Best Brokers With Negative Balance Protection

The best brokers with negative balance protection offer additional security to traders using leverage and demonstrate a dedication to client safety and experience. Whether you are looking for an Australian forex broker, a US CFD broker or just an international firm offering a wide range of products, negative balance protection should be an important consideration.

Read this article to learn what negative balance protection is, how it works, different regulation rules, and how to choose brokers with negative balance protection.

Best Brokers With Negative Balance Protection

These are the top 5 brokers with negative balance protection based on our experts' tests:

#1 - AvaTrade

Why We Chose AvaTrade

AvaTrade is a leading forex and CFD broker, established in 2006 and regulated across 9 jurisdictions. Over 400,000 users have signed up with the broker which processes over 2 million trades each month. The firm offers multiple trading platforms, including MT4, MT5, and a proprietary WebTrader. 1250+ financial instruments are available for day trading, from CFDs to AvaOptions and now AvaFutures, alongside a comprehensive education center and multilingual customer support.

"AvaTrade offers the full package for short-term traders. There is powerful charting software, reliable execution, transparent fees, and fast account opening with a low minimum deposit."

- DayTrading Review Team
  • Instruments: CFDs, Forex, Stocks, Indices, Commodities, ETFs, Bonds, Crypto, Spread Betting, Futures
  • Regulator: ASIC, CySEC, FSCA, ISA, CBol, FSA, FSRA, BVI, ADGM
  • Platforms: WebTrader, AvaTradeGO, AvaOptions, AvaFutures, MT4, MT5, AlgoTrader, TradingCentral, DupliTrade
  • Minimum Trade: 0.01 Lots
  • Leverage: 1:30 (Retail) 1:400 (Pro)

#2 - Deriv.com

Why We Chose Deriv.com

Deriv.com is a low cost, multi-asset broker with over 2.5 million global clients. With just a $5 minimum deposit, the firm offers CFDs, multipliers and more recently accumulators, alongside proprietary synthetic products which can't be found elsewhere. Deriv provides both its own in-house charting software and the hugely popular MetaTrader 5.

"Deriv.com will suit day traders looking to make fast-paced trades using CFDs and multipliers with high leverage up to 1:1000. The broker is also the industry leader in synthetic indices, which simulate real market movements and are available around the clock. "

- DayTrading Review Team
  • Instruments: CFDs, Multipliers, Forex, Stocks, Indices, Commodities
  • Regulator: MFSA, LFSA, VFSC, BFSC
  • Platforms: Deriv Trader, MT5
  • Minimum Deposit: $5
  • Minimum Trade: 0.01 Lots
  • Leverage: 1:1000

#3 - Exness

Why We Chose Exness

Exness is a Cyprus-based forex and CFD brokerage established in 2008. With over 260,000 clients, several awards and reputable licensing, the broker has maintained its position as a highly respected global brand. Active day traders can access the popular MT4 and MT5 platforms, raw spreads and multiple account types.

"Exness remains an accessible broker for all experience levels, though experienced day traders will particularly appreciate the ultra-low commission rates, fast withdrawals and high-quality charting software."

- DayTrading Review Team
  • Instruments: CFDs, Forex, Stocks, Indices, Commodities, Crypto
  • Regulator: FSA, CySEC, FCA, FSCA, FSC, CBCS
  • Platforms: Exness Trade App, MT4, MT5, TradingCentral
  • Minimum Deposit: $10
  • Minimum Trade: 0.01 Lots
  • Leverage: 1:2000

#4 - Pepperstone

Why We Chose Pepperstone

Established in Australia in 2010, Pepperstone is a top-rated forex and CFD broker with over 400,000 clients worldwide. It offers access to 1,300+ instruments on leading platforms MT4, MT5, cTrader and TradingView, maintaining low, transparent fees. Pepperstone is also regulated by trusted authorities like the FCA, ASIC, and CySEC, ensuring a secure environment for day traders at all levels.

"Pepperstone stands out as a top choice for day trading, offering razor-sharp spreads, ultra-fast execution, and advanced charting platforms for experienced traders. New traders are also welcomed with no minimum deposit, extensive educational resources, and exceptional 24/7 support."

