Negative Balance Protection

Negative Balance Protection - A safeguard that guarantees retail traders cannot lose more money than they have deposited. In practice (mandated by regulators like ESMA and NFA), if a client’s positions move against them, the broker must close positions before the account balance goes negative. Thus the trader’s maximum loss is limited to their account equity. This protection became widespread after events (e.g. the 2015 Swiss franc spike) when clients’ losses could exceed deposits.