This brief warning does not reveal all the risks and all the important aspects of trading in the spot market.
This brief warning does not reveal all the risks and all important aspects of trading on the spot market («Forex») (with immediate payment and delivery). Taking into account all risks, you should transact only if you, the Client, fully understand the nature of the contracts (and contractual relationships) you are entering into, as well as the degree of risk you may incur. Trading activities in the foreign exchange market and stock markets are not acceptable to many people. You should carefully consider whether you can engage in business activities, taking into account your experience, objectives, level of training, financial resources, and other relevant circumstances.
General investment risk: All investments carry the risk of losing money. Investing involves substantial risks, including the potential loss of capital and other losses that may prove unacceptable to many people. Investments, unlike checking and savings accounts in a bank, are not insured by the government against market losses. Different financial market instruments have different degrees and types of risk, so you need to consider the risks associated with the particular market instrument you want to invest in.
Trading on an electronic trading system may differ not only from trading on an open auction market, but also from trading on other electronic trading systems. If you transact on an e-commerce system, you will be exposed to the risks associated with this system, including hardware and software failure. The result of such a failure may be that your order is not executed according to your instructions or is not executed at all.
Suspension or restriction of commercial relations and prices:
Market conditions (e.g. liquidity) and/or other rules of a given market (e.g. market hours, trading hours, suspension of trading, etc.) may increase the risk of losses, complicating or making it impossible to conduct transactions, settle or adjust positions. .
The Company with which you are conducting off-exchange transactions may act as your counterparty. It can be difficult to remove an existing position, assess value, determine an acceptable price, or assess risks. For these reasons, these transactions carry additional risk. Off-exchange transactions are typically less regulated and/or subject to an independent control system. Before making such transactions, you should familiarize yourself with the applicable rules and associated risks.
Transactions in foreign jurisdictions:
Transactions in the markets of foreign jurisdictions, including markets formally linked to the domestic market, may expose you to additional risks. Such markets may be subject to rules and laws that offer other conditions of protection or weaken them. Your local regulatory authority may not compel regulators or markets in other jurisdictions to follow the Act, if your transactions have been made in these markets. You should obtain complete information about the types of compensation in place, the rules applicable both in the jurisdiction of your country and in other relevant jurisdictions before you start trading.
Cash deposited and property:
You should familiarize yourself with measures to protect the cash and other assets you invest when conducting both international and domestic transactions, especially in the event of insolvency or bankruptcy. The extent to which you can protect your money or property may be determined by specific foreign laws or other regulations. In some jurisdictions, property, defined as your personnel, will be prorated, as well as cash, for the purposes of distributions in the event of a shortage of funds.
Terms and conditions of contracts:
You should obtain information about the terms and conditions of the specific market instruments you use to trade and the associated obligations (e.g. margin requirements and the terms of their change, order execution limitations, the conditions under which you may be obliged to make or receive delivery, trading dates and restrictions on exercise time, etc.).
Commission and other charges:
Before you start trading, you should receive a clear and complete explanation of all the commissions, fees and other charges you will have to pay. These charges will affect your net profit (if applicable) or increase your loss.
Foreign exchange risks:
Gains or losses on transactions made in foreign currency contracts (business transactions can be carried out in your jurisdiction or in any other) will depend on currency fluctuations in those cases where it is necessary to convert the currency specified in the contract to another currency.
Forex trading in general and e-commerce facilities are backed by computer systems for order routing, execution, comparison, recording and clearing of trades. As with all facilities and systems, they are vulnerable to temporary outages and failures. Your ability to recover some losses may depend on liability limitations imposed by the system provider, marketplace, clearing house or member firm. Such restrictions may vary. Therefore, you need to get a clear explanation of all the details in this regard.
Trading Strategies and Signals:
The effectiveness of trading signals in the past does not guarantee that the trading signal will be equally effective in the future. There are several reasons why your trading figures are unlikely to be the same as the trading performance results presented by a trading signal provider, and are (but not limited to) the following: different levels of market liquidity, different sizes of market spreads, suspension of credit and trading lines, imposed by regulatory or governmental authorities that are imposed on market participants, both sellers and buyers, including their counterpart, subjective errors, trading errors, different levels of connection speed, delay in the formation, transmission, routing and acceptance of orders; lack of tracking of each of the trading signals from the moment of their creation; the effects of other positions you hold that were not placed in accordance with the signals or strategies offered by the trading signal provider; changes in margin requirements; changes in stop-loss (variable) provisions, acceptance of limits and margins; public or market holidays; unique or infrequent exogenous market events; temporary inability of the trading signal provider to generate or transmit trading signals or strategies; lack of trading experience, etc.
Due to the fact that the risk factor is very high in Forex trading, only free funds should be used for such a trade. If you don’t have the extra capital you can afford to lose, you shouldn’t trade the Forex market. Forex trading is suitable only for institutional or experienced private traders, who can withstand financial losses that may substantially exceed the value of margins or deposits.
