Last Update: January 1st, 2025
Table of contents
Introduction
TRUE TRADE PRO LTD. (hereafter referred to as the “Company”) is a trading brokerage incorporated and registered under the laws of the Labuan Financial Services Authority. This notice provides critical information regarding the risks associated with trading financial instruments, specifically Contracts for Differences (CFDs), Foreign Exchange (Forex), and cryptocurrencies.
Importance of Understanding Risks
Clients are urged to consider whether these risks align with their investment goals, risk tolerance, and overall financial situation. Engaging in trading activities without fully understanding the potential risks can lead to significant financial losses. Therefore, it is advisable for clients to seek independent financial advice if they are unsure about their trading decisions or the suitability of these products for their circumstances.
Scope of Trading
Clients can trade CFDs and other financial instruments through the Company. Before participating in any trading activities, it is imperative that clients fully understand and accept the inherent risks involved. This Risk Disclosure Statement aims to provide essential information regarding these risks to promote informed decision-making.
Product Description
A CFD (Contract for Difference) is a financial agreement between a 'buyer' and a 'seller' to exchange the difference between the current price of an underlying asset (such as currencies, commodities, indices, shares, etc.) and its price at the time the contract is closed. CFDs are leveraged products, allowing clients to gain exposure to the markets while only requiring a small margin ('deposit') of the total trade value. This leverage enables clients to benefit from price movements by taking 'long positions' (betting that prices will rise) or 'short positions' (betting that prices will fall) on underlying assets. Upon closing a contract, clients will either receive or pay the difference between the closing value of the CFD and its opening value. If the closing price exceeds the opening price, clients profit; conversely, if the closing price is lower than the opening price, clients incur a loss. Unlike traditional investments like shares, CFDs do not entail the actual ownership of the underlying asset. Instead, they are purely financial instruments that reflect price movements of the underlying assets. While CFDs and other financial derivatives can be employed for managing investment risk, they may not be suitable or appropriate for many clients, given their high degree of risk. Clients should carefully evaluate their risk appetite and investment experience before engaging in trading these products.
Trading Is Considered to Be Risky and Speculative
You, the Client, are entirely responsible for any losses incurred in your trading account. It is crucial to acknowledge that trading in financial markets carries a significant risk of loss. Therefore, you should be prepared to potentially lose your entire invested capital. Under no circumstances should you invest money that you cannot afford to lose. The speculative nature of trading means that while potential profits can be substantial, the risks of loss are equally significant. This volatility requires careful consideration and a well-thought-out trading strategy.
Gearing And Leverage
Before opening a CFD trade or any other financial derivative product, you are required to maintain a margin. Margin is a relatively modest proportion of the overall contract value. This leverage enables you to control a more significant position than your initial investment would typically allow. The terms “gearing” and “leverage” are often used interchangeably in trading CFDs and other financial derivatives. Leverage can amplify both gains and losses, meaning that a small market movement can lead to a proportionately much larger movement in the value of your position. Consequently, while leverage can enhance profits, it also increases the risk of substantial losses. At all times during which you have open trades, it is essential to maintain sufficient equity to cover all running profits and losses. This includes meeting the margin requirements set by the Company. If the market prices move against your position and your account balance becomes insufficient to meet these requirements, the Company may close your positions without further notice, regardless of your agreement or preferences.
Off-Exchange Transactions
When you trade CFDs with the Company, you enter into an off-exchange (OTC) derivative transaction. Unlike exchange-traded derivatives, OTC transactions do not have a centralized market where positions can be easily closed. This lack of an exchange market can expose you to greater risks, including limited liquidity, making it difficult to close positions at your desired price or within a specific timeframe. There is also counterparty risk, which is the risk that the Company may default on its obligations and become unable to fulfill its financial commitments. While the Company strives to maintain financial stability, such risks cannot be eliminated entirely. The Company is committed to safeguarding client funds. All client money is held in segregated accounts, separate from the Company’s own funds and other clients' funds, in compliance with relevant regulations.
Underlying Market Volatility
CFDs and other financial derivative products enable clients to trade based on price movements in underlying markets or instruments. The prices offered by the Company are derived from these underlying assets. It is critical for clients to recognize that fluctuations in the underlying instrument can significantly impact the value of the CFD and, consequently, their profitability. Market volatility can result in rapid price changes that may affect open positions. Clients should also be aware of the concept of “gapping,” where a security's price jumps from one level to another without trading at prices in between. This can occur during significant market events, and gapping can lead to unexpected profits or losses, especially during periods of high volatility or market closure.
Stop Loss Limits
While stop-loss orders are designed to limit potential losses by automatically closing a position at a predetermined price, there are circumstances where they may prove ineffective. In instances of rapid price movements or market closures, the execution price of your stop-loss order may differ significantly from your intended level. For example, if the market price drops sharply overnight, your stop-loss may not execute at the desired price, leading to larger losses than expected. It is essential to understand that stop limits do not guarantee trade execution at your specified price, particularly in volatile markets. Consequently, clients should be prepared for the possibility that stop-loss orders may not provide the intended protection against losses.
Liquidity Risk
Liquidity risk refers to the potential difficulty in executing trades in financial instruments due to insufficient buyers or sellers in the market. Some financial instruments may not be readily tradable, particularly during periods of reduced-price availability or high demand. In such instances, you may find it challenging to sell your holdings or to obtain accurate and timely information on the current value of these instruments. The liquidity of an asset can fluctuate based on various factors, including market sentiment, economic news, and broader market conditions. Investors should be mindful of liquidity constraints, especially when trading less popular or highly volatile assets, as these can increase the likelihood of incurring significant losses.
Execution Risk
Execution risk arises from potential delays or failures in executing your trade orders promptly. There may be a time lag between when you place your order and when it is executed. During this interval, market conditions can change, leading to scenarios where the market moves against your position, resulting in your order not being executed at the expected price.
Cost And Charges
All relevant costs and charges related to trading will be communicated to you by the Company and will also be outlined on the Company’s website. Clients should familiarize themselves with various charges, including transaction fees, spreads, overnight financing costs, and any management fees that may apply to their accounts.
Client’s Acknowledgement
By participating in trading activities with the Company, you acknowledge and declare that you have read, understood, and accept, without reservation, all information included herein, including the risks of fluctuations, past performance limitations, liquidity constraints, and currency risks.
