Multiple accounts, why do people have them?

Beginner Questions
1

I’m new to forex

I’m trying to understand why people say that they blew up multiple accounts. Why would someone need multiple accounts?

Also another question would my losses ever exceed my balance and would I ever owe anything to my broker in the event of a catastrophic loss?

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2

Yes, its a bit puzzling.

Handy if -

you want to have opposing long and short positions on the same instrument, which US etc. brokers are not permitted to offer - not sure thus should be really important for many traders (any traders?)

you can’t access your main account and you don’t want to miss the chance to open/close a position - though I hope the days of platforms crashing and engaged phone lines and internet crashes and modem failures are mostly over.

EU-regulated brokers now must offer negative equity protection - EU clients can never owe them more than their deposited funds.

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@tommor I never thought about using multiple accounts for going long on one and short on the other on the same pair. That’s interesting.

@TraderRobert From a newbie perspective, when people say they’ve blown up multiple accounts its because they lost their initial deposit and had to fund their account again. Every time the account loses all the funds that’s considered blowing up the account and you have to add more money and if you lose all the money again, that’s another account blown up. Not necessarily opening up new accounts but having to continuously add money after losing initial deposit.

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4

I have 2 account,
1 from rakuten ; fast withdraw because support my local bank, better cost at some pair(in London hour)
1 from IC market ; has better cost XAUUSD 17 pips from IC VS 30 pips from rakuten

5

They open it, they blow it up. Then they open a new one which is relatively easy and they do this because when they show performance statistics for this new account to anyone it wouldn’t reflect that massive loss of the blown up account(s). Get it?

6

That’s what I had always assumed they meant as well

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7

good question! I see that mentioned so often especially on facebook. where people say they blow up their accounts. often wondered about that

8

Fortunately, Australia unlike the EU (and the UK), hasn’t been screwed over by the regulators yet so we can still utilize larger leverage (100-500:1)… and therefore aren’t required to deposit vast amounts to trade real positions. ie: ~$320 per 1 lot… not $3200 per 1 lot…

We have multiple accounts across multiple Brokers for a few reasons…

  1. If an account is being traded during a Black Swan event… only open accounts are threatened.

  2. Risk Management, If hackers crack a particular account, they don’t have access to all funds.

  3. Brokers have varying spreads and commision structures which can be used to our advantage.

  4. Certain accounts are just for trading Indices. Usually larger positions.

  5. Set accounts to just trade XAUUSD and XTIUSD and separate Currency Crosses.

"It’s because they keep blowing up their accounts… " Unbelievable…

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9

It can be for safety purpose or based on the different trading strategies.

10

There are several reasons to use several accounts at the same time.

First of all is the safety issue. If you will divide your initial deposit among several brokers, you will lose only one part of it in case of problems with any of the brokers. The non-market risks in Forex are extremely high, that is why such diversification seems to be necessary.

Another point is trading conditions. The idea is that you choose separate broker for each strategy according to the tradig conditions provided. For example, it will be better to use one account for scalping and another - for swing trading.

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Some also use a special acount just for news trading- because they see news trading with high volatility more as gambling than as trading. The reason is, that even you placed a stop loss to your order prior to the news release, in cases of high volatility when price rockets up 60 or more pips within seconds you may get a worse price than your stop loss-if you only have some money in your “gambling account” what you accept to loose, you will not face an unforseen loss

12

Thanks.
If price blows right past someones stop loss, there account would become liquidated, and that would force the account to be closed, correct?
Would someone ever owe the broker more that what is in the trading account if it were liquidated?

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ESMA-regulated forex accounts across the EU including the UK have negative account protection, so you can lose all your profit and all your deposited funds, like everywhere in a disaster, but here you can never lose more than what you put in.

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14

Thanks.
Would you happen to know if US residents are protected in any way from a “Price Disaster”?

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Doubt it. If your US broker offers this, they will be shouting about it.

16

This is correct! That’s the problem with stop loss-n the other side it may also happen, that you get much more if your take profit target is hit in rocket-markets!