"If my trade is losing uncontrollably, would I owe the broker some money?"
Similar questions are often asked by beginners who do not understand the concept of stop loss or margin call. Under normal circumstances, something like that would not happen. Manually, traders can set their own stop loss in order to prevent them from having signifcant losses that go beyond their remaining balance.
Apart from that, there is also the 'final protection' from the broker in the form of a margin call which will automatically close all your positions when the margin is no longer strong enough to withstand losses. Getting a margin call is the worst scenario in trading because it means that most or even all of your capital is lost. On the bright side, this can effectively prevent your balance from going negative so that there will be no debt owed to the broker.
Well, what needs to be underlined in the example above is 'under normal circumstances'. So what if an abnormal situation occurs? In fact, the forex market has been shaken several times by such occasions. For example, when the Swiss Central Bank (SNB) suddenly withdrew its currency peg to the Euro in early 2015, the Euro and CHF pairs fluctuated wildly that all stop loss orders and margin calls for losing positions malfunctioned.
Even though it is relatively rare, a similar incident would certainly have a bad impact on brokers and traders who trade against the market. Several brokers were even forced to go out of business following the SNB incident, and a number of traders had to face the impact of negative balances where they 'were in debt' to the broker.
As such, negative balance protection has been promoted aggressively among forex brokers. This feature allows your negative balance to be reset to 0. That way, you don't need to worry about owing money to the broker.
Even though almost all forex brokers have them, not all of them state this policy clearly. The following list displays brokers who are committed to keeping your account from going negative:
FBS
FBS allows its clients to trade with a negative balance, preventing trader's balance from falling into the red zone. In other words, this broker offers negative balance protection to ensure traders do not experience losses exceeding the funds they deposit.
According to FBS, negative balance protection provides advantages in terms of risk management, trading psychology, and broker reputation. From the management perspective, negative balance protection is clearly effective in protecting trader funds from excessive losses. Meanwhile, this feature also helps protect traders from psychological risks during extreme market volatility. Eventually, negative balance protection can signify a broker's reputation because it represents their commitment to protecting traders from adverse circumstances.
XM
XM is a global forex and CFD broker regulated by ASIC, CySEC, and IFSC. XM is very suitable for beginners due to its comprehensive educational section, regular webinars, and demo accounts.
XM Broker has a limited platform offering as it only provides trading on MetaTrader. However, XM offers negative balance protection (NBP) to all clients, meaning you will never lose more than what you deposit in this broker.
Exness
Exness offers negative balance protection for trading accounts with the null operation. This operation automatically resets the trading account's negative balance to 0. In the process, traders don't need to worry because the account will not be deactivated.
What you need to remember is that the null operation is an automatic process. If funds are deposited into an account with a negative balance while there is an open position, the null operation will not commence and the difference will be deducted from the deposit.
Octa
Octa offers negative balance protection which can change your balance to zero if it previously fell to negative. This is because Octa's risk management ensures that clients cannot lose more than invested. If the balance becomes negative due to stop out, Octa will compensate the amount and adjust the account balance to zero. Octa guarantees that the client's risk is only limited to the funds that have been deposited into the account.
RoboForex
Quite similar to Octa, RoboForex can reset a client's account balance to zero automatically if the amount becomes negative. However, the policy usually applies only in certain situations such as extreme market volatility.
To protect accounts from negative balances during volatile markets, this broker advises traders to always set a reasonable stop loss level. Paying attention to transaction volume is also equally important because not all trades can be profitable. Additionally, carefully adjusting leverage is also necessary to manage risk effectively.
HF Markets
HF Markets understands that a good broker must pay attention to the security of client funds. Therefore, the broker has taken additional measures to ensure an adequate level of security for client funds.
As we know, volatility often occurs in the market. In order to anticipate erratic price fluctuations, HF Markets offers HFM negative balance protection where in very unpredictable conditions when the margin call and stop out can't work properly, the client would not be responsible for paying the negative balance.
ThinkMarkets
ThinkMarkets acknowledges the challenges posed by extreme volatility during news announcements, market openings, and unexpected global events. To meet clients' needs, ThinkMarkets protects accounts from experiencing losses that exceed their deposit capacity. This protection feature is automatically applied for free. However, it is important to note that NBP does not apply to Pro account holders.
FxPro
FxPro offers negative balance protection (NBP) to all clients, regardless of their categorization and jurisdiction. Thus, this broker ensures that all clients will not lose more than the total deposit in their account. FxPro also provides a stop out level which will close the order automatically when the margin level percentage reaches a certain level. The stop out level will depend on the account type and jurisdiction in which you are registered.
easyMarkets
easyMarkets offers a risk management suite that helps you protect your trades, accounts, and funds through negative balance protection. This feature is a form of protection without additional costs.
Negative balance protection ensures that your account will never go below zero, so even if the market moves quickly and is detrimental to your transactions, the account balance will never go negative. This is especially important for new traders who may not be familiar with unpredictable market movements during high-impact news and releases.
This feature, combined with other risk management tools such as dealCancellation and Freeze Rate, gives traders the ability to control risk better when trading on easyMarkets.
iForex
The negative balance protection from iFOREX guarantees that clients will never face a negative balance due to trading losses. This broker specifically developed a monitoring tool that can automatically close all positions once a client's account reaches a zero margin level ( where "exposure coverage" = 0). If the client's balance falls below zero due to a difference with the actual margin level, iFOREX will compensate for the difference.
Conclusion
There are quite a lot of brokers that provide negative balance protection nowadays. Therefore, you don't need to worry too much if your account balance suddenly becomes negative due to an unexpected fundamental event. As long as you trade with a broker that offers protection for negative balances, then you just have to wait until the broker resets your balance or cites the negative balance protection policy in the agreement document should the broker choose to not acknowledge it and charge you to pay off the "debt".
The variety of brokers above also shows that there are various trading conditions in the way they protect their clients' balance. This can certainly be useful to help you find a broker based on its negative balance protection.
The statement of negative balance protection is usually available in the "terms and conditions" or "client agreement". These documents are generally provided before you complete the registration process. Some brokers even confirm applying the policy publicly on their official websites so any visitors can check it out easily.
In closing, be careful when choosing a broker, and read the "client agreement" or "terms and conditions" document attentively when registering an account. It would be your careful approach that can later help you from unexpected problems in the future.