There are risks associated with trading financial contracts. Trading in these markets carries enormous potential for rewards but also a significant potential for losses. Market participants should carefully consider whether such trading suits them in light of their financial condition and don’t trade with money they can’t afford to lose.
It is possible to sustain a total loss of the initial margin funds and any additional funds deposited with a broker or exchange to establish or maintain a position. If the market moves against a position, a broker may require the deposit of additional margin funds on short notice to keep the position.
Failing to provide the required funds within the prescribed time may result in the position being liquidated at a loss.
Under certain market conditions, it may be difficult or impossible to liquidate a position. That can occur, for example, when the market makes a “limit move.” The placement of contingent orders, such as a “stop-loss” or “stop-limit” order, will not necessarily limit losses to the intended amounts since market conditions may make it impossible to execute such orders.