Brokers With Negative Balance Protection

In the hands of a skilled trader, leverage can reap large profits from modest price movements by increasing the size of their position. The reverse is also true, as losses from a single careless or unlucky leveraged trade can grow to substantial proportions, and without the presence of a safety net can completely wipe a trader out and put them in debt.

Luckily, such a safety net exists for retail traders in the United Kingdom, where the country’s regulatory body, the Financial Conduct Authority (FCA), requires trading brokers and platforms to offer negative balance protection on certain trades. Ensuring you are covered by this protection, and understanding how it works, are two important concepts for traders to get to grips with when they start trading with leverage.

This guide breaks down the pros and cons of the safety net, alongside a list of the top trading brokers with negative balance protection in 2025.

• Negative balance protection ensures a trader’s losses do not exceed their account balance
• Traders who use brokers with negative balance protection are prevented from becoming indebted to their platform
• FCA-regulated trading brokers are required to offer negative balance protection
• Negative balance protection generally covers retail but not professional traders

How Negative Balance Protection Works

In trading, leverage allows you to borrow funds and take a position in a trade that exceeds the amount of cash you have deposited. In the UK, the amount of leverage available to retail traders is capped at 1:30, which means that you are able to borrow enough to take a position 30 times larger than the amount of cash you have deposited.

The attraction of this is that it will increase profits from even small price movements, but leverage will work in exactly the same way to magnify losses if a trade turns against you.

Example

If you deposit £1,000 cash into your trading account and open a long position with 30x leverage, a 1% price increase, which would ordinarily net you £10, will instead earn you £300. But what if there’s an unexpected and dramatic movement the other way? If the price were to suddenly fall by 10%, you would be down £3,000, losing everything in your account and putting you in £2,000 debt to your broker.

This was precisely the scenario in January 2015, when the Swiss National Bank made the unexpected announcement that it was ending its four-year practice of fixing the price of the Swiss Franc (CHF) at 1.20 to the Euro (EUR). The CHF price suddenly soared by 20% against the euro, taking traders with leveraged short CHF-EUR positions by surprise and leaving a great many of them in debt to their brokers.

Some of the largest online brokers agreed to forgive most of the debt, averting disaster. But the aftermath of the 2015 panic led several leading regulators to implement negative balance protection rules.

The FCA & Negative Balance Protection

The FCA’s permanent negative balance protection regulations, implemented in 2019, cover firms offering contracts for difference (CFD) and similar derivatives, stipulating that retail traders’ losses should not exceed their account balance.

The regulations also state that customers’ positions must be closed out when their funds fall to 50% of the margin they need to maintain an open position on their CFD account – an action that is known as a margin call.

Brokers With Negative Balance Protection

Since UK regulations state that brokers must provide this safeguard as standard for CFD’s and CFD-like products, it may be a sign that something is amiss if you find a broker or trading platform that appears to operate without negative balance protection on leveraged trades. Check for negative balance protection by reading the broker’s terms and conditions or by conducting a search of their help centre. Alternatively, use our list of trading brokers that offer negative balance protection.

Another tell-tale sign of a legitimate brokerage that was introduced in the same 2019 FCA regulation is the requirement for brokers to “provide a standardised risk warning, telling potential customers the percentage of the firm’s retail client accounts that make losses.” If the broker makes this warning during your onboarding process or as you set up trades, it is a good sign that it will also offer negative balance protection. However, it is always worth checking to be sure, since even some reputable trading platforms which operate in the UK – Interactive Brokers, for instance – do not offer negative balance protection on margin accounts.

In some rare situations, an asset’s price movement will be so sudden and so extreme that it will bring your balance to negative cash equity in spite of negative balance protection. In these instances, brokers with negative balance protection should absorb the cost and return your balance to zero.

Margin Calls

Many good brokers will send traders a warning when their account balance gets close to a margin call, giving them time to top up their balance if they wish to keep a trade running. This may sometimes work out well for a trader who has the courage to back their convictions – if the price movement reverses, they can recoup some of their losses on a losing trade and may even make a profit.

But it’s important to recognise that not every trade will work out, and for every last-minute winner, you will find a hundred traders who have multiplied their losses by throwing good money after bad.

Other Safeguards for Leveraged Trades

Online brokers with negative balance protection will stop you from being wiped out in a single bad trade, but a wise trader will usually want to have measures in place to prevent such a course of events in any case. Setting stop-loss orders, for example, is an effective way to limit your losses and preserve enough capital for you to fight another day and recoup your money.

Bottom Line on Negative Balance Protection

Whether you plan to trade stocks, forex, commodities or cryptocurrencies, if you’re making leveraged trades with a UK broker you should check you are covered by negative balance protection. The presence of negative balance protection is a sign that your online broker is legitimate, and it will save you from the worst effects of inattention or bad luck in a trade. Retail traders can also add an extra layer of protection to their trades by setting stop loss orders. Finally, investors should be careful not to negate the effect of negative balance protection by wasting money in a fruitless attempt to turn a losing trade around.

Use our list of the best forex and stock brokers with negative balance protection to start trading.

FAQs

Why Use Brokers With Negative Balance Protection?

To put it simply, negative balance protection is a safeguard that protects retail traders from the most extreme effects of an unlucky or careless leveraged trade by preventing the balance of their trading accounts from going below zero.

Will Negative Balance Protection Stop Me From Losing Money?

Negative balance protection is the last line of defence against being liquidated and placed in debt due to a bad trade. However, investing is an inherently risky business. There is no protection from losing money on any investment, and you should not expect any regulator to step in if you put yourself in debt by losing money you don’t have in a series of bad trades.

Do All UK Trading Brokers Offer Negative Balance Protection?

The British financial regulator, the FCA, requires trading brokers to provide negative balance protection on CFDs and similar products and to close out a customer’s position when their balance falls to 50 percent of the amount required to keep a trade open. If you find a UK broker that does not appear to mention these safeguards for leveraged trades, it would be wise to be extra cautious if you sign up and trade on their platform.

Is Every Trade Covered by Negative Balance Protection?

Many regulators, including those in the UK, Australia, Cyprus and Germany, have made rules requiring negative balance protection in some form. However, by their nature these regulations usually apply to leveraged trades, so trading platforms and brokers which offer different services may not be required to offer this protection. At the same time, some companies that offer leveraged trades do not offer negative balance protection.

Which Broker’s Negative Balance Protection Is Most Reliable?

Since negative balance protection is FCA-regulated, all brokers should follow the same rules when applying it. However, some may provide clients with related services, such as sending them mobile alerts when their balance falls to a level close to a margin call. Pepperstone and CMC Markets are two particularly popular trading brokerages that provide negative balance protection.