Forex brokers and overdraft protection
Forex traders, wishing to avoid a situation in which they would risk more than their deposit, are increasingly looking for brokers that provide protection against overdraft. Negative Balance Protection). Price gaps, macroeconomic data releases, unforeseen decisions by central banks, as well as terrorist attacks - these are the main factors that make Forex trading with the use of financial leverage an additional risk.
Overdraft protection. Safety or a shot in the knee?
This protection is kind of warrantywhich the broker provides. He assures us that in the event of any circumstances, our account balance will go below zero, we will not have a duty pay off this debt. It is also often a promise that during the 2-3 days the state of our account will be zeroed.
The risk of an account overdraft is most often due to a combination of leverage and trading on instruments with relatively high exchange rate fluctuations. It is true that exchange rate fluctuations usually oscillate around 0,5-2% per day, however, in extreme cases, due to the aforementioned factors, fluctuations can be much greater. A great example of history is freeing the franc course through Swiss National Bank January 15, 2015 and the gap in the opening of oil quotes in the amount of even -30% (depending on the instrument) of March 9, 2020.
It is situations that virtually nobody can predict that cause the biggest changes both on the market and in customer accounts.
Debit protection and ESMA regulations
From August 1, 2018 to August 1, 2019, guidelines introduced by the European Securities and Markets Authority (ESMA) were in force, which impose, inter alia, an absolute obligation on brokers from the European Union to introduce a negative balance protection offer. From August 2, 2019, all European Union countries decided to introduce identical protection at national level.
This protection covers only retail and accounts experienced. This means that this requirement does not apply to customers with a classification professional. Nevertheless, the selected brokers voluntarily decided to cover also professional clients - this group includes the British broker Tickmill.
Overdraft protection and Forex brokers
Below is a list of examples of brokers who provide protection against negative balances on the account.
List of offers 2024
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. From 74% to 89% of retail investor accounts record monetary losses as a result of trading CFDs. Think about whether you understand how CFDs work and whether you can afford the high risk of losing your money.
- * Maximum leverage based on applicable regulations.
- ** MultiCharts can be connected. The broker does not offer this platform as standard.