Negative balance protection explained

Negative balance protection stops your account going below zero, so you cannot owe your broker money after a sharp market move. Whether you have it depends on where your account is held and how you are classified.

How it works

If a fast or gapping market pushes your losses past your account balance, the broker resets the balance to zero instead of asking you to pay the deficit.

Worked example

You hold one standard lot of GBP/USD in a $1,000 account. Over a weekend the price gaps 300 pips against you, and your stop-loss fills at the opening price. The loss is about $3,000.

With negative balance protection, your balance goes to $0 and the extra $2,000 is written off. Without it, you could owe the broker $2,000.

Who must offer it

Retail clients trading CFDs with brokers regulated in the UK (FCA), the EU (under ESMA rules, applied by regulators such as CySEC) and Australia (ASIC) must receive negative balance protection.

It is often not required for offshore entities, and clients classed as professional usually lose it. Some brokers offer it voluntarily everywhere; check the client agreement for your entity.