Risks of trading Margin FX and CFDs
LTT’s training can help you manage but not avoid the risks of trading margin Foreign eXchange and Contracts For Differences. Your broker’s Product Disclosure Statement details these risks including:
- Many untrained novice traders lose much of their capital
- High leverage up to 100:1 greatly magnifies both risks and returns
- Adverse market moves can lose you all your equity and more, or at least cause your broker to call for more equity margin
- Stop losses are recommended to manage risk but may trigger “at market” orders which may be filled past the intended order level
- Markets can be volatile,jumpy, and even “gap” on surprise news/events
- Some markets can be especially illiquid and volatile if thinly traded such as cryptocurrencies
- You could become an unsecured creditor if your broker goes bust and inadequately protects its client trust accounts
