Risk Management

Negative Balance Protection

Negative balance protection is a broker policy that ensures your account balance cannot fall below zero, even if extreme market conditions cause losses to exceed your deposited funds. Without this protection, a trader could owe the broker money beyond their deposit. This is particularly important during high-volatility events like flash crashes or major news surprises where stop-out mechanisms may not trigger fast enough.

Example

You have $1,000 in your account and a leveraged position open overnight. A sudden market gap causes your position to lose $1,500. With negative balance protection, your account is reset to $0 — you lose your deposit but do not owe the broker the extra $500.