One of the most frequently asked questions to me is what happens if my forex account goes down to negative balance, do I have to pay? As far as the negative balance protection had made it mandatory for all institutions in the forex CMB Turkey. In other words, the investor never becomes indebted in addition to the amount invested in the brokerage firm and if the balance goes negative, the brokerage firm completes the minus part.
There is no clear answer to the question of whether I need to pay the institution for the negative balance if my forex account goes negative abroad. Many institutions act according to the situation in case the account goes negative.
I say, if the institution detects bad faith in the investor and the negative balance is high, it may request you to close the negative part of the account. But on a citizen of overseas forex brokerage house in Turkey, I do not know of any serious legal sanctions.
After calling you a few times or emailing you a few times, they usually continue on their way by deleting the negative balance. Of course, the frequency of calls and emails varies depending on how negative the account is. 🙂
In addition, if the negative balance does not exceed a few hundred dollars, the institutions do not pay too much and they continue to delete your account. Of course, if you have a second account at the same institution, they will deduct the negative balance from your other account. Also, if you go back to that institution and deposit money to make a transaction, they will most likely automatically charge you the negative amount.
So how does the forex account go to negative?
Although very rare, your forex account may go negative. Suppose that you are buying in the high EURUSD parity and your free margin is not very high and suddenly there is an unexpected shock effect, the prices stop and the EURUSD suddenly gives a price down 10% after a few minutes. Since your free collateral is not enough, your account goes into negative.
As an example, we can show the movement in EURCHF nearly two years ago, after the Swiss Central Bank suddenly announced that it lifted the 1.20 base in EURCHF without notice.
Just above the 1.20 level, after all, traders who were buying because the SNB was not letting it down suddenly got to a negative stop when the EURCHF price was thousands of pips below. Brokerage houses followed the investors whose account was negative, of course, but there was not much result. The largest brokerage houses in the market such as Alpari and FXCM went bankrupt or on the brink of bankruptcy due to negative balances.
The negative balance can be experienced in the market opening on Monday night. Due to an important development at the weekend, when the parities start the new week at very different levels than closing on Friday, the balance of the investors who do not have free collateral becomes negative.
To summarize, it is a rare situation and the decisions of foreign institutions regarding the negative balance vary according to the situation. They will probably call you a few times and demand that you complete the negative balance, or if it is a very small amount, they will send you an e-mail, they will give up, they will give up.