Negative Balance Definition
Negative Balance is simply when the balance of your trading account becomes negative. This can happen when liquidity is too thin and or the quotes are moving too fast to close your positions. You can go into negative balance when you can’t close your positions manually with a Market Order, or with your Stop Losses and even Stop Out. In this scenario, you would owe your broker for these losses, even if it seems like the broker’s fault they couldn’t close your positions. Some brokers offer negative balance protection. This means they will cover any losses that exceed the balance of your account. This is a requirement of all brokers which are regulated in the European Union. Other brokers may also offer this as a unique selling point, even if it’s not a requirement from their regulator.
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