I think it would be good in babypips school an article which warns newbies about the possibility of losing more than the deposit. This could happen if a huge gap forms. The risk is small but it could happen and the day traders would be the most affected given the fact they should open a bigger position for the same risk then the higher time frames traders. In CFD shares trading the risk is even bigger since gaps form every day. In a short position on CFD shares the potential losses are unlimited. So even if you respect money management you could still lose more than the deposit. Many traders think they can only lose the deposit and this is because there aren’t many articles on the internet that warns them about the possibility of losing more. The idea of losing more than the deposit isn’t a popular idea. The list of brokers that offer a no debit account policy isn’t also very popular. Only some of them like FXCM (and I think Oanda and Fxpro but I’m not sure) will credit the account back to 0 if the account has a negative balance. The majority of brokers will sue the trader and will force him to pay the money. Some brokers don’t warn the traders about this possibility (they say on the first page that traders can lose all the investment) but in the terms and conditions they say traders are liable for a negative balance.
If traders would know about this possibility and if lists with brokers that offer no debit account policy and with brokers that don’t have this policy would be available on babypips or other sites many traders would only want to open account with brokers where they can only lose the deposit. And the other brokers because of competition would be forced to also have no debit account policy.
Thanks for your feedback. We completely agree that losses on gaps should be more prominently mentioned in educational material in general, and more so in our own School of Pipsology. We’ve made a note to revamp our risk management lessons to reflect this.