Risk Disclosure
Important information about the risks of trading
Effective: 2026-04-05
Risk Disclosure
Effective Date: April 5, 2026
PLEASE READ THIS ENTIRE DOCUMENT CAREFULLY BEFORE USING THE SYSTEM R PLATFORM. This Risk Disclosure describes the material risks associated with trading financial instruments and using AI-powered trading tools. This document is not exhaustive. Financial markets carry risks that may not be fully described here. You are responsible for understanding all risks before trading.
1. General Risk Warning
Trading financial instruments involves substantial risk of loss. You may lose some, most, or all of the capital you invest. Do not trade with money you cannot afford to lose.
The System R platform is a software tool that provides AI-powered analysis, automation, and multi-broker connectivity for financial markets. System R is not a guarantee of profits. No software, algorithm, AI model, or analysis tool can eliminate the risk of loss. Markets are inherently unpredictable, and losses are a normal and expected part of trading.
Past performance, whether of a strategy, an AI model, a trading signal, or any other indicator, does not guarantee future results. Historical patterns can and do break down without warning. Strategies that have been profitable for years can become unprofitable overnight due to changing market conditions, regulatory changes, or unforeseen events.
You should only trade with capital that you can afford to lose entirely. If losing your trading capital would materially affect your ability to pay for housing, food, healthcare, education, debt obligations, or other essential expenses, you should not trade. Trading is not a reliable source of income, and you should not depend on trading profits for your financial well-being.
Before using the Service, honestly assess your financial situation, your risk tolerance, your trading experience, and your understanding of the specific instruments you intend to trade. If you are uncertain about any of these factors, consult a qualified financial adviser before proceeding.
2. Market Risks
Financial markets are subject to a wide range of risks that can result in rapid and substantial losses. The following risks apply to all asset classes, though their severity varies by market and instrument.
Rapid Price Movements: Prices of financial instruments can move sharply and without warning due to earnings announcements, economic data releases, geopolitical events, natural disasters, regulatory actions, changes in sentiment, or other factors. These moves can occur in seconds or milliseconds, faster than any human or automated system can react. A position that appears profitable can become deeply unprofitable within moments.
Leverage Amplifies Losses: Many financial instruments involve leverage, meaning you control a position larger than your actual capital. While leverage can amplify gains, it equally amplifies losses. With leveraged instruments, it is possible to lose more than your initial investment. A small adverse price movement in a leveraged position can result in a loss equal to or exceeding your entire account balance.
Gaps and Slippage: Prices can "gap" past your stop-loss orders, meaning that the instrument opens or trades at a price significantly worse than your intended exit level. This commonly occurs during market openings, around news events, and in fast-moving markets. Stop-loss orders do not guarantee that you will exit at your specified price. Slippage can result in losses substantially greater than you planned for.
Illiquidity: Not all markets and instruments are equally liquid. In illiquid markets, you may be unable to close a position when you want to, or you may only be able to close at a price far worse than the last quoted price. Illiquidity can increase dramatically during periods of market stress, exactly when you are most likely to need to exit a position.
Correlation During Stress: Instruments and asset classes that normally move independently can become highly correlated during market crises. Diversification that appears protective under normal conditions may fail to reduce losses during extreme events. "Everything goes down together" is a real and recurring phenomenon in financial markets.
Counterparty Risk: Your ability to realize gains or recover capital depends on the solvency and performance of your broker, exchange, clearinghouse, and other counterparties. The failure of a counterparty can result in the loss of your funds and positions, regardless of the profitability of your trades.
Regulatory and Political Risk: Government actions, including changes to tax law, trading regulations, sanctions, capital controls, or outright bans on certain instruments or activities, can affect the value of your positions or your ability to trade. These changes can occur with little or no advance notice.
3. Asset-Specific Risks
Different asset classes carry distinct risk profiles. The following sections describe risks specific to each asset class supported by the Service.
Equities (Stocks and ETFs)
Individual stocks can and do go to zero. Companies can become insolvent due to fraud, mismanagement, competitive pressure, regulatory action, or economic downturn. When a company's stock goes to zero, your entire investment in that stock is lost with no possibility of recovery.
Pattern Day Trader (PDT) Rules: In the United States, FINRA rules classify accounts that execute four or more day trades within five business days as "pattern day trader" accounts. Pattern day trader accounts must maintain a minimum equity balance of $25,000. If your account falls below this threshold, your broker may restrict your ability to day trade or close your positions. These restrictions are enforced by your broker and are outside System R AI's control.
