Worst Case Scenario With Margin Trading

Say I just bought 1 standard lot of currency @ 1:50 leverage on EURUSD @ 1.23. Say there was a total world catastrophe and the quote drops down to .50 EURUSD…even surpassing the stop loss. And lets just say its that terrible of a scenario. Could I go into severe debt? I use Oanda, and I’m not sure how things would go down. Could I owe millions. Will they let my account go negative?

Firstly, you should be asking Oanda

Secondly, this is a very very very hypothetical scenario and not very likely to occur

Thirdly - it’s not likely your broker will allow you to go MILLIONS in debt because you could just claim
bankruptcy and you wouldn’t need to repay the debt because you are unable to (at least that’s how the law works in Australia)
also there is responsibility to be considered from the institutions point of view
so… it’s not likely they will let that occur

and Most brokers will not let it go into negative at all, that’s what they use Margin Call for

Fourth
Technically speaking … it would have to surpass your stop loss over the weekend and then the first fillable price is where you would get stopped out if your stop loss was not hit
so… even if it happened, it probably wouldn’t be too drastic
but every broker that i’ve been past has tried to avoid this scenario of putting people in debt because they know that people probably won’t have the money to pay it back

as for the worst scenario ,
it’s whatever you can think of

but you also need to ask the question
IS IT LIKELY TO OCCUR

1 Like

Hi PIL… Reading the Risk Disclosure PDF on the “well hidden” link below should answer all your questions…and scare you at the same time…

The Q & A for margin rules with Oanda on the link below…

https://www.oanda.com/resources/legal/united-states/legal/margin-rules

As Martin has said with small positions (Lots) and small leverage of 1:50 you should be safe…

Hope this is of help…

In Germany,for example,is a new law that says it is forbidden to bring you in minus.So if your account has total value of 100, you can loose only 100.

Hi Kashmaster… This is good… Negative Balance Protection… some Brokers already offer it for a fee or higher commision… but to make it actual law is a great idea… Be interesting to see if the rest of Europe (EU) follows… they have…