What Is Negative Balance Protection Forex

What is negative balance protection forex

Financial regulations have existed for quite long now keeping sanity in the financial market sector.

Which weekly option to buy when day trading

They subject financial organisations to certain guidelines, restrictions and requirements. Their aim or objective is to ensure stability in the financial sector, maintain its confidence and promote its protection by ensuring that clients are seriously protected from any fraudulent or deceptive practice. Negative balance protection is one of the financial regulations.

This is in regards to the Contract For Differences (CFDs) trade.

Negative Balance Protection

What is negative balance protection?

Indicador de sentimiento forex

This is a precautionary measure taken by brokerage firms with the intention to safeguard their customers. Negative balance protection policy serves the purpose of ensuring that a trader does not lose money more than that deposited in the event his/her account runs into negative during a trading activity.

In simple terms, this implies that if you as a trader chooses a brokerage firm offering brokerage firm, you won’t be required to pay anything in case of a bad trading move.

Brokerage firms most times have safeguards availed like the margin calls.

FX Brokers with Negative Balance Protection

These have however not worked well in the past as a result of unexpected and quick market movements occurring. The speed of the market movement moving beyond your margin-call-close-out-level, for instance, results in bigger than an expected capital-loss.

Negative balance protection gained more importance just after the Swiss-franc-crisis in the year 2011 when then the Swiss National Bank stopped keeping its own currency against EUR at fixed currency-rate.

This led to the rapid strengthening of the Swiss franc against the EUR.

Definition Of Negative Balance Protect - Forex Trading Business Basics Tutorial in Urdu and Hindi

Very many traders running short of the franc experienced big negative balances. Basically, they lost more than that they had in their accounts. The broker will ask you to deposit additional money if you experience a negative balance.

How Negative Balance Protection Works

Failure to deposit this extra money can result in the broker coming for you to collect it. It is therefore very important that you seriously consider how this issue is handled by either you or your broker. Negative balance protection prevents you from this by making the broker take responsibility for the losses.

Forex Brokers that provide Negative Balance Protection

BrokerInfoBonusOpen Account
Min Deposit: $5
Spread: From 0.2 Pips
Leverage: 500:1
Regulation: FSA (Saint Vincent and the Grenadines), CySEC
50% Deposit Bonus, Real contest 1st prize Luxury car BMW X5 M, Copy trading, Trade&Win.Visit Broker
Min Deposit: $5
Spread: From 0 Pips
Leverage: 500:1
Regulation: ASIC, CySEC, FCA (UK), IFSC Belize
“50% +20% deposit bonus up to $5,000, Loyalty Program BonusVisit Broker
Min Deposit: $1
Spread: From 0 Pips
Leverage: 2000:1
Regulation: FCA UK, CySEC, FSP, BaFin, CRFIN
35% of the account DepositVisit Broker
Min Deposit: $50
Spread: Starting 0 Pips
Leverage: up to 400:1
Regulation: FCA UK, NFA, CFTC, ASIC, IIROC, FSA, CIMA
Visit Broker
Min Deposit: $200
Spread: Starting 0 Pips
Leverage: 500:1
Regulation: ASIC Australia, FCA UK
Visit Broker
Min Deposit: $10
Spread:
Leverage:
Regulation: CySEC
-Visit Broker
Min Deposit: $200
Spread: From 3 Pips
Leverage: 400:1
Regulation: NFA, FCA, CySec
Visit Broker
Min Deposit: $100
Spread: Starting 0 Pips
Leverage: up to 500:1
Regulation: FCA UK, ASIC Australia, MAS Singapore
Visit Broker
Min Deposit: €100
Spread: The Spread can be as low as 0.01%” (0.01% = spread for EUR/USD)
Leverage: 1:294
Regulation: ASIC, CySEC, FCA (UK)
Visit Broker
Min Deposit: $100
Spread: Starting 0 Pip
Leverage: 500:1
Regulation: FCA UK, FSA (Seychelles), CySEC
Visit Broker

Tools To Make Your Account Protected From Negative Balance

Forex market is normally risk-bearing.

What is negative balance protection forex

It is for this reason that you need to get your account protected negative balance. The following are some of the standard tools available out there that you can use on your own:

1.

