Risk Disclosure for Leveraged Forex and CFD Trading
Leverage can magnify losses as quickly as it magnifies gains, so read this page before you risk any money.
See the partner offerA Concrete Example
Suppose you open a position in a major currency pair with a notional value of AUD 10,000 and your account holds AUD 1,000. With leverage of 10:1, a move against you of just one per cent in the underlying market translates into a AUD 100 loss on that position. That is ten per cent of your account. A five per cent adverse move would wipe out half your equity, and a ten per cent move could take the account to zero. This is not a worst-case scenario; it is ordinary market movement on a volatile day.
The example matters because it shows how quickly a modest price change becomes a large account change when you trade on margin. Leveraged forex and contracts for difference are not long-term investments. They are complex products that can lose money faster than many people expect, and the losses can exceed the amount you initially set aside if the market gaps or liquidity disappears. The rest of this page explains the risks that follow from that simple arithmetic.
Protection Varies by Jurisdiction
If a broker or product is regulated in one country, that does not mean the same protections apply everywhere. Different jurisdictions impose different rules on leverage limits, client money handling, dispute resolution, and compensation schemes. An entity licensed in one place may operate through a separate legal entity in another, and the protections available to a client depend on which entity actually holds the account.
Compensation schemes, where they exist, typically have caps and eligibility rules, and they may not cover losses arising from trading itself. They are usually designed for cases such as insolvency or fraud, not for market losses. You should not assume that any particular safeguard applies to you simply because a website is accessible from Australia or because a brand is well known. This site is an independent editorial resource; it is not the broker, it does not provide financial services, and it does not hold client money.
Past Results Say Little
Historical price data, backtested strategies, and past performance figures describe what has already happened. Markets change: volatility regimes shift, liquidity conditions vary, and the events that moved prices in the past may not repeat in the same way. A strategy that produced gains over one period can produce losses over the next, and the fact that a product or approach has been profitable before tells you nothing certain about its future returns.
This applies equally to your own trading history. A run of winning trades can encourage overconfidence and larger position sizes, which is precisely when leverage becomes most dangerous. Treat any past result, whether from a broker's marketing material or your own records, as a description of the past rather than a forecast. No one can guarantee future outcomes, and this site makes no promise of profit or protection from loss.
Trade Only What You Can Lose
Before you open any position, decide how much money you can afford to lose entirely without affecting your rent, your bills, your savings goals, or your family's financial security. That amount, not your account balance, is the true limit of your risk. Money set aside for emergencies, debt repayment, or near-term expenses should not be used for leveraged trading.
Leverage makes it easy to control a large position with a small deposit, but that convenience cuts both ways. Losses can accumulate quickly, and you may be asked to add funds to keep a position open. If you cannot comfortably lose the entire amount you deposit, you should not deposit it. Trading with borrowed exposure is not a way to make money you need; it is a way to risk money you have.
Leverage, Margin Calls, and Costs
Leverage multiplies your exposure in both directions. A small favourable move can produce a large gain relative to your deposit, and a small adverse move can produce an equally large loss. Because the position is much larger than your margin, the percentage change in your account equity is much greater than the percentage change in the market. This is the core mechanic that makes leveraged forex and CFD trading risky, and it operates whether you are buying or selling.
When your equity falls below the required margin, the broker may issue a margin call asking you to deposit more funds. If you do not, or if the market moves further against you, the broker may close your positions automatically, often at the worst possible moment and without further notice. Automatic closure can turn a temporary drawdown into a realised loss, and in fast markets it may happen at prices worse than you expected.
Running costs also erode your account. Spreads are charged on entry and exit, and overnight financing is applied to positions held past the daily cutoff. These costs accumulate over time and can turn a marginally profitable strategy into a losing one. They are separate from market risk, and they apply regardless of whether your trade is winning or losing. Before trading, read the broker's fee schedule and understand how spreads and financing are calculated for the instruments you intend to use.
