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Negative account balance protection ?

Discussion in 'General Forex Talk' started by Agent86, Oct 15, 2008.

  1. Agent86

    Agent86 Sergeant

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    Hi

    I've noticed that Forex.com states on there main webpages:

    Negative Balance Protection

    I've talked with them to confirm and they said in case of spike or gap they gaurantee 0 bal. and if any such gap would occur that you would not be liable for any negative balance.

    Anyhow I'm not sure how many companies offer this I was wondering if any of you knew if there were others out there that offer this as well.

    Also I noticed that some companies in the terms specifically identify that they can contact you to pay for the negative. Other companies do not even mention this in the policy etc.

    I'm wondering if it's not mentioned in the term/policy would you be liable for any negative balance etc. ?

    And if it is mentioned in the terms/policy are you liable for any negative balance ?

    I don't plan on a negative balance, but I think i'ts a good selling point for forex.com to new traders who are concerned about this subject ?

    Please advise if anyone knows about this subject or any other companies that offer negative balance protection.

    thanks
     
    #1 Agent86, Oct 15, 2008
    Last edited: Oct 15, 2008
  2. Pharaoh

    Pharaoh 1st Lieutenant

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    In theory, any good brokerage should give you a margin call before you go negative. Most margin call agreements are structure to leave at least a small positive balance. Of course, a big spike or a price gap over a weekend could wreck your account and leave you negative if you were getting close to a margin call.

    If you were trading correctly, you should never use so much of your available margin that there's any chance of a margin call. Proper risk management involves not only limiting the total percentage of your account risked per trade, but also the total risked at any one time.
     
  3. martin01

    martin01 Banned

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    You’ll never have to face a debit balance (negative balance). for your protection close out your positions- stop order- If your equity falls below your margin requirement. . that way that your risk is limited to only those funds you have deposited into your account.
     
  4. charlyt

    charlyt Private, 1st Class

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    Basically they does not allow you to go negative, they instead generate you a margin call, this is terrible, in the case of FXCM in example, this thing will kill your account right away, a margin call should close all your positions, just imagine all your positions closed before the exit price, you will loose big time

    be carefull.
     
  5. Agent86

    Agent86 Sergeant

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    Margin Call is normal isn't it

    Hi I thought typically all the brokers had a margin / margin call if your account falls below the margin requirements.

    So typically your account should be margin called if you don't have the margin to keep the position open, however in the case of a gap your account could not only be margin called but actually mis the margin call and go below your account balance in which case you would then be required to pay any negative balance. I understand this is most concerning if your account is low or at the min. margin already, however forex.com has a negative balance protection policy which in a case of a gap which could cause negative balance if the margin call does not close all position, then you would not be required to pay any negative balances thats all.

    I don't really know if thats good or not, but it sounds good to new traders that may be starting with min. balances etc.

    But regarding the margin call I believe this is typical for all brokers which require a margin you can just trade with no money in the account and the margin protects them if you risk more then your account balance hence the margin. At least thats how I understand it.
    Thanks for the replies
     
  6. Pharaoh

    Pharaoh 1st Lieutenant

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    It really comes down to risk management. You shouldn't leave large trades open over the weekend until you've learned how your broker deals with price gaps, and should always use stoplosses that will close trades long before a margin call.

    Sure, you use every bit of that leverage and live 30 pips from a margin call and make a lot more money on good trades, but one little mistake or surprise widening of spreads, and all the money goes away in the blink of an eye.

    The first thing in your mind before you pull the trigger should be "can I afford it if this trade goes bad?" The second questions should be "What if every trade I have open goes bad?". How much of your account are you willing to lose if your internet connection drops for 30 seconds and there's another fiscal surprise?

    Overall, I prefer a broker that guarantees I can't go negative, but my risk management should prevent that from every happening as long as my stops are honored to a reasonable degree.
     
  7. NWG_student

    NWG_student Recruit

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    Well this stuff became a bit more important to me after the SNB decission of cutting ties with EUR so suddenly and leaving 1.20 unprotected.

    Im not a typical risk taker, but a gap of over 1k pips and a a total spike of 1900 pips or what it was would be able to take my account to the negative side, in chaotic conditions like that when liquity is a huge problem and price beeing unavailible.

    With no other chooise than holding the falling knife negative equity protection would been of benefit. I cant imagine loosing all my funds but also going int to debt what a terrible situation. What are traders toughts on this'? is there a list of brokers with negative equity protection?

    I guess only market makers would offer it.

    FXpro has it
     
  8. iMusingKiMi

    iMusingKiMi Corporal

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    I thought all broker offer negative protection, and that's why they loss a lot on SNB decision. I am really not sure about this because usually I trade with very tight, hence even worst come to worst, my order usually will get executed on my SL fast enough before it goes too terrible, therefore I seldom have a lot of problem with big slippage. I assume those who put SL above 50 pips or without SL on EUR/CHF that couldn't get executed and became negative. Some platform even freeze for an hour.
     
  9. Pharaoh

    Pharaoh 1st Lieutenant

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    Many brokers offer it, but some don't. Those that don't may end up suing clients to recover money.
     
  10. bigdolly

    bigdolly Sergeant

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    EUR/CHF event is in the group of exceptionally rare events and no need to invent extra measures for extra protection, dodging from the blow, etc. CHF were bound up to Euro and it is of no surprise for me that after discontinuation of the peg, heavy imbalance of liquidity occurred.
    Use SL and TP as you did that before and it should work normally within a range of average slippage for our broker. The other thing is when your broker has bad LP feed and charges you too much. Good reason to think about changes.:D
     

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