lets say you put 1000$ so you can trade 100,000. If lose lets say 5,000 does it mean that you pay that part back? Im sorry its a dumb question.
Broker will do a margin call and ultimately close the trade before that happens. However, yes if you read the T&Cs that your broker provides rather than just clicking “Yeah, yeah I read all that sh!te lets trade” button. It should say somewhere in there that your liable for losses that go beyond what is in your trading account. It could happen but unless there is a big move, the broker would likely close the trade first.
No, you don’t pay anything back. What you lost (5000 units) equates to a deduction of your $1000. I dont know how much the 5000 units equates to how much dollars. But you can find out by taking your current balance and subtracting it by 1000.
No, you do not pay anything back…while the scenario you’d painted will result in margin call, trades being closed and if your trade is on the red, your account will show this (P/L) automatically. So yeah, you get to trade with whatever leverage your broker offers and you certainly do not have to pay anything more than the funds you would have already deposited in your acc…
GFT PDS:
“Negative account balances
• Numerous transactions may be required to stabilise your Account and such transactions may result in fees that overtake the value/assets of your Account. Should such an event occur, you are responsible for paying such fees within a designated period of time. Failure to satisfy this requirement may result in your positions being liquidated at a loss to cover such fees. Further, where funds maintained in your Account are insufficient to meet losses, fees and other charges, you will be required to bring your Account to a zero balance, at least, within forty eight (48) hours after the occurrence and you agree to be liable to GFT for interest on amounts due from you to GFT at an interest rate equal to four (4) percentage points above the UK base rate of Barclays Bank Plc from time to time or the maximum interest rate allowed by law, if lower. If you fail to bring your Account to a zero balance, at least, within forty eight (48) hours after the occurrence, you will be subject to legal proceedings and the court and legal fees spent to recover these amounts due.”
“Effect of Margin Requirements
Margined transactions carry a high degree of risk. The amount of Initial Margin is small relative to the value of the contract so that transactions are ‘leveraged’ or ‘geared’. A relatively small market movement will have proportionately larger impact on the funds you have deposited or will have to deposit. Even small trading transactions can lead to substantial losses, which far exceed the liquid or asset value of your Account. This may work against you as well as for you. You may lose substantially more than you initially invested. See section 17(b) of the PDS for more information about the risks of “leverage” or “gearing”.”
I am no lawyer but my reading of the PDS in Australia suggests that you a liable for losses. I think it would be extremely kind of brokers to guarantee losses that exceed account balances. But I can’t be bothered reading any further…
You set your stop - if your a/c bal is too low the vast majority of systems will alert you and not allow the trade.
Those same systems will close a trade if your a/c bal is too low.
All T&C will tell you you are liable for losses if you a/c gets in negative territory - so how can it get there?
Simple - Gaps - price can gap through your stop - in forex in the majors usually can happen at weekends but is not so common, but it does happen.
Many brokers offer ‘guaranteed stops’ meaning they take the hit should this happen - but you have to pay for this in an increased spread.
Test this out on a demo a/c with a low balance - you will see the effect.
In reality your balance should not be at those levels - if you can’t sleep at night - leverage is too great.
Almost all forex brokers will issue a margin call notification, asking you to supply more money to support the trade. If you don’t put up the money, they close the trade.
You can’t lose more than what you have in the account.