Forex Brokers with Negative Balance Protection

As you can probably guess from the name, a negative balance means that the available funds in your trading account fall below zero. If you are using poor money management or there is an unexpected market event, then you could find yourself in this sticky situation where you own your broker money. This can be avoided by using a forex broker with negative balance protection.

What is a negative balance?

You are responsible for ensuring that your trading account does not fall into a negative balance. If it does, you will need to make additional payments to bring your balance back above zero. This means that your losses can exceed your deposits if you do not have negative balance protection.

What is negative balance protection?

Negative balance protection ensures that forex traders do not lose more than their existing account balance, regardless of what happens. Even if the forex market moves quickly or there is a large gap in prices, negative balance protection should prevent the account funds from going below zero.

Do I need negative balance protection?

If you didn’t have an account at a forex broker with negative balance protection and you were to get a negative balance, the broker would ask you to deposit more money in order to cover this amount. If you did not comply, the broker could then take further action to collect the money that you owe them.

Negative balance protection ensures that traders with losing positions don’t end up with a negative balance in their forex trading account. If you find yourself in a bad trade and are losing money fast, a margin call can save you from going into debt.

How to avoid getting a negative balance?

Whilst using a forex broker with negative balance protection can help prevent unnecessary losses, there are things you can consider to try and prevent yourself from getting into this uncomfortable situation in the first place.

Money Management

You could use a sensible stop loss. A stop loss is the price level in which you would exit the trade at a loss if price went against you. If the stop loss is too wide, this can cause high drawdowns and make it hard to recover from losing positions. I like to cut my losing trades short and let my winning trades run. This way I do not need to worry about one bad trade wiping out a run of winners or even worse, my account.

Leverage

Another way to try and avoid getting a negative balance on your forex account is too not over leverage yourself. Trading forex with high leverage may increase the profit potential of each trade, but it also significantly increases the risk. If you trade with position sizes too large for your account, you could end up getting a margin call or blowing your account before you know it.

Strategy

Think about the trading strategy that you are using and if it is too risky. There are martingale strategies which involve increasing lot sizes to try and recover from a loss. Then there are grid trading strategies that open multiple positions in different directions to try and capitalise on the forex market regardless of the direction in which it moves. These are potentially dangerous forex strategies that can easily wipe out a trading account if the market conditions are not suitable.

Discipline

Trading discipline and emotions are often overlooked by forex traders. If you are tired or angry, you may make silly mistakes that you wouldn’t do otherwise. Fear and greed can also impact your decision making. Therefore, you might want to try and avoid trading if you feel that any of these negative emotions are creeping in that can have an effect on your concentration.

Plan

I think it is vital to have a trading plan in place and try to stick to it. You should make sure that the plan is designed to ensure that you protect your balance in all possible market scenarios. However, we cannot always plan for things such as black swan events which is why a forex broker with negative balance protection is so important.

What is a margin call?

A margin call when trading forex is a notification which lets you know that you need to deposit more money in your trading account, or close losing positions, in order to free up more margin. It’s denoted as a fixed percentage which is determined by your broker and can usually be seen in the account specifications of your trading account.

On the rare occasions when market conditions could cause your account equity to become negative, retail forex brokers will perform a margin call. This means that they will close all your open trades to prevent your account going negative.

Best forex brokers with negative balance protection

Thankfully, some of the best forex brokers provide negative balance protection so you can trade in comfort knowing that you should not be losing more than what you have in your account should something unexpected happen.

However, negative balance protection might not be available in all countries that the broker accepts clients from. If you qualify as a professional trader, you may also be expected to have the knowledge to avoid a negative balance which means that protection might not be available to you. Therefore, it is imperative to check that you will qualify before you start trading.

You can see a selection of our best forex brokers with negative balance protection below.

Broker
Rating
Regulated
Min. Deposit
Founded
Max. Leverage
1.
AvaTrade Review

ADGM FRSA, ASIC, BVIFSC, CBI, FFAJ, FSCA, IIROC, JFSA

$100

2006

1:400

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
2.
IG Review

ASIC, BaFin, CFTC, DFSA, FCA, FINMA, FMA, FSA, FSCA, JFSA, MAFF, MAS, METI, NFA

$250

1974

1:200

76% of retail investor accounts lose money when trading spread bets and CFDs with this provider.
3.
Pepperstone Review

ASIC, BaFin, CMA, CySEC, DFSA, FCA, SCB

$200

2010

1:400

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
4.
IC Markets Review

ASIC, CySEC, FSA, SCB

$200

2007

1:500

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
5.
XM Group Review

ASIC, CySEC, DFSA, IFSC

$5

2009

1:888

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
6.
City Index Review

ASIC, FCA, MAS

$100

1983

1:200

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
7.
Forex.com Review

ASIC, CIMA, CFTC, FCA, FSA, IIROC, JFSA, NFA, SFC

$100

2001

1:50

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
8.
Markets.com Review

ASIC, BVIFSC, CySEC, FCA, FSCA

$/£/€100

2008

1:300

79.90% of retail investor accounts lose money when trading CFDs with this provider.
9.
BlackBull Markets Review

FMA, FSPR

$200

2014

1:500

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
10.
FP Markets Review

ASIC, CySEC, FSCA, SVGFSA

$100

2005

1:500

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.

Negative balance protection pros & cons

Pros

  • Avoid losing more than you have in your account
  • Peace of mind so you can focus on your trading
  • Can show that a broker looks after their clients

Cons

  • Not all brokers provide it
  • Might not be available to some traders
  • Still does not prevent basic trading mistakes

Conclusion: should I use a forex broker with negative balance protection?

In my opinion, it is a very wise idea to use a forex broker that offers negative balance protection as it can prevent you from losing more than your initial investment. The old saying goes, “never risk more than you can afford to lose”. Without protection for a negative account balance, you could indeed lose more than what you initially anticipated.


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