IC Markets
Last updated
High-risk trading disclosure statement
High-risk warning for leveraged trading
Trading in retail foreign currency (forex) transactions carries a high level of risk and may not be suitable for all investors.
The high degree of leverage often available in forex trading can work against you as well as for you. Leverage can lead to large losses as well as large gains. Before deciding to trade, carefully consider your investment objectives, level of experience and appetite for risk.
You could sustain a loss of some or all of your initial investment. Many traders lose money, often because of poor planning and weak risk control. Only trade with risk capital: money you can afford to lose without affecting you emotionally or financially.
No personal financial or investment advice
Information provided by FX Recap is for information, education and general market commentary only. It is not, and is not intended to be, personal financial, investment, tax or legal advice.
- No recommendation. Our content, analysis and reviews are not a recommendation to buy or sell any security, financial instrument or investment strategy.
- Seek professional advice. Consult a qualified financial adviser before making investment decisions. General information should never be mistaken for personal advice.
- Liability. FX Recap is not liable for any loss or damage, including loss of profit, arising directly or indirectly from use of or reliance on this information. You are solely responsible for your financial decisions and their outcomes.
Beware of misleading statements
Investigate carefully any statement by a person, company or broker that plays down or contradicts any part of this disclosure. Statements that minimise the risks may indicate sales fraud.
This short statement cannot disclose every risk of trading off-exchange foreign currency. A sound risk-management plan is essential to active trading: a trader who has built substantial profits can lose them in one or two bad trades without proper risk control.
Acknowledgement
This page is a separate written disclosure statement. By using FX Recap's services you acknowledge that you have received and understood it, that you understand the risks involved, and that you will not hold FX Recap responsible for any trading losses or damages you incur.
The main risks of forex and CFD trading
Leverage risk
A small price move against a leveraged position can wipe out your margin, and positions may be closed automatically at a loss.
Market risk
Rates react to interest rate decisions, data releases and political events, sometimes within seconds.
Gap and slippage risk
Prices can jump over your stop-loss, especially at weekends and around news, so losses can exceed what you planned.
Liquidity risk
Exotic pairs and quiet hours have wider spreads and fewer buyers and sellers, which can make positions costly to close.
Broker and counterparty risk
With CFDs your contract is with the broker. If it fails or acts improperly, your protection depends on its regulator and on segregated client funds.
Fraud risk
Unlicensed firms, clone websites and "account managers" promising returns target new traders. Check our scam broker blacklist.
What leverage does to a small account
A $1,000 account opening one standard lot of EUR/USD (100,000 units), where one pip is worth about $10:
| Price move | Profit or loss | Share of the account |
|---|---|---|
| 10 pips in your favour | +$100 | +10% |
| 10 pips against you | −$100 | −10% |
| 50 pips against you | −$500 | −50% |
| 100 pips against you | −$1,000 | The whole account |
A 100-pip move on EUR/USD is common within a week. Sizing each trade so that a stop-loss costs 1% to 2% of the account keeps one bad trade from ending your trading. Work it out with the position size calculator.
How to limit your risk
- Learn the basics first with our free forex course, and practise on a demo account.
- Use a broker regulated by a strong authority, and check the licence on the regulator's own register.
- Choose an account with negative balance protection where it is available.
- Set a stop-loss on every trade and risk a small, fixed share of the account.
- Use lower leverage than the maximum your broker allows.
- Never trade with borrowed money or money you need for living costs.
Risk Disclosure FAQs
Can I lose more than I deposit trading forex?
It depends on your broker and country. UK, EU and Australian retail clients have negative balance protection, which limits losses to the account balance. Elsewhere, fast markets and gaps can in some cases leave a negative balance. Check your broker's terms.
Is FX Recap giving me financial advice?
No. Everything on FX Recap is general information and education. It is not personal financial, investment, tax or legal advice, and it is not a recommendation to trade.
Why do most retail traders lose money?
Mostly through too much leverage, no stop-losses, trading without a plan and trading costs. A sound risk-management plan is essential.
Who is responsible for my trading losses?
You are. You are solely responsible for your trading decisions and their outcomes, and FX Recap is not liable for losses arising from use of its content.