What is negative balance protection forex

Stop Loss Level

You as a trader needs to reasonably place your Stop Loss. Keeping it at a reasonable level is a good way to protect money in your account from the volatility of the market and fast and crucial changes in prices.

2.

Negative balance protection

Transactions Volume

You need to seriously consider the volume, open-positions number and the orders in the account. This is because of the fact that some transactions may be unprofitable.

What is negative balance protection forex

Being mindful of the transactions volume will help you not to encounter big loss in case of bad trading.

3. Leverage

This is another very crucial tool that will help you from experiencing negative balance.

Negative Balance Protection

Higher effective leverage translates to higher potential risks and finally higher profit.

Advantages Of Negative Balance Protection

1. You are never liable for any losses: This form of protection shifts all loss burden to the broker and this becomes advantageous to the client.

When you are under negative balance protection as a trader, your broker will be responsible for losses higher than the balance in your trading account.

2. Your account will never run negative: Negative balance protection makes sure that that trader experiencing losses does have his/her Forex trading account with a negative balance. a margin call saves you from getting into debt.

Disadvantages Of Negative Balance Protection

1.

What is negative balance protection forex

The fact that the broker is the only one responsible for losses is also disadvantageous: The broker may close out the market just before the markets going back to favor the trader.

2. Increase in brokerage fee: Shifting loss burden to the broker will raise brokerage costs and these firms will recoup the losses by raising brokerage fee.

Policies on Negative Balance Protection

1.

Best Brokers With Negative Balance Protection

CySEC Policy

Cyprus Securities and Exchange Commission clarifies that negative balance protection needs only to be initiated for CySEC regulated firms on a per account basis. This implies that if with a single broker you have 2 different leveraged-positions, funds that she/he has in one account can be taken to clear a negative-balance on another.

The whole account cannot, however, get to a negative state. CySEC is the financial regulatory authority in Cyprus.

2.

Negative balance protection in Forex

FCA Policy

Financial Conduct Authority if the financial regulator in the UK. It instructs the FCA-regulated brokers to meet all the necessary requirements regarding larger capital under the ESMA.

It caps the leverage at 1:25 for little-experienced traders and 1:50 with better-experienced ones.

Brokers Offering Negative Balance Protection

Several regulated brokerage firms online do offer negative balance protection at some degree. The stringency regarding requirements varies from one broker to another.

Forex Brokers that provide Negative Balance Protection

They include the following:

1. The XM Group. This is a globally renowned regulated and licensed forex broker. It operates in the United Kingdom, Australia, Belize and Cyprus under FCA, ASIC, IFSC and CySEC respectively. It adheres to all regulatory standard.

2.

What is negative balance protection forex

Forex.com UK. It is very committed to helping you navigate through the sophisticated capital market.

How maany us based venture capital funds invest into crypto

This brokerage firm also offers Negative Balance Protection and under the regulation of various regulatory agencies or bodies.

3. eToro. This is also a Financial Services Company regulated and authorized by the Australian Securities and Investments Commission, Financial Conduct Authority and the Cyprus Securities Exchange Commission to offer financial services in the respective country.

Conclusion

Forex trading a very lucrative undertaking but also unpredictable.

Forex Brokers Negative Balance Protection

The first decision you need to make as a trader in this sector is to get negative balance protection. What you need therefore is a brokerage firm offering this form of protection.

What is negative balance protection forex

If you as a trader chooses a brokerage firm offering brokerage firm, you won’t be required to pay anything in case of a bad trading move. With this, your success is guaranteed.

Rate this Compare Forex Brokers Providing Negative Balance Protection:

[ratings]

Spread: From 0 Pips

Leverage: 500:1

Min Deposit: $5

Regulated: ASIC, CySEC, FCA (UK), IFSC Belize

Spread: Starting 0 Pips

Leverage: up to 400:1

Min Deposit: $50

Regulated: FCA UK, NFA, CFTC, ASIC, IIROC, FSA, CIMA

Spread: From 3 Pips

Leverage: 400:1

Min Deposit: $200

Regulated: NFA, FCA, CySec