Edward T576_ Roberts

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What is negative balance protection in forex?

Negative balance protection ensures traders cannot lose more than their deposits. Without it, extreme leverage in volatile markets can push accounts into debt. ESMA mandates NBP for EU brokers; many reputable global brokers follow voluntarily. Example: during the CHF peg removal in 2015, some traders owed brokers more than they deposited, sparking lawsuits. With NBP, losses stop at zero equity, avoiding personal liability. Institutions rarely need NBP due to margin frameworks, but for retail, it’s vital safety. Benefits: peace of mind, survival after black swans. Risks: some brokers offset NBP costs via wider spreads or fees. Traders should prioritize NBP as a core selection criterion—it’s protection from catastrophic ruin.