Effect of 'Leverage' or 'Gearing'
Transactions in futures and leveraged foreign exchange carry a high degree of risk. The amount of initial margin is small relative to the value of the futures contract or leveraged foreign exchange transaction so that the transaction is highly 'leveraged' or 'geared'. A relatively small market movement will have a proportionately larger impact on the funds you have deposited or will have to deposit; this may work against you as well as for you. You may sustain a total loss of the initial margin funds and any additional funds deposited with the firm to maintain your position. If the market moves against your position or margin levels are increased, you may be called upon to pay substantial additional funds on short notice in order to maintain your position. If you fail to comply with a request for additional funds within the specified time, your position may be liquidated at a loss and you will be liable for any resulting deficit in your account. You should first seek advice from an independent financial adviser regarding the suitability of transacting in futures and leveraged foreign exchange, taking into account your specific investment objectives, financial situation and/or your particular needs before you make a commitment to carry out such transactions in futures and leveraged foreign exchange. In the event you choose not to seek advice from a financial adviser, you should consider carefully whether carrying out transactions in futures and leveraged foreign exchange is suitable for you.