Risk warning: forex and CFD trading

1. Most retail accounts lose money

Forex and CFDs (contracts for difference) are complex instruments and come with a high risk of losing money rapidly due to leverage. Licensed brokers must publish the share of their retail clients who lose money; it is typically well over half. Only trade with money you can afford to lose completely.

2. Leverage works both ways

With 1:100 leverage, a 1% move against your position wipes out 100% of the margin behind it. Leverage increases losses exactly as much as it increases gains. Use our margin calculator and position size calculator to see the real exposure before you place a trade.

3. You can lose more than you expect

• Prices can gap over weekends or on news, so a stop-loss may close at a worse price than you set.
• Spreads widen during low liquidity and major announcements.
• Overnight swap fees, currency conversion and withdrawal fees reduce returns.
• Check whether your broker offers negative balance protection in your country; not all do.

4. Licensing protects you, partly

A broker licensed by the CMA (Kenya) or the FSCA (South Africa) must follow local rules on client money, complaints and disclosure. It does not protect you from trading losses. An offshore company of the same brand usually gives you none of these protections. Check the exact company on your account agreement with our Broker Check.

5. Signals, account managers and guaranteed returns

Anyone promising fixed daily returns, offering to trade your account for you, or asking you to pay a person instead of a licensed broker is a major red flag. In South Africa and Kenya, giving personal trading advice or managing money needs a licence. Check names with Scam Watch.

6. Prop firms and funded accounts

Prop-firm “challenges” are paid evaluations, usually on simulated accounts. Most traders do not pass, and the fee is not refunded. Read the rules on drawdown, news trading and payouts before you pay.

7. Past performance and education

Past performance, backtests and demo results do not guarantee future results. Our lessons and tools are education, not advice. Nothing on this site is a recommendation to buy or sell. See our terms of use.

8. Tax

Trading profits may be taxable where you live. Tax rules in Kenya, South Africa and Nigeria change; confirm with the tax authority or a registered tax practitioner.