Brokers with Negative Balance Protection
Protect yourself through negative balance protection. These brokers will prevent your account from entering negative territory.
- FxPro Best MetaTrader Broker 2020
- AvaTrade Best Mobile Trading Platform 2021
- HF Markets Best CFD Trading Conditions, 2021
FxPro (FxPro.com) is a global broker, winner of 95+ awards including "Best MetaTrader Broker" in 2020. Trade 250+ instruments across a wide range of asset classes on MT4/5 or cTrader. FxPro accepts all trading styles without restrictions.
- Risk warning: 84.69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs and Spread Betting work and whether you can afford to take the high risk of losing your money.
- Markets: Forex (CFD), Cryptos (CFD)*, Stocks (CFD), Indices (CFD), Metals (CFD), Energy (CFD), Commodities (CFD)* Availability subject to regulation.
- Platforms: MetaTrader 4, MetaTrader 5, cTrader, Copy trading
- Regulators: Bahamas, Cyprus (EU), South Africa, UK
AvaTrade (AvaTrade.com) is an award-winning online broker. Trade CFDs on Forex, crypto-currencies, shares, metals and more on MetaTrader 4 or 5. AvaTrade accepts all Expert Advisors except those with a focus on arbitrage.
- Risk warning: 77.82% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
- Markets: Forex (CFD), Cryptos (CFD)*, Stocks (CFD), Indices (CFD), Metals (CFD), Energy (CFD), Commodities (CFD), Bonds (CFD)* Availability subject to regulation.
- Platforms: MetaTrader 4, MetaTrader 5, Copy trading
- Regulators: Australia, BVI, Cyprus (EU), Gibraltar, Israel, Japan, South Africa, UAE
HotForex (HFM.com) is an award-winning Forex and CFD broker, with accounts tailored to new and experienced traders. Trade a wide range of markets including Forex, stocks, indices and commodities through MetaTrader 4 or 5.
- Markets: Forex (CFD), Stocks (CFD), Indices (CFD), Metals (CFD), Energy (CFD), Commodities (CFD), Bonds (CFD)* Availability subject to regulation.
- Platforms: MetaTrader 4, MetaTrader 5, Currenex, Copy trading, Mirror trading
- Regulators: Cyprus (EU), Mauritius, Saint Vincent and the Grenadines, Seychelles, South Africa, UAE
What is negative balance protection?
In the summer of 2018, the European Securities and Markets Authority (ESMA) required that EU-regulated CFD brokers provide retail investors with "negative balance protection". So what does negative balance protection (NBP) mean? We turned to ESMA's definition for specifics, and placed emphasis on words we consider particularly important.
"Negative balance protection means firms must limit the retail client’s aggregate liability for all CFDs connected to a CFD trading account to the funds in that CFD trading account. This implies that a client can never lose more money than the funds specifically dedicated to CFD trading."
ESMA's definition tells us that negative balance protection applies at the account rather than at the trade-level, across all and only CFD positions. If your account also holds shares or units in exchange traded funds, they will not be covered by ESMA's guidelines, unless your broker choses otherwise.
Funds held in a CFD trading account are defined as cash as well as any unrealised net profits across open CFD positions. If you are unable or unwilling to meet a margin call, your broker will close your positions at their current market price. This is known as "close out" or "stop out", in an attempt to realise your profits and cap your losses.
On rare occasions, large market events can cause sudden changes in prices which prevent some of these automatic protections from being effective. When markets are volatile, stop outs can experience delays. "Gapping" can arise when prices drop sharply, creating a wedge between expected and actual prices. Leverage also has the potential to magnify losses. In the past, you would have been liable for the entirety of these losses, which may, in some cases, have exceeded your investment. Nowadays, negative balance protection means that your broker will ultimately cover your losses, should they exceed the funds in your CFD trading account.
What brokers say about negative balance protection
Some brokers have applied the law to the letter, offering negative balance protection only to retail investors trading with their EU-regulated entities. However, some have gone above and beyond. We've reviewed how some leading brokers have implemented these protections.
FxPro.com offers negative balance protection for all clients, regardless of their categorisation and jurisdiction. The company also provides a stop out level, which will cause trades to be closed when a certain margin level percentage is reached. The stop-out level will depend on the account type and jurisdiction under which you are registered.
Likewise, AvaTrade.com provides negative balance protection for all clients, regardless of their categorisation and jurisdiction. This applies across all its entities, whether they are regulated in Europe, the British Virgin Islands, Australia, South Africa, Japan and Abu Dhabi. AvaTrade allows you to trade Forex and CFDs on a wide range of asset classes on the MetaTrader 4 and 5 platforms.
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