Market Halts and Delistings: Exchanges can halt trading in individual securities for regulatory reasons, extreme volatility (circuit breakers), or pending news. During a halt, you cannot buy, sell, or close positions. Securities can also be delisted from exchanges, which can severely reduce liquidity and make it difficult or impossible to sell your shares.
Short Selling: If you short sell stocks through your broker, your potential loss is theoretically unlimited, because there is no upper limit on how high a stock's price can rise. Short squeezes can cause explosive upward price movements that generate catastrophic losses for short sellers.
Options
Options are complex derivative instruments with unique risks that go beyond the risks of the underlying security.
Options Can Expire Worthless: If you buy options (calls or puts), the entire premium you paid can be lost if the option expires out of the money. The majority of options expire worthless. Buying options is a wager on both the direction and the timing of a price move, both of which must be correct for the trade to be profitable.
Unlimited Risk When Selling: Selling (writing) uncovered call options carries theoretically unlimited risk. Selling uncovered put options carries risk up to the full value of the underlying stock. A single uncovered option trade can generate losses that exceed your entire account balance and result in a margin call or a negative account balance.
Time Decay (Theta): Options lose value over time, even if the underlying price does not move. This time decay accelerates as the option approaches expiration. If you hold long options positions, time is working against you every day.
Complexity: Options pricing is influenced by multiple factors, including the underlying price, strike price, time to expiration, implied volatility, interest rates, and dividends. Understanding how these factors interact requires significant knowledge and experience. Misunderstanding options mechanics is a common cause of large losses.
Assignment Risk: If you sell options, you can be assigned at any time (for American-style options), requiring you to buy or sell the underlying security at the strike price regardless of the current market price. Assignment can occur unexpectedly, particularly around ex-dividend dates and expiration.
Futures
Futures contracts involve unique risks due to their leveraged nature and contractual obligations.
Losses Can Exceed Your Account Balance: Futures are highly leveraged instruments. A relatively small adverse price movement can result in a loss that exceeds your initial margin deposit and your entire account balance. You may owe your broker money beyond what you deposited.
Margin Calls: If the value of your futures positions moves against you, your broker will require you to deposit additional funds (margin call) immediately, sometimes within hours. If you cannot meet the margin call, your broker may liquidate your positions at a loss without your consent. Liquidation typically occurs at the worst possible prices.
Contract Expiration and Delivery: Futures contracts have fixed expiration dates. If you hold a position through expiration, you may be obligated to take or make physical delivery of the underlying commodity or settle in cash. Failure to manage expiration can result in unexpected obligations and costs.
Limit Moves: Some futures markets impose daily price limits. When a limit is hit, trading may be halted or restricted, and you may be unable to close your position. You can be locked into a losing position for multiple days if the market moves limit-up or limit-down consecutively.
Cryptocurrency
Cryptocurrency markets carry extreme risks that exceed those of traditional financial markets.
Extreme Volatility: Cryptocurrency prices routinely move 10-20% or more in a single day. Moves of 50% or more within a week are not uncommon. This volatility can generate rapid, substantial losses.
Exchange and Custodial Risk: Cryptocurrency exchanges have been hacked, have become insolvent, and have frozen customer withdrawals. Unlike traditional brokerages, most cryptocurrency exchanges are not protected by deposit insurance (such as FDIC or SIPC). If your exchange fails, you may lose all funds held on that exchange.
Liquidation: Many cryptocurrency trading platforms offer high leverage (10x, 20x, 50x, or more). Leveraged cryptocurrency positions can be liquidated (forcibly closed) if the price moves against you by a small percentage. Liquidation is automatic and typically occurs at unfavorable prices.
Regulatory Uncertainty: The legal status of cryptocurrencies varies by jurisdiction and is subject to change. Governments may ban, restrict, or heavily regulate cryptocurrency trading, which can cause rapid price declines and loss of access to your assets.
Irreversibility: Cryptocurrency transactions on the blockchain are irreversible. If you send funds to the wrong address, or if your exchange account or wallet is compromised, there is generally no mechanism for recovery.
Smart Contract Risk: If you interact with decentralized protocols, smart contracts, or DeFi platforms, you are exposed to the risk of smart contract bugs, exploits, and governance attacks that can result in the total loss of deposited funds.
Forex (Foreign Exchange)
High Leverage: Forex trading commonly involves leverage of 50:1 or higher. At 50:1 leverage, a 2% adverse price movement eliminates your entire margin. Leverage magnifies both gains and losses proportionally.
24-Hour Market Risk: The forex market operates nearly 24 hours a day, five days a week, plus cryptocurrency forex pairs trade continuously. Positions are exposed to risk around the clock, including during hours when you may be asleep or unable to monitor them.
