Risk Disclosure Statement
IMPORTANT - PLEASE READ CAREFULLY :
Leveraged trading in forex, derivatives, precious metals, CFDs or other o -exchange products (also known as "over-the-counter" or "OTC derivative products") on margin carries a high level of risk to your capital. You do not own, or have any rights to, the underlying assets. Trading is not suitable for everyone and may result in losses that are greater than your deposits. You should only trade with money you can afford to lose.
This statement provides you with a non-exhaustive overview of the key risks that you should take into account when deciding whether to open an account and trade with Forex Holdings. This statement does not explain all of the risks involved in trading or how the risks relate to your personal circumstances. It is important that you read the relevant legal documentation to fully understand the risks involved in light of your personal circumstances before deciding to open an account and trade with us. We recommend that you seek independent advice if you're unsure.
A. NO ADVICE
Our products and services are provided on an execution-only basis - you are solely responsible for any decisions that you make in relation to our products and services.
Forex Holdings is not a nancial advisor nor do we provide any regulatory, tax or legal advice. Sometimes we will provide you with general factual information about the market and how our various products and services work. Any information and analysis provided by us is general in nature and does not take into account your or your client's personal objectives, nancial situation or needs. You should not regard any of the information that we provide to you as an investment recommendation or an o er to make a transaction.
Tax bene ts are subject to change and depend on your individual circumstances. We recommend that you seek specialist advice if you are uncertain about any of these matters.
1. Margin FX Contracts
The price of a Margin FX Contract is based on the underlying instrument, which is the price of one curren- cy relative to another. Please note that at no stage will you take any physical delivery of currency (being the underlying instrument) when trading Margin FX Contracts.
Margin FX Contracts can be di erentiated from other foreign exchange products in that they allow the investor an opportunity to trade foreign exchange on a margined basis as opposed to paying for the full value of the currency. This "gearing" or "leverage" often obtainable in trading Margin FX contracts means that a relatively small market movement can lead to a proportionately much larger movement in the val- ue of your investment. Leverage can work against you as well as for you and in some cases, may result in you losing more money than your original deposit. Please see section D for more information regarding margins and leverage.
A CFD is a leveraged nancial instrument that uctuates in value based on the price of the underlying instrument - which could be the price of gold, a share index, a currency or of a particular commodity. A CFD does not provide ownership or any rights to the underlying instrument and does not entitle you to the delivery of the underlying instrument at any stage.
A CFD is an agreement between you and us to exchange the di erence in value of an underlying instru- ment from when a position is opened to when it is closed. If the value of the CFD has moved in your favour, you will be paid an amount into your account. Should the value of the CFD move against your po- sition, an amount will be deducted from your account. The amount of pro t or loss you make will be the di erence between the price when the CFD is opened and the price when it is closed, adjusted to re ect notional dividends and interest payments, where applicable.
D. GENERAL TRADING RISKS
OTC derivative products such as Margin FX Contracts and CFDs are leveraged products, which means that you can open a position (also known as a contract) without having to fund the whole position. Instead you will be required to put up a deposit or "margin" to maintain each open trade on your account. To open a trade you must have su cient trading resources on your account to cover the margin requirement appli- cable to that trade. You will then need to maintain su cient net equity in order to keep that trade open.
If the market moves against you, you may be required to pay substantial additional funds or margin at short notice to maintain your position. If you fail to do so within the time required, your position may be liquidated at a loss and you will be liable for any resulting de cit. It is very important that you closely monitor any open positions, to help limit the risk of any de cit if the market moves against you.
OTC derivative products involve a high level of leverage. Whilst the use of leverage can work in your favour, it can also work against you. Even a slight uctuation in the market could lead to a proportionately much larger movement in the value of your investment, and your potential losses may be far greater than the money you deposit into your trading account. Please also be aware that commission is paid on a pro rata basis, based on the size of your notional position .
EUR/USD is trading at 1.12000 and your trading account equity is €10,000 EUR. You believe that the price of EUR/USD will fall, so you sell 1 lot (100,000 EUR) of EUR/USD at 1.12000. Your leverage on this trade is therefore 10:1 relative to your account equity.
Five days later the price of the EUR/USD has risen to 1.12500 and you choose to close your position at this price by selling 1 lot (100,000 EUR) of EUR/USD at 1.12500. The net movement for EUR/USD has been: (1.12500 - 1.12000) /1.12000 * 100 = 0.44%.
However, as your leverage on this trade was 10:1 the loss was much larger than 0.44% as a proportion
of your account equity. Your loss on this trade, ignoring any other fees and charges, will be 100,000 * 0.00500 = $500 USD or 500 / 1.12500 = €444.44 EUR at the time the trade is closed. As a proportion of your starting account equity, this loss has resulted in an equity loss of 444.44 / 10,000 * 100 = 4.44% on your Account. Because the size of the trade was 10 times larger than the account equity, the pro t or loss from any price movement on EUR/USD is also ampli ed by 10 times.
3. Past Performance
Past performance of any investment is not necessarily a guide to future performance.
4. Foreign Markets
Foreign markets will involve dierent risks from currency markets. In some cases, the risks will be greater. The potential for pro t or loss from transactions on foreign markets or in foreign denominat-ed contracts will be a ected by uctuations in foreign exchange rates.
5. Contingent Liability Transactions
Contingent liability transactions that are margined require you to make a series of payments against the purchase price, instead of paying the whole purchase price immediately.
When trading OTC derivative products you may sustain a total loss of the margin you deposit to establish or maintain a position. If the market moves against you, you may be required to pay substantial addi- tional margin at short notice to maintain your position. If you fail to do so within the time required, your position may be liquidated at a loss and you will be liable for any resulting de cit.
Even if a transaction is not margined, it may still carry an obligation to make further payments in certain circumstances over and above any amount paid when you entered into the contract.
Movements in the price of underlying markets can be volatile and unpredictable and are outside of our control. This will have a direct impact on your pro ts and losses. Understanding the volatility of an un- derlying market will help you to manage the risks in relation to your trades
7. Stop-Losses Not Guaranteed
You are responsible for monitoring your account and taking steps to limit your losses.
We encourage you to employ "stop-loss orders" to minimise your risk, but it is important for you to note that stop-losses are not guaranteed. If there are instances of illiquidity, slippage or the market gaps up or down, your exit price could deviate signi cantly from your intended stop-loss price.
Orders may be subject to slippage. This most commonly occurs during fundamental news events or gapping in the markets. The volatility in the market may create conditions where orders are di cult to execute, since the price might be many pips away due to the extreme market movement or gapping. Execution is subject to available liquidity at any and all price levels. This means that if a stop-loss order cannot be executed at your chosen price in the market, or cannot be executed in the desired volume at the chosen price, the order will be lled at the best available price at that time.
Our insolvency or default may lead to positions being liquidated or closed out without your consent. In certain circumstances, you may not get back the actual assets which you lodged as collateral and you may have to accept any available payment in cash. We accept no responsibility for insolvency of, or default by, other brokers involved with your transactions.
10. System Risk
Operational risks in relation to our trading platform are inherent in every product that we o er. For example, disruptions to our operational processes such as communications, computers, computer networks, software or external events may lead to delays in the execution and settlement of a position. You may be unable to trade in a particular product that we o er and you may su er a nancial loss or opportunity loss as a result.
11. Regulatory and Legal
Changes in taxation and other laws, government, scal, monetary and regulatory policies may have a material adverse e ect on your dealings in OTC derivative products..