Risk Disclosure and Warning Notice
Contracts for Difference (referred to as “CFDs”) are intricate financial tools. They don’t safeguard your capital or promise returns. With leverage, trading outcomes can be amplified. CFD trading isn’t suitable for everyone. Traders must grasp product features and risks before opening accounts. Only invest what you can afford to lose, and be mindful of trading risks.
The Extent of Risk Disclosure
The Risk Disclosure document provides a clear overview of the risks associated with CFD trading in a fair and unbiased manner.
Before starting CFD trading, clients must grasp the risks involved. It’s important to note that the Risk Disclosure document can’t cover all aspects or how they apply to each client’s situation. Clients should make informed decisions and may consider seeking independent professional advice beforehand.
This disclosure serves as information only and should not be viewed as marketing material or a solicitation to clients.
It’s essential to go through the Risk Disclosure document alongside the Client Agreement and General Business Terms provided on the website for a comprehensive understanding.
Key Risks in CFD Transactions
Using Leverage in Trading
In CFD transactions, leverage enables clients to access the underlying asset with a smaller initial investment, referred to as margin.
Leverage is like a two-sided coin: it amplifies both gains and losses with market shifts. This means even small changes can greatly affect profits or losses. However, retail clients are protected from losing more than their account balance thanks to “negative balance protection” provided by the Company.
Before diving into margin trading instruments, it’s crucial for clients to invest only what they can afford to lose.
Understanding Credit and Insolvency Risk
When you trade CFDs, you’re engaging in over-the-counter (OTC) transactions. This means positions opened with the Company can’t be closed elsewhere. OTC deals carry more risk than those on regulated markets like traditional exchanges because there’s no central counterparty. This exposes both parties to counterparty credit risk.
If the Company faces insolvency or defaults, your positions could be liquidated or closed without your consent.
Dangers of Market Changes
CFDs face market events like government policies, economic changes, and natural disasters, affecting asset prices. Each contract exposes clients to various market risks like interest rates, commodities, stocks, foreign exchange, etc.
Before entering the market, clients should thoroughly assess their investment goals, knowledge, experience, and risk tolerance.
The Volatility Risk of Market Fluctuations
Volatility risk can greatly affect a CFD position. When volatility is high, prices can swing more, boosting both potential gains and losses.
Clients should acknowledge that during abnormal or highly volatile market conditions, the processing time for their orders and instructions may be prolonged.
Risk of Currency Exchange Changes
Stay mindful of currency risks. When trading CFDs, you might deal in a currency other than your account’s base currency. Changes in exchange rates could impact your profits or losses. Also, making payments in a different currency from your trading account exposes you to foreign exchange risks.
Liquidity Risk
Liquidity risk is when some assets are hard to trade or lack market activity at a given time. This can lead to hard-to-avoid losses. It might also widen the bid-ask spread, making transactions costlier.
Dangers in Technology Use
Technical risk is a natural part of online trading, covering issues like hardware failures, internet problems, and hacker attacks. Traders need reliable tech, antivirus software, and a stable internet connection. They should also have risk management strategies, stay updated on platform changes, and prepare for technical issues. It’s important to keep login details secure with strong, unique passwords.
Trading Platforms
All client instructions are sent to our server and executed in sequence. You can’t place a new order until the previous one is complete. Sending a new order prematurely will result in rejection. Clients are responsible for any unintended trades made by resubmitting orders before getting results from the first one.
It’s important for clients to know that closing the order or position window doesn’t cancel a submitted order.
Clients understand that only quotes from our server are valid. If there’s a connection issue between the client terminal and our server, clients can get missing quote data from the terminal’s database.
Communication
There’s a risk of clients missing important messages if their contact info isn’t updated or working right. It’s vital for clients to keep their contact details current and reliable to prevent communication gaps and any related issues.
Abnormal Market Conditions – Suspensions of Trading
In specific trading situations, it might be hard or impossible to execute or close a position, or the time to execute client orders may be prolonged. This can happen during rapid price changes, leading to trading suspension or restrictions. Using a stop loss order may not always limit losses as expected due to market conditions. Sometimes, stop loss orders are executed at worse prices than expected, resulting in greater losses.
Unexpected Events Beyond Control
The Company won’t cover any financial losses caused by events beyond anyone’s control, known as force majeure. These include unpredictable and unstoppable situations that the people involved in the agreement can’t foresee or prevent. Examples of such events are natural disasters like earthquakes and floods, fires, accidents caused by humans, problems with utilities, cyberattacks like DDOS, and social or political disturbances including riots, wars, terrorist acts, public protests, strikes, as well as decisions made by government authorities.
Trading Price Slip
Slippage happens when there’s a change in the price from what you expected to what you actually get when you make a trade. It means the trade gets completed at a different price than you planned. This can happen anytime but is more common when the market is very active and prices change quickly. Slippage isn’t always bad or good; it just means there was a difference in prices. Depending on the actual price you get compared to what you expected, slippage can be positive (you get a better deal), none (it matches exactly), or negative (you get a worse deal). Essentially, your trade might end up being more or less beneficial than you aimed for due to these price shifts.
Risks from Different Countries’ Laws
Clients are responsible for their trading and non-trading activities in countries where these actions are limited or banned by law.
Risks from Others Involved
The Company might place client funds with another party. While the Company will be careful and diligent in choosing this third party, some situations are out of the Company’s hands. Therefore, the Company cannot be held liable or responsible for any losses clients might face due to that third party going bankrupt, facing similar legal troubles, or failing in any way.
Further Declarations
Margin Requirements
Clients are required to always meet the minimum margin needed for their open trades. It’s up to the clients to keep an eye on their account balance and make sure they have enough money to support their trading plans and meet these margin requirements. If they don’t, their open trades might be automatically closed out. It’s important for clients to understand that waiting until the last minute to add funds to their account is not advisable.
Rights to the underlying asset
Trading CFDs doesn’t give you any ownership rights to the actual assets.
Taxation
Clients are advised to consult with a tax professional if needed to determine their tax obligations, including any potential stamp duty.
Impersonation Risk
There’s a chance that fraudsters might pretend to be officials or reps from our Company. We urge clients not to share their personal or trading account details with anyone claiming to be from the Company unless they’re sure these individuals are using the Company’s official contact information and email domains.
If you have questions about this document or our product features, please reach out to our customer support at [email protected].
Before you start trading, it’s important to assess your financial situation, goals, and needs thoroughly. It’s also wise to get advice from independent professionals in finance, law, and taxes.
Should you have any concerns about the risks involved in trading, we recommend consulting with your legal, tax, and financial advisors before making any transactions with the company.
