Risk Disclosure: Leveraged Forex and CFD Trading
An independent editorial resource explaining the risks of leveraged forex and CFD trading for readers in Australia.
Go to the partner nowThe Losing Majority
Consider an Australian trader who deposits a few thousand dollars, opens a leveraged position on a currency pair, and watches the market move against them within hours. The account is closed, and the money is gone. This is not a rare outcome. Regulators in several jurisdictions require brokers to publish the share of retail accounts that lose money on leveraged products, and those figures consistently show that most retail clients lose. The exact percentage varies by broker, product and period, but the pattern is stable: a large majority of retail accounts end up with a loss.
This site does not provide financial services, accounts, deposits or advice, and it is not affiliated with any broker. The figures above describe the retail population as a whole. They do not predict what will happen to any individual, but they do set a realistic baseline against which any decision to trade should be weighed.
Leverage amplifies both gains and losses. A small move in the underlying market can wipe out a substantial portion of the capital committed, which is why the loss statistics for retail accounts are so persistent across brokers and time periods.
Limits of Past Performance
Past results say little about the future. A strategy that produced gains last year may fail next month, because market conditions shift, volatility changes, and the factors that drove a particular outcome may no longer be present. Historical data can describe what happened, but it cannot forecast what will happen.
Claims based on past performance should be treated with caution, whether they come from a broker, a commentator or a trading course. A track record is not a guarantee, and it is not evidence that the same approach will work again. Markets are influenced by events that cannot be anticipated, and any trading approach carries the risk of loss regardless of how it performed previously.
Capital You Can Afford to Lose
Trade only with money you can afford to lose. This means money that is not needed for rent, bills, food, education, debt repayment or any other essential commitment. If losing the amount deposited would affect your financial stability, the amount is too large.
Leveraged products can move quickly against a position. Losses are not limited to a slow decline; they can accumulate in a short period. Money set aside for emergencies or long-term goals should not be exposed to this kind of risk. Before opening any position, consider what would happen if the entire amount committed were lost.
Margin Calls and Automatic Closure
When you trade on margin, you deposit a fraction of the position's value and the broker extends the rest. If the market moves against you, the equity in your account falls. Once it drops below the required maintenance margin, the broker may issue a margin call requiring you to add funds.
If you do not add funds, or if the market moves further against you, the broker may close your positions automatically to limit its own exposure. This can happen without warning and at a time not of your choosing. Automatic closure may lock in a loss you would have preferred to ride out, and it may occur at prices less favourable than those quoted when the position was opened.
Margin requirements can also change. A broker may raise them in response to market conditions, which can trigger margin calls or closures even if your positions have not moved. The terms governing margin, calls and closure are set out in the broker's client agreement, and those terms should be read before trading.
Gaps, Slippage and News Volatility
Prices do not always move smoothly. A market can gap from one level to another, skipping the prices in between. When that happens, stop-loss orders may be executed at the next available price rather than the level specified, and the resulting loss can be larger than expected. This is known as slippage.
News-driven volatility increases these risks. Economic announcements, central bank decisions and geopolitical events can produce rapid price swings, wider spreads and reduced liquidity. Orders may be filled at prices far from those shown when the order was placed, and in fast markets some orders may not be filled at all.
Protection schemes differ by jurisdiction and entity. The safeguards that apply to a client of one legal entity, in one country, may not apply to a client of a different entity or in a different jurisdiction. Readers should establish which entity would hold their account, which jurisdiction governs it, and what protections, if any, apply. This site does not provide advice on those questions; enquiries about a specific account should be directed to the broker through the contact form on this site.
