Is it possible to lose your broker's money on Forex?

A key feature of Forex trading is the use of borrowed funds, known as leverage . This allows you to increase your available funds by tens, and if necessary, hundreds, of times.

The loan is provided by the broker, who organizes the dealing process—in simple terms, transmits your buy or sell orders to the currency market.

Is it possible to lose the broker's money on Forex? And will you have to pay off the loan with your own money?

In theory, it's impossible to lose your broker's money. Two mechanisms—margin calls and stop outs —are used to protect borrowed funds. The former can be triggered if less than 30-40% of your deposit remains, while the latter is guaranteed to be triggered if the balance is less than 10-20%.

The size of these stops is set individually by each forex brokerage company; margin calls are triggered at the broker's discretion, while stop outs are mandatory as a last resort.

In such a situation, it might seem like your broker's money is reliably protected, and you're only losing your own money, but as practice shows, you can lose your broker's money in forex trading!

Gaps and high leverage are the reasons why stop outs don't trigger.

To understand how this works, you first need to understand how orders are executed on the exchange. Any order, including a stop loss or stop out, is triggered at the first available quote.

So, you set a stop-loss at 1.3500, but a price gap occurs, starting at 1.3499 and ending at 1.3550. As a result, you incur an additional 50 pips of losses.

A similar situation is mitigated with broker stop orders, where a 10% buffer seems to be available, but even this doesn't always protect. This is due to high leverage, resulting in a negative balance for the trader, sometimes reaching several thousand.

However, not all is lost; most forex brokerage companies specify in their trading terms that they will cover negative balances. This means you won't have to return the money to the broker, but be careful: if such a clause isn't included in the contract, you may be subject to financial claims.

However, to avoid any problems, try to do two things: avoid excessive leverage and don't leave trades open over weekends.