Past investment performance is no guarantee of future gains.
Trading in financial markets, involving leveraged financial instruments, provides a wide range of opportunities and enables investors ready to take risks to make high profits, but it carries a potentially high level of risk of loss. Therefore, prior to trading you should address the issue of choosing an appropriate investment strategy, taking into consideration available resources.
This Risk Warning does not disclose all the risks associated with investing in financial instruments using margin trading. If you have any additional questions, please contact TeleTrade consultants.
The aim of this Risk Warning is to provide a wide circle of stakeholders with information about the risks that may arise in connection with trading transactions in the Forex market and other financial markets, and to warn about potential losses that may result from executing operations in Forex instruments and CFDs.
Please note that due to the diversity of situations that may arise in the financial markets, including the Forex market, the list of risks set out in this Risk Warning is not exhaustive and does not disclose all the risks associated with investing in financial instruments in the Forex and CFD markets.
Any investment activity related to financial instruments in the Forex and CFD markets carries a high level of risk, as it involves leveraged transactions and may lead not only to loss of the expected return on investment but also to loss of initial investment. For the purposes of this Risk Warning, the risk of executing operations involving Forex and CFD financial instruments means the possibility of an event causing or capable of causing a loss of profit or loss of Client's initial investment.
This Risk Warning is not intended to force the Client to refrain from transactions in financial instruments in the Forex and CFD markets but is intended to help the Client understand and assess the risks associated with investing in the financial instruments and encourage the Client to make more informed investment decisions.
Trading in the Forex market and other financial markets involves certain trading and non-trading risks.
The Risk Classification can be presented in different ways, but for the purposes of the Risk Warning it is set out as follows:
BY SOURCE OF ORIGIN:
- systemic risk is the risk associated with the operation of the system as a whole and not associated with a particular financial instrument. The major systemic risks include political risk, the risk of adverse (when considering the conditions of doing business) changes in legislation, macroeconomic risks (rapid devaluation of the national currency, a turmoil in the government debt market, a crisis in banking, a currency crisis, etc.). Systemic risks are related to the risks of force majeure.
- non-systemic (individual) risk is the risk of a particular financial market participant: the investor, Forex company, funds manager, trading system and so on.
BY RISK FACTOR:
economic risk is the risk of adverse economic events. The likelihood of economic risk is generally higher than the systemic ones. The types of economic risks include:
price risk which is the risk of loss caused by adverse price changes. A number of instruments may have significant intraday price changes, which implies both the potential to gain and a high risk of loss;
currency risk which is the risk of loss caused by adverse changes in exchange rates;
interest rate risk which is the risk of loss caused by adverse changes in interest rates;
inflation risk which is the risk of decrease in the purchasing power of money;
liquidity risk which is the possibility of difficulties arising from the sale or purchase of a financial instrument at any given moment, which can also lead to an increase in the size of the spread. A wide spread makes it difficult to use limit stop orders that are placed in order to limit the extent of loss when opening a position (stop loss). To avoid major losses, the Clients shall be continuously monitoring the situation in the financial markets and exercising reasonable activity while managing their positions;
legal risk – the risk of changes in law (legislative risk) – which is the possibility of loss due to new or amended (cancelled) law, including taxation. The legislative risk includes the possibility of loss caused by the lack of regulations governing the activities in the financial markets, particularly in the Forex market;
socio-political risk which is the risk of a radical change in the political and economic situation, the risk of social unrest, including strikes, the risk of an outbreak of hostilities;
crime risk which is the risk associated with the illegal actions of third parties, such as fraud, unauthorized access to computer systems and confidential information, etc.;/p>
operational (technical, technological, personnel) risk which is the risk of direct or indirect loss:
- because of the failure of information, communication, electronic, electrical and other systems, or
- because of errors due to any shortcomings of the market infrastructure, including trade execution technologies, procedures, management, recording and control, or
- because of any actions (or inaction) of the employees.
For example, when working with the client terminal, failure may arise due to any malfunction in the client's hardware, software, and/or any incorrect settings, outdated software version or poor connection quality. In periods of peak loads (for example, when major economic data being released) the client must be aware of the possibility of overloading the communication channel and of possible limit on the ability to contact the Forex company by telephone.
- natural risk which is the risk that is independent of human activity (risks of natural disasters: earthquakes, floods, hurricanes, typhoons, lightning strikes, etc.);
- man-made risk which is the risk generated by human activities: emergency situations, fires, etc.
BY ECONOMIC IMPLICATIONS FOR THE CLIENT:
- risk of loss of profit which is the possibility of an event resulting in any loss in part or whole of the expected return on investment;
- the risk of loss of initial investment which is the possibility of an event resulting in a loss in part or whole of initial investment;
BY CLIENT'S CONNECTION WITH SOURCES OF RISK:
- immediate risk which is a source of risk that is directly related to any relationship with the Client;
- indirect risk which is the possibility of an adverse event for the Client occurring to the source not directly connected with the Client but causing a chain of events that ultimately leads to a loss for the Client.
When executing transactions, the following additional types of risk may occur:
- Transactions in financial instruments of the Forex market and CFD are characterized by high degree of risk due to the leverage effect is relatively small exchange fluctuations may have a significant impact on the trading account.
- In the event that there is a situation unfavorable for the Client's position in the financial market, it is possible within a relatively short period of time to suffer losses in the amount of the initial deposit and any extra funds deposited by the Client in order to hold open positions, enter into Agreements and execute trades as per the Agreement.
- In case a price movement is in the Client's favour, and as per the Agreement and the Regulations of Interaction Between the Company and the Client, the Client's position can be forcibly removed, which can lead to the implementation of the risk of loss of profit and the risk of loss of initial investment. The Client shall be responsible for any losses incurred as a result of such events.
- As a result of the conditions prevailing in the Forex market, it may be difficult or impossible to close a position opened earlier by the Client at the desired price. The occurrence of such situation is possible, for example, when there are rapid changes in prices.
- Stop orders aimed at limiting losses may not always limit them to a certain pre-determined level, because when there is a drastic change in the market prices, the execution price may significantly differ downwards from the stop order price.
The Company hereby notifies the Client that the Company shall warrant no returns and make no representation in regard to profits from operations executed by the Company pursuant to the Client Agreement. The Client shall take own decisions in regard to executing operations in financial instruments in the financial markets and independently determine his own investment strategy.
Operations executed in the Forex market and other financial markets may result in financial losses; past experience is no indicator of future financial results. Any financial performance by other party is no guarantee of the same results for the Client.
With the above in mind, the Clients shall take into careful consideration whether risks arising while executing operations in financial instruments in the Forex and CFD markets are suitable for them in terms of their investment goals and financial situation.
All of the above is not intended to force the Client to refrain from transactions and is only intended to help the Client understand the risks related to this line of business, evaluate their suitability, assess the Client's financial goals and situation, and more closely look into the aspect of choosing a suitable investment strategy.