- DayTrading Review Team
  • Instruments: CFDs, Forex, Currency Indices, Stocks, Indices, Commodities, ETFs, Crypto, Spread Betting
  • Regulator: FCA, ASIC, CySEC, DFSA, CMA, BaFin, SCB
  • Platforms: MT4, MT5, cTrader, TradingView, AutoChartist, DupliTrade
  • Minimum Deposit: $0
  • Minimum Trade: 0.01 Lots
  • Leverage: 1:30 (Retail), 1:500 (Pro)

#5 - XM

Why We Chose XM

XM is a globally recognized forex and CFD broker with 10+ million clients in 190+ countries. Since 2009, this trusted broker has been known for its low fees on 1000+ instruments. XM is regulated by multiple financial bodies, including the ASIC and CySEC.

"XM is one of the best forex and CFD brokers we have tested. The flexible account types will suit a variety of short-term trading styles while the $5 minimum deposit and smooth sign-up process make it easy to start trading."

- DayTrading Review Team
  • Instruments: Forex, Stock CFDs, Turbo Stocks, Indices, Commodities, Precious Metals, Energies, Shares, Crypto, Futures
  • Regulator: ASIC, CySEC, DFSA, FSC, FSCA
  • Platforms: MT4, MT5
  • Minimum Deposit: $5
  • Minimum Trade: 0.01 Lots

What Is Negative Balance Protection?

Negative balance protection is a security feature that applies when trading leveraged products. It prevents users from being able to lose more money than they have in their accounts, no matter how far their open positions drop, stopping them from becoming indebted to their broker. While there are some firms without negative balance protection, most popular brokers, such as Interactive Brokers, eToro, markets.com, and XM offer the service. Generally, this applies to retail clients only and professional traders are not offered the same level of protection.

How Does Negative Balance Protection Work?

Negative balance protection ensures that, whenever you trade with leverage, you cannot lose more money than the balance of your account. It protects retail clients from becoming indebted to brokers.

The best way to explain how this works with one of the best brokers with negative balance protection is through an example. Let’s say that you have deposited £1,500 into a CFD trading account. The broker you are using offers maximum leverage of 1:30 and you decide to open a position with £1,000 at a leverage rate of 1:5.

This means that the position you actually open is worth £5,000. If the market is particularly volatile and your position suddenly drops by 40%, you will suffer a loss of £2,000, 133% of your account’s deposited funds (not the position margin). If you did not have negative balance protection, you would owe the broker £500.

However, if you got into this same scenario but your broker provided negative balance protection, your losses cannot exceed the deposited amount of £1,500. If the loss starts building, the broker will automatically close the trade when the loss hits £1,500, ensuring that you do not owe the broker money. Negative balance protection only protects funds up to the balance of your account.

If you had more than £2,000 deposited, you would lose the full amount.ecn brokers with negative balance protection

It is also worth noting that this is not always a guarantee. Most brokers will close the position as it becomes too large but significant margin volatility could cause the position to drop even further before the order is fulfilled. When this happens, you may still owe the broker some money. However, the best brokers with negative balance protection will guarantee this and take on that added loss themselves.

Why Did Negative Balance Protection Become Mainstream

Negative balance protection became particularly prevalent in January 2015. Up to this point, the Swiss National Bank (SNB) had been holding the Swiss Franc (CHF) at a fixed exchange rate with the Euro (EUR), which it had been doing since September 2011. On January 14th, 2015, the SNB announced that it would stop this practice and, as a result, the Swiss Franc soared against the single market currency.

While this would be seen as a success for the Swiss National Bank, it had some unfortunate repercussions. The Swiss market recorded unforeseen losses as many traders had been shorting the Swiss Franc. Many of these investors ended up with negative balances as a result and it was feared that the brokers would demand these losses be paid to cover their losses.

Some brokers, including FXCM, chose to “forgive” up to 90% of their clients given the unprecedented nature of the losses. The main outcome was that negative balance protection entered the limelight and regulatory bodies started to create measures to prevent such drastic losses from happening again.

Pros Of Negative Balance Protection For Traders

Negative Balance Protection Regulations

Following the events in 2015, many regulators have implemented different rules when it comes to negative balance protection. It is important to check each individual broker but here is an overview of some of the main regulatory bodies policies.

The Financial Conduct Authority (FCA), the UK’s regulatory body, has implemented rules to ensure negative balance protection is offered. They have stated that firms offering CFDs and CFD-like assets must guarantee that a client cannot lose more than the total funds in their trading account. Additionally, they must close out a customer’s position when their funds fall to 50% of the margin needed to maintain the open position on their CFD account. This applies to retail clients only, professional traders do not receive the same protection. The FCA’s supervisory team will work with brokers to ensure the proper management of negative balance protection.

