Slippage and Negative Balance Scenarios
Over-the-counter derivatives are leveraged products that carry a high level of risk to your capital. Derivate instruments such as Forex and CFDs can be highly volatile due to the market conditions of the underlying instrument and the amount of leverage available.
When you apply leverage to a trade, the potential exists to lose more than the monies you have deposited in your trading account as it amplifies the profits and/or losses, depending on the market movement. In general, the greater the leverage the higher the potential returns but the higher the potential losses may be.
Examples of scenarios that could result in a negative account balance include:
Negative slippage
Whenever an order is placed between one of these parties there is a time delay (even if only for a fraction of a millisecond). If prices change during that time delay then there could be SLIPPAGE.
When slippage occurs you don’t get the price you were quoted, instead, you get the next best price that is available.
When you place a large order you could be slipped because there are not enough buyers or sellers to take your trade.
Slippage occurs when
- There is volatility – Such as news events
- Fast moving markets – Such as during a breakout
- Illiquid markets – such as public holidays
- Over the weekend
Axi does not offer a guarantee on stop losses. It is possible to receive negative slippage which can result in you losing more than the balance of your account.
Overnight financing charges
If you are holding a short position overnight, swap charges will apply, and these have the potential to create a negative result.
Index CFD dividend adjustment
Index CFDs are made up of a group of shares that may pay or charge dividends throughout the year. Short positions will be positively impacted by the drop in Index price, so you will be debited the dividend adjustment value. Long Positions are negatively impacted so you are credited with the dividend adjustment.
For more information on the above please read the Product Schedule.