Leverage magnifies losses
Leverage lets you control a large position with a small deposit (margin). A price move that is small in percentage terms can therefore wipe out a large share of your balance. Higher maximum leverage, such as the very high ratios advertised by some offshore entities, means higher potential losses, not just higher potential gains.
Margin calls and stop-outs
If losses reduce your equity below the broker's required level, positions can be closed automatically at a loss, often at an unfavourable moment. In fast markets prices can gap past your stop-loss.
Costs add up
Spreads, commissions where applicable, overnight swap charges and currency conversion all reduce returns. Frequent trading increases total costs. See XM trading costs.
You do not own the underlying asset
A CFD is a contract on the price difference. You do not own the share, coin or commodity, and you do not have the rights an owner would have.
Protection depends on the entity
Investor-compensation schemes and negative-balance protection depend on which XM company serves you and its regulator. Offshore entities generally offer less protection than entities regulated in the EU, UK or Australia. Read your client agreement.
Promotions do not reduce risk
Bonuses and promotions come with conditions and do not make trading safer. Never trade larger because of a bonus.
Practise and size carefully
- Practise on a demo account first.
- Only deposit money you can afford to lose entirely.
- Use small position sizes and a stop-loss on every trade.
- Do not borrow money to trade.
Not advice
Nothing on ExemSignup is a recommendation to trade or a personal investment recommendation. Past performance is not a reliable indicator of future results.