The following disclosure statement suggests certain – but not all – risks associated with trading currency (also known as "foreign exchange trading," "forex," or "fx").
Forex trading is speculative and may result in substantial or complete loss of funds, or even losses in excess of your initial margin deposit. It should therefore be undertaken only with "risk capital," defined as funds that are not necessary to your survival or well-being. It is your responsibility to consider whether foreign exchange trading is suitable for your financial position and investment objectives. If you do not thoroughly understand either the risks involved in Forex trading or S²trade's various trading rules and policies, you are hereby instructed not to utilize S²trade's services. Without limiting the generality of the foregoing, trading involves risks associated with the following factors:
1. Spot trading may be leveraged with funds worth hundreds of times more than the value of your margin deposit. Resulting losses may therefore far exceed such deposit.
2. Losses may be compounded due to sudden adverse market movements, position build-up, or accumulation of commissions and other charges.
3. Execution of orders at a stipulated price, or contingent "stop-loss" or "stop-limit" orders may be impossible or costly due to certain market conditions or fluctuations. You may on short notice be called upon to deposit additional margin funds, the failure of which may result in the liquidation of your position and your liability for any deficit in your account.
4. Currency is not traded on an exchange and some combinations are traded irregularly. Price quotations for such orders may be outdated or unreliable due to the absence of a counterparty, among other reasons. Orders for such trading may in any case not be readily realizable.
5. S²trade does not make recommendations or give advice for trading and may have undisclosed interests that conflict with yours. In particular, S²trade may represent adverse positions or act as a counterparty in transactions, meaning that S²trade may act as buyer when you sell and seller when you buy. In addition, S²trade may establish the prices at which it offers to trade with you, which may not represent the best prices or those available to other customers.
6. S²trade, or a bank or broker that it uses, may become insolvent resulting in immediate closing of your positions.
By using S²trade you acknowledge that you have read and understand this disclosure.