Negative Balance Protection: how it saves traders from debt

Trading in the financial markets, especially Forex and CFDs, comes with significant risks. One of the scariest scenarios for traders is ending up with a negative account balance, where losses exceed the deposited funds, leaving them owing money to the broker.

Fortunately, some brokers offer Negative Balance Protection (NBP), a safety net that prevents traders from losing more than their initial investment. In this article, we’ll explain how NBP works, why it matters, and which brokers provide it, along with the top 5 FX and CFD brokers for trading stocks.

What is negative balance protection?

Negative Balance Protection is a risk management feature that ensures a trader’s account balance never falls below zero, even in extreme market conditions (e.g., flash crashes, high leverage, or gaps). Without NBP, traders could end up owing money to their broker if their positions go severely against them.

Example of negative balance without protection ⬇

Imagine you deposit $1,000 into a trading account with 100:1 leverage and open a large position. If the market moves sharply against you, your losses could exceed your deposit, leaving you with a -$5,000 balance. Without NBP, the broker could demand repayment.

Example with negative balance protection ⬇

With NBP, even if your losses exceed your balance, the broker resets your balance to zero, and you don’t owe anything extra.

Which brokers offer negative balance protection?

Not all brokers provide this protection, especially those in less-regulated jurisdictions. However, regulated brokers in the EU, UK, Australia, and other strict jurisdictions often include NBP as a mandatory feature.

Brokers that offer negative balance protection

Here are some well-known brokers that provide NBP:

1. eToro (EU/UK regulated) – Offers NBP for retail clients.
2. XM (CySEC, ASIC, FCA) – Provides NBP under EU regulations.
3. AvaTrade (EU, Australia, Japan) – Ensures NBP for retail traders.
4. Plus500 (FCA, CySEC, ASIC) – Includes NBP for retail accounts.
5. XTB (FCA, CySEC) – Complies with ESMA’s NBP rules.

How negative balance protection works (step-by-step)

1. Choose a regulated broker that offers NBP

Not all brokers provide NBP, so your first step is to open an account with a broker that guarantees it. Check their regulatory status:

• EU/UK brokers (e.g., eToro, XTB, Plus500) – Must offer NBP for retail traders.
• ASIC-regulated brokers (e.g., AvaTrade) – Also provide NBP.
• Offshore brokers (e.g., some IC Markets accounts) may not offer NBP.

🔹 Tip: Always check the broker’s “Client Agreement” or “Risk Disclosure” section to confirm NBP is included.

2. Open a retail account (not professional)

NBP is only for retail traders under EU/UK/ASIC rules. If you opt for a “Professional” account (which gives higher leverage but removes protections), you lose NBP.

🔹 Example:

• Retail Account (FCA-regulated broker) → Negative Balance Protection ✅
• Professional Account (same broker) → No NBP ❌

3. Avoid extreme leverage and high risk

Even with NBP, you should manage risk wisely. If your account hits zero, NBP saves you from debt, but you still lose your deposit.

🔹 Best practices:

• Use stop-loss orders to limit losses.
• Avoid over-leveraging (e.g., 1:500 on volatile assets).
• Monitor margin levels to prevent forced liquidation.

4. Understand when NBP may not apply

• Market gaps and slippage: In extreme volatility, your losses could still exceed your balance before NBP kicks in.
• Corporate/Pro Accounts: NBP is usually disabled for professional traders.
• Non-regulated brokers: Some offshore brokers do not offer NBP at all.

What happens if your balance goes negative? (with NBP)

If your broker has NBP, here’s what happens:

1. Your losses exceed your balance → The broker automatically resets your account to ZERO.
2. No debt obligation → You don’t owe the broker anything beyond your initial deposit.
3. Account freeze → You may need to deposit new funds to trade again.

🔹 Example:

• You deposit $1,000 and lose $1,500 due to a sudden crash.
• With NBP → Your balance is adjusted to $0 (you don’t pay the extra $500).
• Without NBP → You owe the broker $500!

Pro tip: Always use stop-loss and take-profit!

Brokers where NBP is automatic (no setup needed)

If you’re looking for a reliable broker to trade stocks, Forex, and CFDs, here are the top 5 picks based on regulation, fees, and features:

XTB

✅ Regulation: FCA, CySEC, KNF
✅ Negative balance protection: Yes (for retail traders)
✅ Stock trading: Offers real stocks & CFDs with low spreads
✅ Pros: Advanced platform (xStation 5), educational resources

eToro

✅ Regulation: FCA, CySEC, ASIC
✅ Negative balance protection: Yes
✅ Stock trading: Commission-free real stocks + Copy Trading
✅ Pros: Social trading, user-friendly for beginners

Risk disclaimer: eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 61% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

This communication is intended for information and educational purposes only and should not be considered investment advice or investment recommendation. Past performance is not an indication of future results.

Copy Trading does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk.

Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more.

eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro.

AvaTrade

✅ Regulation: Central Bank of Ireland, ASIC, FSA
✅ Negative balance protection: Yes
✅ Stock trading: CFDs on global stocks with leverage
✅ Pros: MT4/MT5 support, automated trading options

Plus500

✅ Regulation: FCA, CySEC, ASIC
✅ Negative balance protection: Yes
✅ Stock trading: CFD-only (no real stocks)
✅ Pros: Simple platform, tight spreads

XM Group

✅ Regulation: CySEC, ASIC, IFSC
✅ Negative balance protection: Yes (under EU rules)
✅ Stock trading: CFDs on US & global stocks
✅ Pros: Low minimum deposit ($5), strong MT4/MT5 support

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