Laura Leopold answered the question What are the constraints imposed by brokers offering "Negative Balance Protection"?

What are the constraints imposed by brokers offering "Negative Balance Protection"?

Good evening,Some brokers provide a feature called negative balance protection (NBP), while others do not. It's a helpful feature because it ensures that you cannot lose more than the amount you initially deposited.I've noticed certain trading strategies that rely on the fact that NBP covers your losses. For instance, if you're speculating on overnight gaps in an index, especially during extended breaks between trading sessions (from 22:00 to 09:00), and the market opens significantly higher or lower (say, 1% or more) than the previous close, you could potentially trigger NBP multiple times with each trade involving such an overnight gap.Is it possible, or has anyone experienced situations where brokers raise concerns or issues when they realize that a customer is intentionally and consistently using this feature in their trading?Please communicate in English.

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Laura Leopold

If there is no NBP if the client trade oversize lots, they will get in debt. the account will be minus and the client need to pay the minus if he/she trade with the same account.

Last updated: 10/19/2023 03:40

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Ian Birrell

Some opinions say that the NBP does not really protect clients because brokers can still increase the margin requirements and stopout levels of their accounts so that traders are charged fees in other aspects.

Last updated: 10/27/2023 03:00