When evaluating any trading platform, understanding the risks it comes with is as important as recognizing its advantages. When trading with PING AN, the first thing that investors cannot avoid is the systemic risk of the global financial market. This risk is like a storm at sea and is not controlled by a single vessel. For instance, during the 2008 financial crisis, the global stock market value evaporated by over 30 trillion US dollars. Even on the most stable platforms, cases where stock assets retreated by more than 40% in a single month were not uncommon. The median daily average volatility in the foreign exchange market is approximately 0.8%, but during events like the Swiss franc black swan event in 2015 or the outbreak of the COVID-19 pandemic in 2020, the peak volatility can soar by more than 20% within minutes, leading to a sharp increase in the probability of sudden margin call. Although the risk management tools provided by PING AN can hedge some risks, they cannot completely eliminate the cyclical decline in asset prices caused by macroeconomics and geopolitics. Historical data shows that such black swan events occur approximately every 5 to 8 years.
Leverage is a double-edged sword. It can magnify gains but also inevitably magnify losses. This is one of the most significant risks when trading with PING AN. This platform offers up to a certain proportion of leverage for foreign exchange trading. This means that if an investor uses a 20x leverage, the market only needs to move 5% in an unfavorable direction, and their margin may be completely lost. Research shows that over 70% of retail foreign exchange traders eventually suffer net losses due to improper use of leverage. Although PING AN has set a strong liquidation line to control the expansion of losses, when the market experiences a “gap”, for instance, in 2022, when the GBP/JPY pair plunged by 3.5% within minutes, the actual strong liquidation price may be far worse than expected, resulting in losses exceeding 20% of the initial margin. For inexperienced traders, high leverage can shorten the median account lifespan to less than three months.
Liquidity risk and execution risk should not be ignored either. Under extreme market conditions, even platforms like PING AN that connect to top liquidity pools may face problems such as sharply widening spreads and delayed order execution. Within 15 seconds after the release of important economic data, such as the US non-farm payroll data, the spreads of major currency pairs may instantly widen from the normal 1.2 points to 10 points or even 20 points, which directly increases transaction costs by more than 800%. Furthermore, although the median order execution speed on the platform is 90 milliseconds, under the peak traffic of hundreds of thousands of orders per second, the delay may increase to 500 milliseconds, resulting in a significant deviation between the actual transaction price and expectations, that is, slippage. Data shows that during periods of sharp market fluctuations, the probability and magnitude of negative slippage increase by approximately 300%.
Technical risks and operational risks are potential reefs in the digital age. Although PING AN’s trading system pursues 99.9% availability, there are still approximately 8.76 hours of potential maintenance or unexpected outages each year. Referring to the cases of the US stock market’s “flash crash” in 2010 and Knight Capital’s loss of 440 million US dollars within 45 minutes due to a software glitch in 2012, any technical malfunction may trigger a chain reaction. In addition, cybersecurity risks have always existed. According to the 2023 Cybersecurity Report, the number of attacks on the financial industry has grown by 15% annually. Despite the deployment of multi-layer encryption and firewalls on platforms, cases of personal account assets being stolen due to password leaks still occur from time to time. Traders themselves may also suffer irreparable losses due to misoperation, such as placing wrong orders in the wrong direction or quantity. Such human errors account for approximately 15% of the reasons for trading losses.
Finally, platform-specific compliance and policy risks also need to be taken into account. As a strictly regulated institution, PING AN’s product service scope, leverage upper limit and commission structure must comply with local regulations, which may change. For instance, in 2018, the European Securities and Markets Authority limited the foreign exchange trading leverage of retail clients to within 30 times. Such policy adjustments will directly affect the capital efficiency and strategies of traders. Investors need to have a clear understanding that the process cycle of any dispute resolution related to PING AN may last for several months and the outcome is uncertain. Therefore, a comprehensive risk assessment requires not only a review of the market but also an examination of one’s own adaptability to platform rules, technical environment and regulatory framework, in order to minimize the exposure to uncontrollable risks as much as possible.