Please read these notes concerning margin requirements.
Before you are allowed to enter into a Contract with us, you will be required to lodge money with us – this is called the margin requirement. This margin requirement will usually be a relatively modest proportion of the overall Contract value, 2% - 20% of the Contract value, for example.
This means that you will be using ‘leverage’ or ‘gearing’ and this can work for or against you; a small price movement in your favour can result in a high return on the margin requirement placed for the Contract, but a small price movement against you may result in substantial losses.
At all times during which you have open positions, you must ensure that your account balance, taking into account all running profits and losses, is equal to at least the total margin requirement that we require you to have paid us. Therefore, if our price moves against you, you may need to provide us with substantial additional margin requirement, at short notice, to maintain your open positions.
If you do not do this, we will be entitled to close one or more or all of your positions.
You will be responsible for any losses incurred.
You should also be aware that under our Customer Agreement
we are entitled to increase margin rates at short notice. If we do so, you may be required to deposit additional funds into your account to cover the increased margin rates. If you do not do this, we will be entitled to close one or more or all of your positions.
Unless you have taken steps to place an absolute limit on your losses it is possible for adverse market movements to result in the loss of the whole of your account balance and more, so that you owe additional money to us.
We offer a range of risk management tools to help you to manage this risk.
Because of the effect of gearing and therefore the speed at which profits or losses can be incurred it is important that you monitor your positions closely. It is your responsibility to monitor your positions and while you have open positions you should always be in a position to do so.
CFDs are financial instruments that allow you to speculate on price movements in underlying markets. Although the prices at which you trade are set by us, our prices are derived from the underlying market. It is important therefore that you understand the risks associated with trading in the relevant underlying market because fluctuations in the price of the underlying market will effect the profitability of your trade.
Some such risks include:
- currency: if you trade in a market other than your base currency market, currency exchange fluctuations will impact your profits and losses;
- volatility: movements in the price of underlying markets can be volatile and unpredictable. This will have a direct impact on your profits and losses. Knowing the volatility of an underlying market will help guide you as to where any Stops should be placed.
- gapping: ‘gapping’, a sudden shift in the price of an underlying from one level to another.
Various factors can lead to gapping (for example, economic events or market announcements) and gapping can occur both when the underlying market is open and when it is closed. When these factors occur when the underlying market is closed, the price of the underlying market when it reopens (and therefore our derived price) can be markedly different from the closing price, with no opportunity to close your trade in-between. ‘Gapping’ can result in a significant loss (or profit). A Non-guaranteed Stop will not protect you against this risk whereas a Guaranteed Stop will protect you against the market gapping.
Market liquidity: In setting our prices, spreads and the sizes in which we will deal we take account of the market or markets for the relevant underlying instruments. Market conditions can change significantly in a very short period of time, so that if you wish to close a contract we might not be able to do so under the same terms as when you opened it.