Everything in life has risk, whether we choose to ignore it or not. The same holds true for day trading stocks, forex, futures, or anything else.
The National Futures Association (NFA) and CFTC (Commodity Futures Trading Commission), the regulatory agencies for the forex and futures market in the United States, require that customers be informed about potential risks in the forex market. That’s why this page was created.
Risks Associated with Forex and Day Trading
Day trading foreign currencies is a challenging and potentially profitable opportunity for educated and experienced investors. However, before deciding to participate in the forex (FX) market, you should carefully consider your investment objectives, level of experience and desire to take risk. Most importantly, only use money that is risk capital; i.e., money that you can afford to lose.
There is considerable exposure to risk in any FX transaction. Any transaction involving currencies involves risks including, but not limited to, the potential for changing political and/or economic conditions that may substantially affect the price or liquidity of a currency.
Moreover, the use of leverage when day trading currencies means that any market movement will have an equally proportional effect on your deposited funds. This may work against you as well as for you. The possibility exists that you could sustain a total loss of initial margin funds and be required to deposit additional funds to maintain your position. If you fail to meet any margin call within the time prescribed, your position will be liquidated and you will be responsible for any resulting losses. Investors should lower their exposure to risk by employing risk-reducing strategies such as ‘stop-loss’ or ‘limit’ orders.
There are also risks associated with utilizing an internet-based trading platform including, but not limited to, the failure of hardware and software. System providers usually employ back up systems and contingency plans to minimize the possibility of system failure, and phone trading is always available.
Any opinions, news, research, analyses, prices, or other information contained on this website are provided as general market commentary, and do not constitute investment advice. Day Trading Tutor is not liable for any loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Day Trading Tutor has taken reasonable measures to ensure the accuracy of the information on the website. The content on this website is subject to change at any time without notice.
Commission-Free Trading and Compensation
Even though words such as “commission free trading,” “no commissions,” “commission free,” “zero commissions,” etc. are used throughout Day Trading Tutor, investors should know that Day Trading Tutor and some FCM’s that Day Trading Tutor works with get compensated from the spreads between the bid and ask prices. For institutional type firms and ECN’s (e.g., Currenex brokers), Day Trading Tutor may receive a commission per transaction. For managed accounts, Day Trading Tutor is also compensated from performance fees charged to investors. Thus, it is our responsibility to inform you that receiving volume based compensation and performance fees may constitute a potential conflict of interest to trade a client’s account regardless of profit potential due to volume based compensation.
Profit and Loss Potential
In any market where a potential for profit exists, there exists also a risk of loss. None of the information on Day Trading Tutor nor any information or education provided by any means assures that the client will make money in the forex market or day trading. The information contained on this website does not constitute investment advice. Day Trading Tutor will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
Benefits and Risks of Leverage
Even though the forex market offers traders the ability to use a high degree of leverage, day trading with high leverage may increase the losses suffered. Please use caution when using leverage in day trading or investing.
No testimonial used on this website is indicative of future results. Past results are not indicative of future results. The individuals quoted in the testimonials used were not paid to be quoted. The testimonials used on this website are unsolicited and are non-representative of all clients; certain accounts may have worse performance than that indicated.
Should you have any questions or concerns about this risk disclosure page, please feel free to contact Day Trading Tutor.