Risk disclosure

1. The headline warning

Most retail investors who trade CFDs lose money. A CFD (a contract for difference) is an agreement to exchange the difference in the value of a market between the time you open a position and the time you close it. Because a CFD is leveraged, a small move in the market can produce a large move in your account, in either direction. Do not trade with money you cannot afford to lose. If you are not sure whether CFD trading is right for you, do not trade until you have taken independent advice.

2. Leverage works in both directions

Margin is the money set aside from your balance to hold a position open. Leverage lets you control a position larger than that margin. It multiplies gains and losses in the same way. A small move against you can use up a large part of your margin, and a larger one can use up all of it.

Choosing higher leverage does not improve your expected return. It makes it more likely that an ordinary market movement closes your position out before your view has had time to play out.

3. Market risk and gapping

CFD prices follow an underlying market, and that market can move sharply and in jumps. Markets gap over weekends, after scheduled news, during political events, and when an underlying instrument is suspended. When a market gaps past your stop level, your stop order becomes a market order and may be filled well away from the price you chose.

A stop loss is a tool for limiting how much you are prepared to lose. It does not promise you a price, because the market can jump past your level. No order type on the platform removes that risk.

4. Execution risk

Execution through the platform is not perfect. An order can be filled at a price different from the one you saw when you submitted it, and in thin or fast markets that difference can be significant. This is slippage.

If an order is filled at a price that is clearly wrong, we may cancel the trade and put your account back to where it was.

5. Counterparty risk

When you trade a CFD on the platform, the other side of your trade is us, not another customer. If we became insolvent, you would be a creditor for any money we owed you.

Whether a compensation or investor-protection scheme applies to your account depends on the entity that holds it and on the country where you live. Those arrangements are being finalised and will be published here.

6. Currency risk

Some instruments are priced in a currency other than your account currency. When you trade one of them, exchange-rate movements affect your profit or loss as well as the price of the instrument. A move in the exchange rate can increase a loss or reduce a gain.

7. Cost drag

Every position carries a cost. Depending on your account type, that cost sits in the price you are quoted or is charged as a separate commission. A position held past the daily rollover may also be charged overnight financing. These costs are charged whether or not the trade makes money, so frequent trading can be unprofitable on cost alone even when many of your trades go your way.

8. Technology risk

You reach the platform over the internet, on your own device. A dropped connection, a device fault, a browser problem or a problem at your internet provider can stop you opening, changing or closing a position.

Stop loss and take profit levels you set are held with your position in the platform, so they are not lost if your browser closes. Even so, think about how much you are willing to have at risk before you open a position, not afterwards.

9. Suitability and independent advice

CFDs are not suitable for everyone. They are not right for you if you need to preserve your capital, if you cannot afford to lose the money you deposit, or if you do not understand leverage, margin and what happens when your account falls below the level needed to hold your positions open.

QuantivoFx does not provide investment, tax or legal advice, and we do not assess whether a particular trade is suitable for you. If you are unsure whether CFD trading is right for your circumstances, take independent advice before you open an account.