Trading in financial derivatives, such as contracts for difference and currencies, involves significant risks and is not suitable for every investor. Before deciding to trade financial derivatives, you should carefully consider your investment objectives, risk tolerance and experience in dealing with financial products. The risk disclosures contained in this document are for general information purposes only and do not constitute a complete or exhaustive statement of all risks associated with trading financial derivatives.
When trading financial derivatives, you can use leverage to open larger positions with a smaller capital investment. However, this also means that even minor price changes can result in significant losses that exceed your initial capital investment. Therefore, it is important that you understand how leverage and margin work and consider the risk of margin calls.
Trading in financial derivatives is subject to various market risks, such as interest rate fluctuations, currency risks, political decisions and macroeconomic developments. These risks can lead to significant price losses, especially in the case of highly volatile financial instruments such as CFDs and forex. In addition, the liquidity of financial derivatives may be limited, which may lead to difficulties in executing orders or closing out positions.
When trading financial derivatives, you are exposed to the creditworthiness and solvency of your trading partner, the counterparty. In the event of the counterparty's insolvency or inability to pay, this may result in significant losses.
Trading in financial derivatives is subject to applicable national and international laws and regulations. It is your responsibility to inform yourself about and comply with applicable laws, tax regulations and reporting requirements. Changes in legislation and the tax environment may have an impact on the attractiveness and profitability of financial derivatives.
Trading in financial derivatives requires extensive knowledge of how financial markets, financial instruments and the securities behind them work. Missing or insufficient information can lead to wrong decisions and increased risk of loss. Information asymmetry, i.e. the imbalance in the availability of information between you and other market participants, can also lead to disadvantages and losses. It is therefore advisable to obtain comprehensive information about the financial instruments traded and the underlying markets and, if necessary, to seek professional advice.
Trading financial derivatives can trigger strong emotions such as greed, fear or hope, which can lead to irrational decisions and thus losses. To minimize emotional factors, it is important to develop a disciplined trading strategy and follow it consistently.
Financial derivatives, such as CFDs and Forex, are complex financial instruments whose performance depends on various factors. You may not fully understand the operation and risks of these financial instruments, which may result in unforeseen losses. Before you start trading financial derivatives, you should make sure that you sufficiently understand the operation and risks of each financial instrument.
The statement that past performance is no guarantee of future results has been dealt with in more detail at this point.
To reduce the risk associated with trading financial derivatives, it is advisable to diversify your investments and use different investment strategies. This includes the use of risk management tools such as stop-loss or take-profit orders. Nevertheless, such measures cannot completely prevent losses.
Trading in financial derivatives does not guarantee profits. Even experienced and professional investors may suffer losses. It is important that you are aware of the risks and are willing to accept them before you start trading financial derivatives.
The trading conditions of financial derivatives may change due to market developments, regulatory changes or decisions of issuers and trading platforms. Such changes may impact your open positions and future transactions. It is important to keep yourself regularly informed about the current trading conditions and possible changes in order to minimize unforeseen risks.
When trading financial derivatives, you may rely on technological systems such as trading platforms, Internet connections and computer hardware. System failures, delays or malfunctions may result in losses, especially if you are unable to close positions or execute orders in a timely manner. To minimize such risks, it is advisable to perform regular system maintenance and consider alternative trading options such as telephone orders.
The investment duration and trading strategy you choose can affect the risk associated with trading financial derivatives. Long-term investments may be more affected by market fluctuations, while short-term investments may have higher transaction costs and increased volatility. It is important to develop a trading strategy that suits your investment objectives, risk tolerance, and financial situation.
Financial crises and extreme market events may result in significant price losses and liquidity difficulties in financial derivatives. In such situations, you may not be able to execute orders or close positions, which may result in significant losses. To minimize this risk, it is important to diversify your investments and possibly hold a portion of your portfolio in less volatile and lower risk investments.
The investment duration and trading strategy you choose can affect the risk associated with trading financial derivatives. Long-term investments may be more affected by market fluctuations, while short-term investments may have higher transaction costs and increased volatility. It is important to develop a trading strategy that suits your investment objectives, risk tolerance, and financial situation.
As of JUly 2023