10 Best Negative Balance Protection (NBP) Forex Brokers for 2023
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Negative balance protection forex brokers refers to forex (Foreign Exchange) brokerage firms that provides a specific safeguard called Negative Balance Protection (NBP) for its traders ensuring that they cannot lose more money than they have deposited in their trading account.
NBP is a policy or a feature offered by some forex brokers that ensures that traders cannot lose more money than they’ve deposited. Forex trading, especially when leveraging positions, can result in losses that exceed the initial deposit. With negative balance protection, the broker will automatically close out positions before the account goes into a negative balance, or, if due to extraordinary market events the account does go negative, the broker will reset the balance to zero, effectively absorbing the loss.
In this article, you will find our top choice for the best forex broker with Negative Balance Protection (NBP).
Within the ranking, you will also be able to find the regulations in which brokers offer Negative Balance Protection.
|NBP forex brokers||NBP for retail traders||NBP in offshore regulation||NBP for professional traders|
*These brokers may not offer NBP to retail traders under some of their regulations.
What are the best NBP forex brokers?
Below our curated list of the best forex brokers offering Negative Balance Protection, with details of features and characteristics.
What is negative balance protection?
Negative Balance Protection (NBP) is a protection that safeguards traders from owing more than their account balance to their trading broker. In short, Negative Balance Protection ensures that the trader’s accounts equity won’t drop below $0.
This means that if a trader has a $1000 forex trading account, they will only be able to lose $1000 even in times of extreme volatility that would normally cause the balance to go negative.
Not all trading platforms offer negative balance protection. NBP is in fact standard only in a few areas of the world, including Europe, the UK, and Australia.
Negative balance protection was first made mandatory in 2017 with the European MiFID II legislation, following the CHF/EUR crisis of 2015 that caused losses and debt in the accounts of thousands of forex traders.
The goal of the Negative Balance Protection is to protect less experienced traders from making mistakes that could lead them into debt, protect them from any moments of high volatility, and at the same time push Fx brokers to more virtuous behaviors in educating their traders on risk management.
How does Negative Balance Protection work in trading?
When using leverage in trading, at times of high volatility it is possible to lose more money than what is in the trading account.
For example, if on the trading account, the equity is $1000, there is a 1 mini lot ($10000) forex position in 1:1000 leverage on EUR/USD, which means that in case of a loss of 150 pips, the equity should drop to -$500.
When there is negative balance protection, the broker makes the equity go to $0 and pays out of his own pocket the negative deficit of $500.
Negative balance protection is closely related to Margin Call, which is an automatic tool used by brokers to automatically close an account’s trading positions if equity is in danger of going negative.
There are instances when an account’s equity can go negative, and that is the presence of two or more trading accounts at the same broker.
If in one account the equity is $200, and in the other is $1000, the equity of the first account can go as low as -$1000. In this case, the equity of the second account will go to zero.
Do all regulated forex brokers provide Negative Balance Protection?
Negative balance protection is not offered by all regulated brokers, in fact, its availability depends on the entity with which the forex broker is regulated, and the status of the trader.
For example, if a forex broker has two branches, one CySEC regulated and the other SCB regulated, it is highly likely that traders registered under CySEC will have Negative Balance Protection, while traders registered under SCB will not.
So if you are interested in the NBP you have to choose the forex brokers branch well.
The Negative Balance Protection policy may also change depending on the broker and the trader. For instance, where it is available, it is often not mandatory to be offered to professional traders.
In fact, experienced traders are less likely to incur a negative account balance with CFD trading, as they know how to protect their capital on the trading platform.
Summary table of regulations and availability of Negative Balance Protection for retail clients.
|Forex regulator||Country/Area||NBP for retail traders|
|ESMA-compliant regulators (e.g. CySEC)||Europe||Yes|
|NFA/CFTC||United States of America||No|
|FSC of BVI||British Virgin Islands||No|
If a forex broker is regulated in a country where this is not required, it may still decide to offer Negative Balance Protection to its traders.
Is it possible to still get access to the NBP when not available?
If you are based in a country where forex trading is not regulated or where the local regulator does not make negative balance protection mandatory, you can request the forex broker of your choice to place your trading account at an in-house branch that has this feature.
For example, if you are based in Vietnam, the forex broker will probably place you by default at the offshore branch, which normally never has NBP because the regulation does not make it mandatory.
You can ask the forex broker to move your account to CySEC or another entity that offers NBP.
You have to be careful, however, because switching institutions for NBP can lead to other problems and limitations such as:
- Higher deposit/withdrawal fees because the bank the broker relies on may change
- High latencies, because the servers the broker relies on may change
- Reduced leverage, because generally mandatory NBP is available under regulations with maximum leverage of 1:30
- Limited services, because generally, the range of services and assets offered among different broker branches may vary.
Does the NBP affect forex trading in some way?
Negative Balance Protection positively affects forex trading, as it is an extra layer of protection from adverse market events.
NBP does not affect the cost, spread, or other features and/or analysis tools. Anything you can do without NBP, you can also do with NBP.
The only big difference is for forex brokers: in fact, if before the Negative Balance Protection came into being they could ask traders for money in case they owed money (and thus had every interest in pushing traders to invest more than they had to) now they have to make up the losses out of their own pockets.
Therefore, along with the other MiFID II regulations, now the environment in which forex traders operate is more professional and risk-aware than before.
Trading Abuse with Negative Balance Protection
Brokers must recover the losses caused by traders with their own money if they exceed the amount of money invested by the trader.
For this reason, forex brokerages may punish traders who abuse this protection.
In fact, the NBP may not be applied if the forex broker is sure that the loss was caused voluntarily.
For example, if the market is waiting for news from a central bank, and a trader goes all-in with 1:500 leverage without knowing the nature of the news, and the market takes a big beating that causes the forex broker to lose much more money than the money the trader has lost (who was protected by the NBP), the forex broker may decide to retaliate against the trader for abusing this protection system.
This is an extreme case, and retail forex brokers evaluate on a case-by-case basis just as you can see here. Therefore, regardless of Negative Balance Protection, it is important to manage trading risk.
Is trading without NBP dangerous?
Trading without Negative Balance Protection is very dangerous for inexperienced traders (especially when using high leverage), while for professional traders it remains risky only in cases of extreme volatility (as in the case of the SNB on the Euro-Swiss franc exchange rate in 2015).
When the NBP is not present, it is therefore important to know what to do to manage the risk.
For example, you can:
- Learn how to properly set stop loss orders (or GSL if the broker offers it).
- Do not go all-in, but use a maximum of 2% of your capital per trade.
- Use margin responsibly, not opening 1:500 leverage trades at times of extreme volatility.
- Do not trade at times of extreme volatility unless you have sufficient experience.
- Do not trade in low liquidity financial markets, as it can be difficult to successfully close out your trading positions.
- Constantly monitor your trading robots if you use algorithms, or you can create an automatic rule that simulates Negative Balance Protection and closes all positions instantly if the balance goes to zero.
- Learn how to set TP and SL, or to create your own risk management tool.
Pros and cons of the Negative Balance Protection
- You cannot lose more than you deposit
- You are protected in case of adverse market events
- It is in the interests of the forex broker to educate its traders so that they do not trigger the Negative Balance Protection
- No cons
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