Risk Disclosure Statement

Understanding the Risks

This Risk Disclosure Statement is provided to inform you of the risks associated with trading forex, contracts for difference (CFDs), and other leveraged products offered by Capital FX Markets. By opening an account and trading with us, you acknowledge that you have read, understood, and accepted these risks.

Trading is not suitable for everyone. You should carefully consider your investment objectives, level of experience, and risk appetite before making any trading decisions.

1. General Risk of CFD Trading

What Are CFDs?

Contracts for Difference (CFDs) are complex financial instruments that allow you to speculate on price movements without owning the underlying asset. When you trade CFDs, you are entering into a contract with us to exchange the difference in the price of an asset from when you open the position to when you close it.

Key Characteristics of CFDs

• Derivative Products: CFDs derive their value from underlying assets
• Leveraged Trading: You can trade positions larger than your account balance
• Bidirectional Trading: Profit from both rising and falling markets
• No Ownership: You don't own the underlying asset
• Overnight Financing: Positions held overnight incur financing charges

2. Leverage Risk

What Is Leverage?

Leverage allows you to control a larger position with a smaller amount of capital. For example, with 1:100 leverage, you can control a $10,000 position with just $100 of your own capital.

Double-Edged Sword

While leverage can magnify profits, it equally magnifies losses:

Risk of Total Capital Loss

• You can lose your entire investment very quickly
• Losses can exceed your initial deposit in extreme market conditions
• High leverage increases the risk of margin calls and stop-outs
• The higher the leverage, the lower the market movement needed to lose your capital

3. Market Volatility Risk

Price Volatility

Financial markets can be extremely volatile, with prices moving rapidly in either direction. Volatility is influenced by:

• Economic Data Releases: GDP, employment, inflation reports
• Central Bank Announcements: Interest rate decisions, policy statements
• Geopolitical Events: Elections, conflicts, trade tensions
• Market Sentiment: Fear, greed, speculation
• Liquidity Conditions: Thin markets amplify price movements

Consequences of Volatility

• Slippage: Orders may execute at different prices than requested
• Gap Risk: Prices can gap through stop-loss orders
• Rapid Losses: Account equity can decrease quickly
• Forced Liquidation: Positions may be closed automatically

4. Margin and Stop-Out Risk

Margin Requirements

To maintain open positions, you must have sufficient margin (collateral) in your account. Margin levels fluctuate with market prices.

Margin Call Process

1. Warning Level (100% margin): You receive a notification
2. Margin Call (50% margin): You should deposit more funds or close positions
3. Stop-Out (20% margin): Positions are automatically closed starting with the largest losing position

Stop-Out Risks

• Positions are closed at current market prices, which may be unfavorable
• You have no control over which positions are closed
• You may realize losses at the worst possible time
• In extreme cases, you may lose your entire account balance
• You remain liable for any negative balance

5. Liquidity Risk

What Is Liquidity?

Liquidity refers to how easily you can buy or sell an instrument without significantly affecting its price. Low liquidity can result in:

• Wider Spreads: Higher costs to enter and exit trades
• Slippage: Orders filled at worse prices than expected
• Inability to Close Positions: Difficulty exiting trades at desired prices
• Price Gaps: Sudden price jumps between trading levels

When Liquidity Issues Occur

• Market opening and closing times
• Major news announcements
• Holiday periods
• Overnight trading sessions
• Exotic currency pairs and less popular instruments

6. Operational and Technology Risks

System Failures

Technology and operational issues can affect your trading:

• Platform Outages: Inability to access your account or execute trades
• Internet Connectivity: Loss of connection during critical moments
• Order Execution Delays: Orders may not execute immediately
• Data Feed Errors: Incorrect price information
• Software Bugs: Unexpected platform behavior

Consequences

• Missed trading opportunities
• Inability to close losing positions
• Orders executed at unintended prices
• Failure of stop-loss orders to execute

7. Currency Risk

If your account is denominated in a different currency than the instrument you're trading, you are exposed to currency risk:

• Exchange rate fluctuations can affect your returns
• Currency movements can increase or decrease profits/losses
• Hedging strategies may not fully eliminate currency risk
• Conversion fees may apply

8. Past Performance Is Not Indicative of Future Results

9. Client Categorization and Suitability

Client Categories

We categorize clients as:

• Retail Clients: Highest level of regulatory protection
• Professional Clients: Lower protection, higher leverage available
• Eligible Counterparties: Minimal regulatory protection

Appropriateness Assessment

Before you can trade, we assess whether CFD trading is appropriate for you based on:

• Your knowledge and experience in trading
• Your understanding of leverage and risks
• Your financial situation and ability to bear losses

10. Retail Investor Loss Statistics

What This Means

• The majority of retail traders lose money
• Only a small minority achieve consistent profits
• Losses can be substantial and occur quickly
• Success requires knowledge, discipline, and risk management

You should not trade with money you cannot afford to lose.

11. Risk Management Recommendations

To minimize your risk exposure, we recommend:

12. Acknowledgment and Declaration

By opening an account with Capital FX Markets, you acknowledge that:

• You have read and understood this Risk Disclosure Statement
• You understand the risks associated with leveraged trading
• You accept that you could lose some or all of your invested capital
• You will not hold Capital FX Markets responsible for any losses incurred
• You have sufficient knowledge and experience to trade CFDs
• You are financially able to bear the risks of trading losses
• You will seek independent advice if you have any doubts

Need More Information?

If you have questions about the risks of trading or need clarification on any points in this disclosure:

• Email: support@capitalfxmarkets.com
• Phone: +1-800-FOREX-99
• Visit our Education Center