The Client should unreservedly acknowledge and accept that the risk of loss arising from Foreign Exchange Instruments and Contracts For Differences can be substantial because may fluctuate downwards or upwards and it is even probable that the investment may become of no value. You should carefully consider whether such investments are suitable for you in the light of your circumstances and financial resources.
The high degree of “gearing” or “leverage” is a particular feature of Derivative Financial Instruments. This stems from the margining system applicable to such trades, which generally involves a comparatively modest deposit or margin in terms of the overall contract value so that a relatively small movement in the underlying market can have a disproportionately dramatic effect on the Client’s a trade and balance.
If the market moves against your position, you may, in a relatively short time, sustain a total loss of the funds placed by way of margin or deposit. You may be required to deposit a substantial additional sum, at short notice, to maintain your margin balances at a good level. If you do not maintain your margin balances your position may be closed out at a loss and you will be liable for any resulting deficit.
Under certain market conditions it may be difficult or impossible to close out a position. This may occur, for example, where trading is suspended or restricted at times of rapid price movement.
Where permitted, placing a stop-loss order will not necessarily limit your losses to the intended amounts, for market conditions may make it impossible to execute such orders at the stipulated price.
Foreign Exchange Instruments and Contracts For Differences can be highly volatile and investments in them carry a substantial risk of loss.
You may sustain a loss of some or all of your invested capital, therefore, you should not speculate with capital that you cannot afford to lose.
This brief statement cannot disclose all risks of investments in Foreign Exchange Contracts and Contracts For Differences. They are not suitable for many members of the public and you should carefully study such investments before you commit funds to them.
Investing in FX Contracts and CFDs with an underlying asset listed in a currency other than your base currency entails a currency risk, due to the fact that when the CFD or FX Contract is settled in a currency other than your base currency, the value of your return may be affected by its conversion into the base currency.