The Risks of Trading

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Although every investment
involves some risk,the risk of loss
in trading off-exchange forex
contracts can be substantial.
Therefore, if you are considering
participating in this market, you
should understand some of the
risks associated with this product
so you can make an informed
decision before investing.
As stated in the introduction to
this booklet,off-exchange foreign
currency trading carries a high
level of risk and may not be suitable
for all customers. The only
funds that should ever be used to
speculate in foreign currency
trading, or any type of highly
speculative investment, are funds
that represent risk capital – i.e.,
funds you can afford to lose without
affecting your financial situation.
There are other reasons why
forex trading may or may not be
an appropriate investment for
you, and they are highlighted in


THE MARKET COULD MOVE
AGAINST YOU. No one can predict
with certainty which way
exchange rates will go, and
the forex market is volatile.
Fluctuations in the foreign
exchange rate between the time
you place the trade and the time
you close it out will affect the
price of your forex contract and
the potential profit and losses
relating to it.
YOU COULD LOSE YOUR
ENTIRE INVESTMENT. You will
be required to deposit an amount
of money (often referred to as a
“security deposit” or "margin")
with your forex dealer in order to
buy or sell an off-exchange forex
contract. As discussed earlier, a
relatively small amount of money
can enable you to hold a forex
position worth many times the
account value.This is referred to
as leverage or gearing.The smaller
the deposit in relation to the
underlying value of the contract,