Negative balance protection explained
Let’s say that you deposit A$2000 and go long the AFTERPAY share with 5:1 leverage. The value of your position is $10,000. An unexpected market event causes the price to drop rapidly by 8% beyond your margin call close out level. You suffer a 30% loss due to leverage, meaning a total loss of A$3000.
Broker WITHOUT negative balance protection
If you place this trade with a broker that doesn’t offer negative balance protection, you will owe A$1000. The broker has the right to take action against you in order to collect the amount owed.
Broker WITH negative balance protection
A broker who offers negative balance protection has risk management tools in place that prevent your account from going below zero. You will only lose your initial deposit and the broker will absorb the loss.
Your total balance is protected with us
At Qtrade, we understand that no risk management rule can protect traders from extreme volatility during announcements, market openings and unexpected global events. That’s why we take the responsibility to protect your total balance* with Qtrade from going negative.