Risk Disclosure Statement
The risk of loss in trading shares can be substantial, especially if this is done on a leveraged basis. You should therefore carefully consider whether this kind of trading is appropriate for you in light of your financial circumstances and if you have agreed to leverage, whether the amount of leverage involved is suitable.
In deciding whether or not you will become involved in this kind of trading, you should be aware of the following matters:
- You could sustain a total loss of initial capital as well as margin funds that are deposited with the appropriately licensed financial intermediary to establish or maintain a position in a stock market. Your loss is not limited to your initial deposit.
- If the stock market moves against your position, you may be required, at short notice, to deposit with the appropriately licensed financial intermediary additional margin funds in order to maintain the position. Those additional funds may be substantial. If you fail to provide those additional funds within the required time, your position may be liquidated at a loss and in that event you will be liable for any shortfall in your account resulting from that failure.
- Under certain conditions, it may become difficult or impossible to liquidate a position (this can, for example, happen when there is a significant change in prices over a short period).
- The placing of contingent orders (such as a stop-loss order) may not always limit your losses. Market conditions may make it impossible to execute such orders.
- A spread or ‘pair’ position is not necessarily less risky than a simple long or short position.
- The degree of leverage that is used in stock trading can result in large losses to you.
Please note: This statement does not disclose all of the risks and other significant aspects involved in trading the stock market. It is therefore recommended that you study leveraged stock trading carefully before becoming involved in it.
There is a chance that an investment’s actual return will be different than expected. This includes the possibility of losing some or all of the original investment. It is usually measured by calculating the standard deviation of the historical returns or average returns of a specific investment. A fundamental idea in finance is the relationship between risk and return.
The greater the amount of risk that an investor is willing to take on, the greater the potential return. The reason for this is that investors need to be compensated for taking on additional risk. For example, a U.S. Treasury bond is considered to be one of the safest investments and, when compared to a corporate bond, provides a lower rate of return. The reason for this is that a corporation is much more likely to go bankrupt than the U.S. government. Because the risk of investing in a corporate bond is higher, investors are offered a higher rate of return.