FXDirectDealer Risk Disclosure

That is why FXDirectDealer believes all of our clients, should individually analyze their financial objectives, financial status, investment constraints and tax situation to determine whether this type of trading is suitable.  In addition, we encourage our clients to educate themselves to the  potential risks they may encounter while trading margined foreign exchange with FXDirectDealer, and  look for ways to control those risks so the rewards can be achieved.

Risks associated with trading margined foreign exchange include, but are not necessarily limited to the following:

Market Risk:  Risk associated with the price movement of the currency pair traded resulting primarily from a change in economic and/or political conditions. 

Liquidity Risk: Risk resulting from decreased liquidity of a currency pair usually due to unanticipated changes in economic and/or political conditions.  When liquidity decreases, the trader can expect, at the minimum, to have wider bid to ask spreads.  Decreases in liquidity can also result in "Fast Market" conditions where the price of a currency pair moves sharply higher or lower or in a volatile up/down pattern without trading in an ordinary step-like fashion.  Although there may be instances when the markets enters a "Fast Market" situation, it is important to note that under all circumstances, FXDirectDealer's prices, bid/ask spreads and liquidity will reflect prevailing interbank market conditions.

Excessive Leverage: FXDirectDealer gives the trader the ability to leverage the deposited funds by a 100:1 ratio (this is under normal market conditions and can be reduced or increased at FXDirectDealer's discretion).  With this level of leverage, an investor has the potential to control a maximum margined position of up to $1,000,000 with an account balance of just $10,000.  

Leverage works for the investor when the position is favorable, but can work against the investor in a losing position.   As a result, it is possible that the amount of margin initially pledged against a trading position, can be completely depleted.  In fact, it is possible for the margin to go negative.

In the event that this happens, FXDirectDealer protects itself and its clients by imposing margin requirements and rules.  If an outstanding position results in a loss to a level that is incongruent with the amount of margin deposited for that size of a position, a "margin call" will be made that will require the client to deposit additional funds.  Doing so will allow the client to maintain the existing position.  In the absence of a new margin deposit, or in the event that the position continues to deteriorate passed the Liquidation Margin Level, FXDirectDealer has the option to automatically liquidate the client's position.  The client will be fully responsible for any resulting losses as a result of the liquidation.   

Because excessive leverage has the potential to magnify losses, FXDirectDealer encourages it's clients to only use an amount of leverage that the client feels comfortable with.  Furthermore, trading discipline and sound money management principles should always be used when trading. Stop Loss Orders along with careful monitoring of positions and orders are essential ingredients to making sound trading decisions.  Having a plan, and following the plan through the disciplined use of Stop Loss Orders and market monitoring, is essential to becoming a successful trader.

Technology Risk:  There are risks inherent with trading via any online internet trading application.   Technology failure can manifest itself in many ways.  The inability of a client to successfully dial into an Internet Service Provider (ISP) is a technology risk on par with a complete hardware or software failure.   Both will prohibit electronic execution.

FXDirectDealer employs state of the art technology that allows scalability and advanced performance. 

However,  the possibility still exists for a system failure no matter the level of technology or safeguards employed.   As a result, FXDirectDealer maintains a phone in service whereby clients can telephone a clerk who will execute the orders at the best available price.   To make telephone orders as efficient as possible, FXDirectDealer requests that all clients use a standard dealing protocol (see examples of our standard dealing protocol by clicking here).

FXDirectDealer encourages it's clients to understand the risks associated with leverage, a lack of liquidity, and technology when trading foreign exchange, and to utilize disciplined money management practices including Stop Loss Orders.  FXDirectDealer also requires all clients read, sign and understand the FXDirectDealer Risk Disclosure document before opening an account with FXDD.