Interest Rate and Central Bank Risk: Currency prices are heavily influenced by central bank policy decisions, interest rate changes, and macroeconomic data. These announcements can cause sudden, large price movements and sharp increases in spreads and slippage.
Carry Trade Risk: Strategies that profit from interest rate differentials between currencies (carry trades) can generate steady income during calm markets but produce sudden, large losses when market volatility increases or risk sentiment shifts.
Prediction Markets
Binary Outcomes: Prediction market contracts typically resolve to either full value or zero. There is no partial outcome. If your prediction is wrong, you lose your entire stake on that contract.
Resolution Disputes: Prediction market outcomes depend on the resolution source and methodology defined by the market creator or platform. Disputes over how an event is interpreted, measured, or reported can result in resolutions that do not match your expectation, even if you believe your prediction was correct.
Illiquidity and Wide Spreads: Many prediction market contracts have low trading volume, resulting in wide bid-ask spreads and difficulty entering or exiting positions at favorable prices.
Regulatory Ambiguity: The legal status of prediction markets varies by jurisdiction. Some prediction market contracts may be classified as gambling, derivatives, or swaps under applicable law. You are responsible for understanding and complying with the laws in your jurisdiction.
4. Technology Risks
The Service is a software platform that depends on technology infrastructure, third-party services, and internet connectivity. Technology failures can directly affect your trading activity and financial outcomes.
Software Errors: Like all software, the System R platform may contain bugs, errors, or defects that can cause incorrect behavior, including incorrect calculations, failed order submissions, improper position sizing, or inaccurate data display. While we test thoroughly and fix known issues promptly, we cannot guarantee that the software is free from errors.
AI Model Inaccuracy: The AI models used by the Service (Claude and GPT) generate analysis and suggestions based on patterns in their training data and the context you provide. AI outputs can be wrong. Models can produce plausible-sounding analysis that is factually incorrect, logically flawed, or based on outdated information. AI-generated numbers, statistics, and calculations should always be independently verified.
Connectivity Failures: The Service requires an active internet connection. Loss of connectivity, whether due to your internet service provider, network congestion, DNS failures, or other causes, can prevent you from monitoring positions, submitting orders, or activating the kill switch. You should always have a backup method for managing your positions that does not depend on the System R platform.
Broker API Failures: The Service connects to your broker through their API. Broker APIs can experience outages, slowdowns, rate limiting, data inaccuracies, or breaking changes without notice. An order submitted through the Service may not reach your broker, may be rejected by your broker, or may be executed at a different price than expected. System R AI does not control your broker's systems and cannot guarantee their performance.
System Outages: The Service may experience planned or unplanned downtime due to maintenance, infrastructure failures, capacity issues, or other causes. During an outage, you cannot access the Service, but your positions at your broker remain open and exposed to market risk. You are responsible for being able to manage your positions directly through your broker if the Service is unavailable.
Latency: There is always a delay between when you submit an action and when it is executed. This delay includes network transmission time, processing time on our servers, and transmission time to your broker's API. In fast-moving markets, this latency can mean the difference between a profitable and unprofitable trade.
5. AI-Specific Risks
The use of artificial intelligence in trading introduces risks that are distinct from traditional software risks. You should understand these risks before relying on AI-generated analysis or enabling AI-driven automation.
Hallucination: AI models can generate outputs that appear confident and well-reasoned but are entirely fabricated. This includes inventing statistics, citing nonexistent sources, providing incorrect historical data, and generating plausible but wrong analysis. The confidence of an AI response is not an indicator of its accuracy. A model can be completely wrong while expressing total certainty.
Historical Patterns May Not Repeat: AI models are trained on historical data and identify patterns from past events. Markets are forward-looking systems influenced by new information, changing participant behavior, and structural shifts. A pattern that held for decades can break permanently. AI analysis based on historical patterns provides no guarantee about future market behavior.
Position Sizing Is Mathematical, Not Guaranteed: The Service may suggest position sizes based on risk parameters, volatility calculations, account size, and other inputs. These calculations are mathematical models based on assumptions about market behavior. Real markets can and do violate these assumptions. A position size that appears conservative under normal conditions can generate catastrophic losses during extreme market events. Tail risk events (events far outside normal statistical distributions) occur more frequently in financial markets than standard models predict.
Automated Execution Requires Careful Configuration: If you enable automated trade execution, the AI will submit orders to your broker based on its analysis and your configuration. Misconfigured automation can submit orders you did not intend, trade the wrong instruments, use incorrect position sizes, or execute at inappropriate times. You must thoroughly understand and test your automation configuration before enabling it with real capital. Always start with small position sizes and monitor closely.
