Negative balance: account blow up

[ieonqutav]

Hi guys,

It seems that some brokers/dealers explicitly state that the client is liable for a negative balance and may contact him to pay it, while others are not clear about what happens.

In the event of a crazy market spike/gap, are margin calls really enough to stop some undercapitalized unlucky bad trader? Or in that case is there a good probability for him to be thrown into the negative side?

 

[Depth Trade]

Hi guys,

It seems that some brokers/dealers explicitly state that the client is liable for a negative balance and may contact him to pay it, while others are not clear about what happens.

In the event of a crazy market spike/gap, are margin calls really enough to stop some undercapitalized unlucky bad trader? Or in that case is there a good probability for him to be thrown into the negative side?

Usuall you have a margin call when your still a certain amount of percentage points away from zero margin, then if you fall into the danger area (closer to zero margin available, your position is closed), so you never will owe money to a broker.

What platform/ broker are you using?

 

[NetTecture]

Yeah. I must say t6hough I have seen markets (in ommodities) going limit up for a week without a chance to close positions on REALLY low volume. In this extreme cases one contract may result in extreme losses (100.000+ USD possibly).

 

[ieonqutav]

What platform/ broker are you using?

Last year I was at Forex Club using Rumus platform and had a real account that went exactly $0.00 without further problems (excelent charting platform but long execution times).

Now I'm much more experienced in money management and looking around to try other market makers, but read somewhere that each one is different in this particular issue.

Look at this post at Forex Peace Army by Teresa F. at 2009-02-03:

IBFX.COM is NOT for the serious trader. They close early on Friday's at 4:00 PM and if you leave posistions open you will definitely get screwed as the market is still moving until 5:00 PM and even worse they open on Sunday at 6:00 PM but the market is really starting the real activity hours before that time and usually you will see big 100 point gaps on their platform when they open; this is a big problem that can lead you to have a negative balance in your account because their platform won't fill orders until it opens which means whatever the price is at the time which could be 100 pips against you and totally wipe you out if you are using 100 to 1 leverage. You can also go negative and they will ask you to cover the negative balances as it has happened to me. I think that their hours are meant to be in their favor thereby screwing the traders easily and as you know when you lose the house wins. STAY AWAY FROM THEM IF YOU ARE A SERIOUS TRADER.

One of the big advantages of a market maker usually is a "no negative balance" policy, which is necessary for all those amateurs with small accounts and crazy leverage, but even a less amateur must know that this may happen to him. As Forex Club is targeted to the lowest end of the market, this is good.

So, "automatic margin call" seems to be different from "no negative balance protection".