Can I be in debt when trading (NOT borrowing for trading)

[SkyTrad]

Hi folks,

I'm completely new to trading world and I just want to test for small amounts.

Generally speaking: can I ever be in debt when trading on mainstream platforms (for example XTB) ?

I am not borrowing any money, I use my bank cash saving account.

For example if I take shares for £500 of a company, and the share value decrease drastically.

My understanding is that in the worst-case scenario, I completely loose my initially invested £500.

HOWEVER, I will never have to pay any £1 more in case the price value go even below my initial £500-worth investment.

--> in other words: Worst-case scenario = I cannot recover my £500 but I will never have to "pay" more than that

Thanks for any clarification, this would be the first thing I'd like to clarify before making a move forward.

SkyT

 

[BigDeal]

I am assuming you are in the UK with this answer.

If you are buying and owning the actual shares, then you can only lose your investment ie if the company goes out of business, your investment is worth nothing.

It is also possible to trade using derivatives, such as CFDs. In this instance you will be trading the price of the shares rather than owning them. These are different in that you will put down a percentage of the full value of the shares and borrow money from the broker to fund the deal. These arrangements carry the risk of loss beyond your initial deposit. However, as long as you are classifled as a retail client, (which as new trader you should be), under current UK legislation a broker must offer negative balance protection, meaning that once again you cannot lose more than the funds you have deposited.

CFDs carry more risk and are more complex, and there are other costs involved with these, so you need to research fully before considering these, or deciding if they are right for you.

 

[timsk]

Welcome to T2W, SkyTrad,
I concur 100% with BigDeal, but worth adding that everything he says about CFD's also applies to spread betting, which is worth considering if you want to open a small test account of £500. Whatever you do, paper trade first until you know what you're doing, as you can easily burn through £500 in the blink of an eye!