«Leverage» or «gearing» effect:
Forex transactions are very risky. The initial margin amount is small relative to the value of the Forex contract, which is why transactions are backed by «leverage». A relatively small movement of the forex market will have a proportionately greater impact on the funds you have invested or will have to invest – this can work for both you and against you. You may suffer a total loss of the initial margin funds and any additional funds deposited to maintain your position. If the movement of the Forex market is against your position or margin levels are rising, you may need to pay substantial additional funds immediately or at very short notice to maintain your position. If you do not meet the requirement for additional funds within the prescribed time, your position may be liquidated at a loss and you will be responsible for any resulting shortfalls.
Risk reduction orders or strategies:
Placing stop-loss orders, which are designed to limit losses to certain amounts, can prove ineffective, as market conditions can make it impossible to execute such orders. Strategies that use combinations of positions, such as «hedging» or «blocking,» can be as risky as taking long and short positions.
SPECIFIC STOCK MARKET RISKS The fund may lose value:
There can be no guarantee that invested funds will achieve investment objectives and past performance should not be seen as a guide to future returns. The value of investments and income may decrease or increase, so investors may not return the original amount invested in one or another financial instrument. Investments in financial instruments may be affected by any changes in exchange control regulation, tax laws, tax withholdings, international, political and economic events and governmental, economic and monetary policy. Interest rate risk:
Funds invested in bonds and other securities can lose value in the event of changes in interest rates. Generally, the prices of debt securities rise when interest rates fall and their prices fall when interest rates rise. Longer-term debt securities tend to be more sensitive to changes in interest rates.
Funds invested in bonds and other fixed-income securities may run the risk of issuers not making payment on such securities. The issuer experiencing negative changes in its financial situation may reduce the credit quality of the securities, which would lead to even greater price fluctuations in these securities. The reduction of the credit rating of securities can also offset the liquidity of the security, creating difficulties in selling them. Funds invested in lowerquality debt securities are more susceptible to these problems and their value can be more volatile.
Foreign exchange risks and hedging:
Since funds and liabilities may be denominated in currencies other than the base currency of the deposit, changes in control regulations or in exchange rates between the base currency and other currencies may positively or negatively affect the deposit. Changes in exchange rates can affect the value of shares, dividends, interest, profits or losses. The exchange rate between currencies is determined by supply and demand in foreign exchange markets, the international balance of payments, government intervention, speculation, and other economic and political conditions. If the currency in which the securities are denominated rises with respect to the base currency, the values will increase in value. And on the contrary, the fall in the exchange rate of the currency will adversely affect the value of the securities. Deposit funds can be used in foreign currency transactions to hedge foreign exchange risk. However, there is no guarantee that coverage or protection will be achieved. This strategy can also limit the trader’s profits on securities in the event of an increase in the currency of the securities against the base currency.
Futures and options in the stock markets:
Funds can be invested in options and futures on securities, indices and interest rates to manage the investor portfolio more effectively. Funds can also be invested in futures and options or forward currency exchange contracts to hedge market and currency risks. Futures transactions carry a high degree of risk. The amount of the initial margin is small relative to the value of futures contracts, therefore these transactions are backed by «leverage». A relatively small market movement will have a proportionately larger impact, which can work for or against the investor. Placing certain orders with the intention of limiting losses to certain amounts may not be effective because market conditions may make it impossible to execute such orders. Option transactions also carry a high degree of risk. The sale («subscription» or «grant») of an option generally involves a greater risk than the purchase of an option. Although the premium the seller receives is fixed, the seller may suffer losses that far exceed this amount. Seller shall also be exposed to the risk of Buyer exercising the option, and Seller shall be obliged to settle the option in cash or acquire or deliver the underlying investment. If the option is «hedged» by the seller, who has a corresponding position in the underlying investment or futures or other options, the risk can be reduced.
Stock trading platforms, which include small-cap companies, have higher risks than platforms that invest in large companies. For example, small-cap companies may have limited product lines, market, financial, or management resources. As a result, the prices of small-cap companies can be more volatile. The transaction costs of securities in small-cap companies may be higher than those of large-cap companies and may be less liquid.
Qualification of non-investment debts:
Credit risk is most pronounced for investments in fixed income securities, with a rating below investment grade or comparable quality. The risk of default could be more serious and the market for such securities could be less active, creating difficulties in selling securities at reasonable prices, as well as making it difficult to evaluate securities. The stock market may incur additional expenses, if the issuer is insolvent and the market tries to recover some of its losses caused by bankruptcies or other similar processes.
SECONDARY RISK DISCLOSURE: HIGH-RISK INVESTMENTS
Trading is a very risky and speculative activity. Forex trading is highly speculative and suitable only for those clients who: (a) understand and wish to take on the economic, legal and other risks involved, and (b) can financially afford significant losses exceeding margin or deposits. A Client, who represents, warrants and agrees that he understands these risks; a Client who is willing and able, financially or otherwise, to assume the risks of currency trading; and the loss of a Customer’s entire checking account will not change the Customer’s lifestyle.
The high leverage and low margin associated with forex trading can lead to significant losses due to changes in the prices of currency contracts and contracts for cross currency exchange rates. The marginal policy of the companies may require additional funds as a security deposit in the Client’s account and the Client must immediately comply with such margin requirements. Failure to maintain the required margin balance in an amount equal to or greater than 60% of the initial margin requirements may lead to the elimination of any open position with consequent loss to the Client.
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