Leveraged Forex and CFD Trading: What You Need to Know Before You Start
An independent guide for readers in Uganda on the real costs and risks of leveraged trading, and why most retail accounts end up losing money.
Official site of the sponsorWhat will this actually cost me beyond the trade itself?
When you open a leveraged forex or CFD position, the price you see on screen is not the price you get. The broker earns from the spread, which is the gap between the buying and selling price, and that gap widens when markets are quiet or volatile. On top of the spread, any position you hold overnight usually attracts a financing charge, calculated on the full size of the position you control, not just the money you put down. That charge can add up quickly if you keep trades open for days or weeks.
There are other running costs too. Some accounts charge commissions on each trade, inactivity fees if you stop trading for a while, and conversion fees when your account currency differs from the currency of the instrument. These costs apply whether you win or lose. A strategy that looks profitable on a demo account can turn into a losing one once spreads, financing and fees are taken into account. Before you trade, add up every charge the broker publishes and ask yourself whether your expected gains can realistically cover them.
Leverage magnifies both gains and losses, and it also magnifies the effect of these costs. A small move against you can wipe out a large part of your account when you are highly leveraged. The costs are certain; the outcome of the trade is not.
Am I protected if something goes wrong?
Protection for retail traders is not the same everywhere. Different countries have different rulebooks, and the same broker may operate through separate legal entities in different jurisdictions. That means the safeguards attached to your account depend on which entity you sign up with, not on the brand name alone. Compensation schemes, if they exist at all, have limits and conditions, and they typically cover only certain types of losses.
In some jurisdictions, brokers must keep client money in segregated accounts and participate in a compensation fund up to a set amount. In others, there is no such fund, or the protections are weaker. Negative balance protection, which stops your losses from exceeding your account balance, is also not guaranteed in every jurisdiction. If the broker or its banking partners fail, or if a dispute arises, your ability to recover money may be limited.
This site is an independent editorial resource. It is not the broker, it is not affiliated with the broker, and it does not provide financial services, accounts, deposits or advice. It cannot confirm which entity would hold your account or what protections would apply. You should check the broker's legal documents and the rules of the relevant regulator yourself before depositing any money. If you need to contact this site, use the contact form on this site.
Can past results tell me what will happen next?
No. Past performance is not a reliable guide to future results. Markets change, and a strategy that worked in one period can fail in the next. Historical charts and backtests are drawn from conditions that may never repeat. A track record, whether from a broker, a signal provider or your own trading, says nothing certain about what comes next.
Leveraged products are especially sensitive to short-term moves. A position that was profitable yesterday can be closed out today by a price swing that nobody predicted. This is why you should treat any claim of consistent returns with caution, including claims that appear to come from data or analysis. The only thing you can control is your own risk: how much you put at stake, how much leverage you use, and whether you can afford the loss.
How many retail traders actually lose money?
Regulators in several countries require brokers to publish the share of retail accounts that lose money on CFDs. Those figures commonly fall between 70 and 80 percent, and sometimes higher. In other words, the majority of retail traders lose money over time. This is not a prediction about you personally, but it is the base rate you should keep in mind.
The reasons are not mysterious. Leverage, spreads, overnight financing and the difficulty of predicting short-term prices all work against the retail trader. Many accounts are closed within weeks or months. A small number of winners do exist, but you should not assume you will be one of them.
Because of this, you should trade only with money you can afford to lose entirely. Do not use rent, school fees, emergency savings or borrowed money. Do not top up a losing account in the hope of recovering losses. If you are not sure you can absorb a total loss, the safest step is not to trade at all. This site does not provide advice, and nothing here should be read as a recommendation to trade.