You Must Review Before Acting: AI-generated analysis and trade suggestions are starting points for your own decision-making, not directives to follow blindly. Before acting on any AI output, you should verify the underlying data, check the logic of the analysis, consider factors the AI may have missed, and make your own independent judgment. If you do not understand why the AI is recommending something, do not act on it.
Model Changes: The AI models used by the Service are updated and changed by their providers (Anthropic and OpenAI) on their own schedules. A model update can change the quality, style, or accuracy of outputs without notice. Analysis that was reliable under one model version may be unreliable under a newer version.
6. Your Responsibilities
By using the Service, you accept full responsibility for your trading activity and financial outcomes. The following responsibilities rest entirely with you:
Understand the Risks: Before trading any instrument, you must understand the specific risks described in this document, the mechanics of the instrument you are trading, the rules of the market you are trading in, and the terms and conditions of your broker. If you do not understand something, do not trade it.
Position Sizing: You are responsible for determining appropriate position sizes for your account, risk tolerance, and strategy. No single trade should put an unacceptable portion of your capital at risk. A common guideline is to risk no more than 1-2% of your account on any single trade, but the appropriate amount depends on your individual circumstances.
Stop Losses: You are responsible for implementing stop-loss orders or other risk management measures to limit potential losses. You must understand that stop-loss orders are not guaranteed to execute at your specified price (see "Gaps and Slippage" in Section 2).
Monitor Your Positions: You are responsible for actively monitoring your open positions, especially when using leverage, short selling, or options strategies with unlimited risk. Markets can move significantly between monitoring intervals, and you must be prepared to act quickly when conditions change.
Do Not Rely Solely on AI: The AI features of the Service are decision-support tools, not decision-making tools. You must apply your own judgment, conduct your own research, and make your own trading decisions. Delegating all decision-making to an AI system is irresponsible and dangerous.
Maintain Adequate Capital: You are responsible for maintaining sufficient capital in your brokerage accounts to meet margin requirements, cover potential losses, and avoid forced liquidation. You should maintain a capital buffer above the minimum margin requirements to withstand adverse price movements.
Comply with Applicable Laws: You are responsible for understanding and complying with all laws, regulations, and rules applicable to your trading activity in your jurisdiction. This includes, but is not limited to, securities laws, commodities regulations, tax obligations, anti-money laundering requirements, and exchange rules. System R AI does not provide legal or regulatory guidance.
Have a Backup Plan: You must have the ability to manage and close your positions without the System R platform, by logging into your broker's own platform or contacting your broker directly. You must not be solely dependent on the Service for managing your trading positions.
7. Regulatory Notice
System R AI LLC is NOT a registered broker-dealer under the Securities Exchange Act of 1934 or any state securities law. We do not execute trades, route orders, or act as an intermediary between you and any marketplace.
System R AI LLC is NOT a registered investment adviser under the Investment Advisers Act of 1940 or any state investment adviser law. We do not provide personalized investment advice, manage client portfolios on a discretionary basis, or act in a fiduciary capacity.
System R AI LLC does NOT hold customer funds or assets. We do not accept deposits, custody securities or cryptocurrency, maintain brokerage accounts, or have access to withdraw funds from your accounts. All funds and assets remain with your chosen broker or exchange at all times.
System R AI LLC is NOT providing financial advice. All analysis, suggestions, scores, signals, and other outputs generated by the Service are informational tools, not advice. No output from the Service should be interpreted as a recommendation to buy, sell, hold, or otherwise transact in any financial instrument.
System R AI LLC is NOT registered with or regulated by the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Financial Industry Regulatory Authority (FINRA), the National Futures Association (NFA), or any state or international financial regulatory authority. The Service is a software product, not a regulated financial service.
You should consult a qualified financial adviser, broker, attorney, or tax professional before making trading or investment decisions. A qualified adviser can assess your individual financial situation, risk tolerance, and investment objectives in a way that no software platform can.
If you are located outside the United States, you are responsible for determining whether your use of the Service complies with the laws and regulations of your jurisdiction. Some jurisdictions restrict or prohibit certain types of trading, the use of leverage, or the trading of certain instruments. System R AI makes no representation that the Service is appropriate or available for use in any particular jurisdiction.
Contact
If you have questions about this Risk Disclosure, contact us at:
System R AI LLC 7901 4TH ST N, STE 28529 ST PETERSBURG, FL 33702
Email: ashim@systemr.ai
This Risk Disclosure was last updated on April 5, 2026.