The Cyprus Securities and Exchanges Commission (CySEC) is a regulatory body based in Cyprus and one of the main regulators for EU brokers. CySEC has taken a more lenient route for the implementation of negative balance protection. Under them, brokers must implement it on a per-account basis. This means that a client who has one large leveraged position within a portfolio can still lose more than the value of the initial position. The other positions or funds the client has will be used to cover the negative balance. Overall, a customer’s account can never have a negative balance and, if it does, that loss falls to the broker.

Australia’s regulatory body, the Australian Securities and Investments Commission (ASIC), also implemented similar rule changes in 2021. In addition to limiting the leverage offered on different assets to a maximum of 1:30, they have stated that brokers must provide negative balance protection. This ensures that clients losses are limited to the funds available in their account. As with the FCA and CySEC, these rules only apply to retail traders, professional traders still stand to lose more than their available funds.

Germany’s Federal Financial Supervisory Authority, better known as BaFin, also requires negative balance protection to be offered to clients. BaFin did not introduce a limit on leverage in 2017 but they have stated that all licensed brokers must offer negative balance protection to customers, ensuring retail clients cannot lose more than they have deposited into their accounts. Any losses on top of this are borne by the broker.best brokers with negative balance protection

How To Choose Brokers With Negative Balance Protection

When choosing from the best brokers with negative balance protection, there are many things to look out for. Below we have outlined our top recommendations.

One of the first things to check is which agency the broker is regulated by. Try to ensure that you use a broker who is regulated by a top-tier regulatory body, such as the FCA, CySEC or ASIC. On top of requiring that brokers offer negative balance protection, they implement fund segregation rules, offer dispute meditation and provide insurance cover.

Check each broker’s website and find the section on security. Here, it should clearly mention whether they offer negative balance protection, alongside other things like cybersecurity, login protection and two-factor authentication (2FA).

Customer reviews are a great way to learn about a broker’s practices. Many people will note down their experiences with brokers, positive or negative, on online forums and websites. Visit these to learn about brokers and how they deal with issues like negative balance, fund withdrawal issues and more.

Look at the funding procedures a broker provides. Check that they provide a variety of payment methods and that withdrawals and deposits are processed within two to three days. This allows you to trust that your funds will go through successfully and you do not have to worry about your money being lost. Lots of payment methods is also an indication of privacy and security levels, as each provider will have required standards.

Additionally, there are a host of other things to check when comparing the best brokers with negative balance protection. You should ensure that the chosen broker offers the assets you want to trade, be that forex or stock CFDs, for example. Moreover, compare fees and spreads, trading platforms, mobile apps and additional features.  For a full guide to selecting a broker, see our guide here.

Final Word On The Best Brokers With Negative Balance Protection

Opening accounts with the best brokers with negative balance protection helps protect your funds from serious market downturns and volatility. It ensures that, when trading a leveraged position, you cannot lose more than the amount you have deposited in your account,  preventing retail clients from becoming indebted to brokers. When choosing a broker, try to ensure that they offer negative balance protection as markets are volatile and you do not want unexpected losses. Additionally, follow our guide above to ensure you pick brokers that you can trade safely with.

FAQs

Does CySEC Require Negative Balance Protection?

Yes, CySEC does require negative balance protection. They are more lenient than some other bodies but they still state clients accounts cannot go into the red.

Do The Best Brokers With Negative Balance Protection Prevent Big Losses?

Brokers with negative balance protection don’t just automatically stop any major losses from hitting your account, they only protect you from a net zero balance. This means that major losses that don’t completely wipe out your capital are still let through, so you should still implement robust risk management.

What Should I Look For When Choosing A Broker?

There are many factors to consider and every trader will have different requirements. Generally, you should compare the best brokers with negative balance protection by checking that they are regulated by a top-tier body, they offer the assets you wish to trade on the platform you desire and have convenient payment methods and base currencies.

Does The FCA Require Negative Balance Protection?

Yes, the FCA requires all licensed brokers to offer negative balance protection. This is relevant for all retail clients, though professional traders are not afforded the same protection as they are expected to better understand the risks involved with margin trading.

Do The Best Brokers With Negative Balance Protection Remove Risk?

Negative balance protection removes the risk of being indebted to the broker, though general financial risk is still very much present and you can still lose your entire account balance.