Negative Balance Protection at TFX Markets

When trading in volatile forex market, "how is my account protected?" is a very important questions all traders should ask. One crucial questions should be about negative balance protection which is also called margin call, which can prevent a trader from reaching a negative balance (more than the sum invested) and into debt.

For inexperienced traders, a lack of risk management and adequate margin can lead to negative balances, after all, all traders do not expect to lose more than the sum they have defined as acceptable and deposited. At TFX Markets, Negative balance protection ensures that losing positions do not result in negative balance in the forex trading account.

How does Negative Balance Protection Work?

Traders that find themselves with losing orders are protected in two stages, the first stage is the margin call that warns the trader that the liquidation level is approaching, and this level is set to 100% at TFX Markets. The second stage is to close losing orders at 50% of used margin.

It's important to note that STP Forex Brokers, where trades are executed to liquidity banks and providers, all negative balances must be paid to the banks and this is one of the factors why the stop out level is set to 50%. On the other hand, when trading with a market making broker (a virtual market), where client's losses are the brokers profit, the stop out level is much lower, usually 10% or 20%. These lower levels are set to ensure that the trader losses as much as possible to the broker who will make a greater profit the more the trader losses.

In most cases the stop out of trades prevents the account from reaching a negative balance, however, when trading in fast moving forex markets, reaching a negative balance cannot be guaranteed 100% of the time. In such cases, where the trader has ignored the margin call and allowed the losing trades to continue running, and the stop out has occurred resulting in negative balance, TFX Markets is committed to cover negative balances and will set the trading account to zero to allow the trader to continue trading from zero and be free from debt to the markets. 

To read more about Negative Balance Protection at TFX Markets and other benefits, please visit: http://www.tfxmarkets.com/about-us/broker-advantages/