Risk Disclosure

Financial markets are inherently volatile and unpredictable. Market risk factors include:

• Price volatility: rapid and significant price swings can result in substantial losses
• Market gaps: gaps between sessions can cause unexpected losses
• Economic events: announcements may trigger sudden market moves
• Geopolitical risk: political events increase uncertainty and volatility
• Liquidity risk: illiquid markets make it difficult to exit positions

Leverage magnifies both potential profits and losses:

• Small market moves can cause disproportionately large account swings
• In extreme cases, losses may exceed the initial account balance
• Margin calls may force liquidation at unfavorable prices
• Higher leverage increases the risk of total account loss
• Psychological pressure rises with leveraged positions

Technical and operational factors that may affect trading:

• Platform outages or technical failures
• Internet connectivity issues
• Order execution delays or rejections
• Pricing feed errors or delays
• System maintenance and updates

2.1 Forex Risks

• Currency risk: exchange rate moves impact P&L
• Interest rate risk: central bank policy affects currency values
• Country risk: political and economic stability affects currencies
• Carry trade risk: rate differentials may move against positions
• 24/5 market: continuous trading implies overnight exposure

2.2 Commodities Risks

• Supply/demand: physical factors influence commodity prices
• Weather risk: climate conditions affect agricultural products
• Storage costs: warehousing impacts pricing
• Seasonality: cyclical patterns can drive predictable volatility
• Producer risk: major producers may influence supply

2.3 Equity Indices Risks

• Market correlation: indices reflect overall sentiment
• Company‑specific risk: constituents impact index performance
• Dividend risk: payouts affect index calculations
• Rebalancing risk: composition changes introduce volatility
• Economic sensitivity: indices react strongly to macro data

2.4 Cryptocurrency Risks

• Extreme volatility: crypto assets experience large price swings
• Regulatory risk: government actions can significantly impact prices
• Technology risk: blockchain and security vulnerabilities
• Liquidity risk: some assets have limited depth
• Market manipulation: unregulated venues may be susceptible

3.1 Evaluation Phase Risks

During evaluation, traders face specific challenges:

• Rule compliance: violations can lead to failure
• Psychological pressure: conditions may affect performance
• Time pressure: some programs impose time limits
• Performance targets: specific profit goals are required
• No funding guarantee: passing does not guarantee funding

3.2 Funded Account Risks

Funded accounts have unique risk considerations:

• Profit sharing: only a portion of profits belong to the trader
• Ongoing compliance: continuous adherence to rules is required
• Account termination: violations may result in immediate closure
• Scaling requirements: growth may require sustained performance
• Payout limits: schedules and minimums apply

3.3 Business Relationship Risks

The nature of the prop trading relationship involves:

• No employment rights: traders are independent contractors
• No guaranteed income: profits depend entirely on performance
• Firm dependency: success depends on continued operations
• Rule changes: trading rules and terms may be modified
• Competitive environment: performance relative to other traders

4.1 Technology Infrastructure Risks

Technology‑related risks that may affect trading activity:

• Platform downtime: trading platforms may become unavailable
• Execution delays: orders may be delayed during high volatility
• Price feed issues: market data may be delayed or incorrect
• Connectivity problems: internet or server issues may impact trading
• Software bugs: platform defects may affect functionality

4.2 Cybersecurity Risks

Digital security considerations include:

• Account security: unauthorized access to trading accounts
• Data breaches: protection of personal and financial information
• Phishing: fraudulent attempts to obtain credentials
• Malware risk: software that may compromise security
• Identity theft: misuse of personal information

4.3 Automated Trading Risks

For traders using automated systems (EAs):

• Algorithm failures: automated systems may malfunction
• Over‑optimization: strategies may fail in live conditions
• Market changes: algorithms may not adapt to new regimes
• Technical faults: software errors within automated systems
• Monitoring needs: automation still requires oversight

5.1 Regulatory Changes

Regulatory environment risks include:

• Rule changes: regulations may change and affect prop trading
• Jurisdictional issues: laws vary by country and region
• Compliance obligations: new requirements may be imposed
• Tax implications: treatment of profits may change
• Licensing: professional licenses may be required

5.2 Legal Considerations

Legal factors affecting traders include:

• Contract terms: binding legal agreements govern the relationship
• Dispute resolution: limited recourse in case of disputes
• Jurisdictional limits: legal protections vary by location
• Professional liability: potential liability for trading decisions
• Documentation: obligation to maintain proper records

6.1 Emotional Trading Risks

Psychological factors that can negatively impact performance:

• Fear & greed: emotional decisions can lead to poor trades
• Overconfidence: success may lead to excessive risk
• Loss aversion: reluctance to close losing positions
• Revenge trading: attempting to quickly recoup losses
• FOMO: chasing market moves

6.2 Cognitive Biases

Psychological biases that may affect trading decisions:

• Confirmation bias: seeking information that confirms beliefs
• Anchoring: overreliance on initial information
• Recency bias: overweighting recent events
• Overconfidence bias: overestimating one’s ability
• Herding: following crowd sentiment

6.3 Stress and Health Considerations

Health and wellness factors to consider:

• Financial stress: trading losses can cause significant stress
• Sleep disruption: market hours may affect sleep patterns
• Social isolation: trading can be solitary
• Decision fatigue: constant decision‑making can be exhausting
• Health impacts: sedentary lifestyle and screen time effects

7.1 Core Risk Management Practices

Recommended practices for managing trading risk:

• Position sizing: risk only a small portion of the account per trade
• Stop‑losses: use stops to limit potential losses
• Diversification: spread risk across instruments and strategies
• Risk‑reward: ensure potential gains justify potential losses
• Periodic review: continually assess and adjust strategies

7.2 Education and Preparation

Important steps before engaging in trading:

• Education: thorough understanding of markets and trading
• Practice: use demo accounts to test strategies
• Strategy: develop and validate trading approaches
• Psychology: understand the mental aspects of trading
• Financial planning: risk only capital you can afford to lose

7.3 Professional Guidance

Consider seeking professional advice:

• Financial advisors: consult qualified professionals
• Tax professionals: understand tax implications of trading
• Legal counsel: review agreements and obligations
• Trading mentors: learn from experienced traders
• Educational resources: leverage reputable materials