Leverage and CFD Risk Disclosure
What this page covers, and what it does not, before you act on anything you read about leveraged forex and CFD trading.
Begin with the sponsorWhat does this page cover, and what does it not?
This page explains the main risks of leveraged forex and contract for difference trading. It is written for readers of hfembrokerke.com, an independent editorial resource that reviews a broker for a Kenyan audience. The page is general information only. It does not describe your personal circumstances, and it does not tell you whether trading is suitable for you.
This site is not the broker. It is not affiliated with the broker, it does not open accounts, it does not take deposits, and it does not provide financial services or advice. Nothing here is a recommendation to trade, to deposit, or to use any particular product. If you need advice about your own position, speak to someone qualified to give it.
Leveraged products carry a real risk of losing money quickly. Read this page alongside the broker's own legal documents, which are the binding terms, and not this summary.
How does leverage work in both directions?
Leverage lets you control a position larger than the money you put down. The deposit is margin, not the full value of the trade. A small price move therefore produces a result that is large relative to your margin.
That works both ways. A move in your favour is multiplied, and a move against you is multiplied by the same factor. Losses can exceed the margin you set aside for that position and can reach other funds in your account. Leverage does not improve the odds of a trade; it only changes the size of the outcome.
Many traders treat leverage as extra buying power. It is better understood as borrowed exposure, and it is repaid through the size of your losses when the market moves against you.
What can gaps, slippage and news do to my position?
Prices do not always move smoothly. A market can gap from one level to another, especially over weekends, around major announcements, and during periods of thin liquidity. A stop order becomes a market order once triggered, so it does not guarantee the price you set.
Slippage means your order fills at a worse price than you expected. In fast markets, the difference can be substantial, and with leverage the effect on your balance is larger still.
News-driven volatility can move a position far in seconds. Economic data, central bank decisions and political events are common triggers. Positions held through such moments carry risk that is difficult to control, and a stop may not protect you at the level you planned.
What ongoing costs will I pay while a position is open?
Trading costs reduce your result whether the market goes your way or not. The spread is the difference between the buy and sell price, and it is charged on entry and effectively on exit. Wider spreads in volatile or quiet markets make trading more expensive.
Positions held overnight are usually subject to financing charges, which can add up over days and weeks. Some accounts also carry commissions, inactivity fees or conversion costs when your account currency differs from the instrument's currency.
These costs are easy to overlook because they are small per trade. Over many trades they are not small, and they are paid regardless of whether the position is profitable.
How many retail accounts lose money, and what happens at margin call?
Regulators in several markets require brokers to publish the share of retail accounts that lose money on these products. Those figures are usually a majority, and they are worth reading before you open an account. Past results do not predict your own, but the disclosure shows how the product behaves for ordinary retail clients.
Investor protection differs by jurisdiction and by the legal entity that holds your account. Compensation schemes, dispute routes and the rules on negative balance protection vary, and an entity in one country may offer less protection than another. Check which entity your account sits with.
If your account falls below the required margin, the broker may issue a margin call and then close positions automatically, possibly without further notice and at an unfavourable price. For questions about this page, use the contact form on this site.
