Protecting a trader's account from a negative balance

Despite much talk and writing about how impossible it is to lose your broker's money using leverage,

experience shows that in some situations and with certain brokerage firms, this is a possibility.

Once this happens, everything depends on the broker's loyalty and the trading conditions outlined in the client agreement, which is rarely read.

In the worst case, you'll have to restore your account balance to a positive balance by depositing your own funds.

To avoid this, choose the right broker and follow a few simple rules.

Rules that will help protect against a negative balance:

Read the client agreement – ​​most of these documents specify who pays for any negative balance and how.

You'll also find a lot of other useful information in the client agreement.

Use leverage carefully – it's advisable to use high leverage only when your account is under control.

High leverage is the most common cause of a negative balance in Forex trading.

Stop orders – don't forget about stop orders; setting a stop loss will often prevent you from going into the red and even preserve some of your funds.

Don't hold positions over the weekend gaps often occur after the weekend , which prevent stop orders from being triggered.

In these cases, not only the stop loss and trailing stop are not triggered, but also the broker's stop out . Therefore, after a price gap occurs, high leverage can easily push an account into the red.

Trading on the exchange is quite risky, and situations vary, and no one can ensure your financial security better than you.

When opening a new account with a broker, carefully study the company's website; some brokers guarantee protection of client accounts from negative balances:

A guarantee is the best option for a trader, as there's no longer any fear that a mistake will lead to debt.

In most cases, account protection is an indicator of a company's reliability and its honest treatment of its clients.