Leveraged Forex and CFD Trading: What You Need to Know Before You Start
This page explains the main risks of leveraged forex and CFD trading for readers of eighbrokerke.com, an independent editorial site that is not a broker and does not provide financial services.
Partner broker detailsWhat happens if something goes wrong with the broker?
When you trade with a broker, the protection you get depends on which legal entity you are dealing with and where that entity is licensed. Different jurisdictions have different rules on how client money is held, whether there is any compensation scheme, and how complaints and disputes are handled. An entity operating under one licence may offer different protections from another entity in the same group.
Before you open an account, find out which entity would hold your money, where it is based, and what local rules apply to it. Do not assume that a scheme available in one country covers clients in another. If you are in Kenya, check what recourse you would have if the broker failed or refused a withdrawal. The contact form on this site is only for editorial feedback; it is not a complaints channel and cannot recover money for you.
This site reviews EightCap but is not EightCap. We do not open accounts, accept deposits, place trades or give advice. Any decision to trade is yours, and any money you send goes to the broker, not to us.
How much will trading cost me beyond the trade itself?
Leveraged products carry running costs that are easy to overlook. The spread is the difference between the buy and sell price, and it is charged on every trade. On some accounts a commission is added on top. Overnight financing is charged when you hold a position past the daily cut-off, and it can build up quickly if you keep positions open for days or weeks.
There may also be charges for deposits, withdrawals or inactivity. These costs apply whether you win or lose, so they steadily reduce your balance in a way that is not always obvious from the trade ticket. Read the broker's fee schedule and work out what a typical month of your trading would cost before you deposit.
Costs vary by account type and by the entity you sign up with. If you cannot find a clear answer, treat that as a warning sign rather than a detail to sort out later.
How much money should I put at risk?
Only trade with money you can afford to lose entirely. Leverage magnifies both gains and losses, and a small price move can wipe out a large part of your balance. Money set aside for rent, school fees, emergencies or debt repayment does not belong in a trading account.
A common mistake is to deposit more after a loss to try to recover it. That turns a trading loss into a financial problem that affects your household. Decide in advance what you are willing to lose, keep it separate from essential savings, and stop when that amount is gone.
No strategy removes the risk of loss. If losing the amount you plan to deposit would change your daily life, the amount is too large.
Can I rely on past performance?
Past results say little about what will happen next. A strategy that worked in one market condition may fail in another. Historical charts, backtests and reported returns are based on decisions made with information that is now known, and they do not show how the same approach would perform under future uncertainty.
Be cautious with any track record you see, including your own early results. A short run of wins can be luck rather than skill, and it can encourage you to take larger risks. Leverage makes that temptation stronger.
Treat performance information as background, not as a forecast. Nothing on this site is a prediction of future results or a recommendation to trade.
What happens if my losses grow too large?
When your losses reduce your account equity below the level the broker requires, you may receive a margin call. This is a demand to add funds or reduce positions. If you do not act, or if the market moves further against you, the broker can close your positions automatically, sometimes at a loss larger than you expected.
Automatic closure is not a safety net that protects you from losing more than your balance. In fast markets, the closing price may be worse than the level that triggered it, and you may still owe money depending on the terms of your account agreement.
Understand the margin rules for your account before you trade. Keep track of your free margin, and do not assume you will have time to react when the market moves quickly.
Why do prices sometimes jump past my level?
Markets can gap, meaning the price moves from one level to another without trading in between, often around news, economic data or market opens. Slippage happens when your order is filled at a different price from the one you requested, which can be better or worse. Stop-loss orders are not guaranteed and may be filled well beyond your chosen level.
News-driven volatility can widen spreads sharply and make it hard to close a position at a fair price. This is especially relevant for leveraged positions, where a small adverse move has a large effect on your balance.
Finally, be aware that a large share of retail accounts lose money when trading CFDs and leveraged forex. That figure is published by brokers in some jurisdictions and is not a guarantee about your own outcome, but it is a useful reminder of how difficult these products can be.
