Negative Balance Protection
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Thread: Negative Balance Protection

  1. #1
    Administrator RoboForex Administrator's Avatar
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    Negative Balance Protection


    There are situations, when the market volatility prevents clients from keeping their accounts balance in the black. In these cases, RoboForex Ltd resets their accounts balance to zero.


    It happens automatically in cases the client’s account balance becomes negative if the following conditions are met:
    • The client’s account, which is reset to zero, is of the following account types: Fix-Standard, Pro-Standard (except cTrader-based accounts), Fix-Cent, Pro-Cent


    How to protect your account from negative balance on your own?

    Trading on the Forex market is always risk-bearing. To protect your account from negative balance, you can use standard tools available to all RoboForex clients:
    - STOP LOSS LEVEL.Placing your Stop Loss reasonably will help you to protect funds on your account from crucial and fast changes in prices and the market volatility.
    - TRANSACTIONS VOLUME. It’s important to realize that not all transactions may be profitable, that’s why one should be very attentive to the volume and the number of open positions and orders on the account.
    - LEVERAGE. Leverage is another important tool to manage your risks. The higher the effective leverage is, the higher the potential risks and the profit are.
    Cases, when RoboForex can not guarantee the compensation:
    • Misuse of this guarantee
    • In cases of abnormal market situations and exceptional market volatility
    • If the client isn’t a retail one


    The Company reserves the right to exclude any client form the program in its sole discretion without giving any reasons.

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  2. #2
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    Negative Balance Protection Service

    NEGATIVE BALANCE PROTECTION SERVICE




    INTRODUCING THE NEGATIVE BALANCE PROTECTION SERVICE IN ROBOFOREX.

    From the explanation of this negative balance protective services in the Roboforex official site, its been said to be situations in the market due to volatility that would prevent client from keeping their account balance in the black. These makes Roboforex limited reset account balance to zero.

    To further break this definition to a good understanding, the negative balance protection will be said to be an automated modification of a client account balance to zero ($0) in case it becomes negative after a stop out must have occurred.
    Choosing a broker that have this negative balance protection service will be a great option for any client because in this service, a client cannot loose more than what he invested in his forex account. So this means that if a traders account balance becomes negative due to stop out, Roboforex will come along to compensate the negative balance and modify account balance to zero.


    Explaining The Negative Balance Protection Service With A Trader 'Ulthred'.



    Ulthred was a trader who was trading with Roboforex broker company offering a negative balance protection service. Ulthred now deposited $1000 with a leverage of 1:500. It means that for every $1 of Ulthred account, he can control 500 times of the amount of $1. So with his $1000 x 500, he can control 500,000 of his trade.
    Lets assume he uses $5 per pip to trade, a negative move of 200 pips will result to Ulthred loosing his $1000. This loss would eat his capital and a negative balance which Ulthred will owe to Roboforex. But because Roboforex provides a negative balance protection service, Ulthred loss can't be bigger than his deposited $1000.



    FACTS THAT COULD CAUSE NEGATIVE BALANCE PROTECTION


    1. Inability Of Using Stop Loss: for traders who are fond of trading without stop loss, they expose their capital to any market volatile condition that might come their way and when this happens, the probability of experiencing stop out or margin calls becomes higher. When this happens, negative balance protection service would come in place and save a trader acquiring negative balance.

    2. Higher Leverage: leverage is like a borrowed funds from a broker and one advantage of leverage is the ability to take higher risk even with the small amount of capital that you have. This makes it easy to target higher amount of profits than what your capital could withstand in a standard situation.
    Roboforex provides its client up to 1:2000 leverage and taking advantage of such high leverage can easily expose your account to stop out. By using higher leverage the ability of using a bigger volume comes in place and this would however bring forth easy stop out and activates the negative balance protection service.

    3. Higher Volumes or Lot Size: like discussed above, the higher leverage can enhance our capability of opening trades with large volumes and we know when this happens, we can possibly have the opportunity to make large profits or would easily find ourselves loose our capital which will warrant the negative balance protection service to come into place.




    NEGATIVE BALANCE PROTECTION SERVICE (PROS & CONS)




    PROS:

    *Debt prevention: Since Roboforex broker aligns with a negative balance protection service feature, it will erase any negative balance which therefore prevents a trader from debt.

    * No loss beyond limit: here the negative balance protection service enables you not to loose much more than invested.

    * Roboforex resets automatically negative balance to zero

    * Negative balance protection service says a lot about a broker legitimacy in financial dealings.

    * It can also act as a risk management tool.


    CONS: In as much Roboforex broker offers the negative balance protection service, i see no disadvantage of this tool because instead of been in debt, you can count on Roboforex broker to erase negative debt that would occur due to stop out.



    Protecting Your Account From Negative Balance


    i) Learn to place stop loss reasonably, so that you could only risk what you could afford.
    ii) Your lot size is important as well with the number your positions. Do everything necessary to choose lot size that can aid your risk management.
    iii) Ensure that even when higher leverage is set, do everything to protect your capital by using adequate lot size and stop loss.
    iv) Ensure you trade with brokers such as Roboforex that have the negative balance protection services.



    RECOMMENDATIONS TO ROBOFOREX ON THE NEGATIVE BALANCE PROTECTION SERVICE



    I have observed that Roboforex does not maintain a percentage of a required margin so that once it hits that point, it can still give a trader some leftover capital to trade with.
    For example: If Roboforex company had a 5% negative balance protection margin, Ulthred would have been left with $50 amount. So positions will be closed on a 5 percent negative margin leaving Ulthred with $50 so as to prevent Ulthred account of becoming zero.
    If this recommendation will be employed by Roboforex, it will help traders still have an amount to depend on after the negative protection takes place.

    Lastly, I would also recommend for notification prior to reaching negative balance level so that traders can either minimize loss or add more funds to account in order to appease the margin requirements.

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    Last edited by Ulthred; 03-24-2019 at 04:24 PM.

  3. #3
    Trader xauyuro's Avatar
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    This is the first time I've heard that there are brokers who provide negative balance protection service. and this service is provided by roboforex. I hope that many traders who are aware of this service will certainly be very helpful when we experience a large floating minus.

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