaches the close-out level, the broker may close your positions automatically, without consulting you and without waiting for a recovery.
Automatic closure can happen during fast markets, at prices worse than the level that triggered it, and it can convert what looked like a temporary drawdown into a realised loss. Closing positions may also trigger the costs described above.
Monitor your margin continuously rather than at the end of the day, and size positions so that an adverse gap does not put you at the close-out threshold. If you have questions about how this site covers these topics, use the contact form on this site.
