Can you lose more than you invest?

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pvangils4
203
pvangils4  

Hi everyone,

Simple question, and I hope a simple answer: can you lose more than you invest?

If I open an account and deposit $1.000, is there any way *at all* that I can lose more than that $1.000 ? If so, how?

Any insight is appreciated.

‌‌

honest_knave
Moderator
2302
honest_knave  

It depends entirely on your broker.

S‌ome have "negative balance protection".

Some have guaranteed stops.

S‌ome have chosen to forgive negative balance.

S‌ome don't.

You should speak to your broker to clarify their policy.

A‌lso Google "negative balance black swan" which will explain how you can lose more than your deposit using a real-world example.

Eleni Anna Branou
Moderator
6554
Eleni Anna Branou  

If your broker doesn't offer 'Negative Balance Protection' as honest_knave very well pointed out above and an 'extinction level event' occurs (like Swiss franc, or Brexit), then stop loss or margin call cannot be applied and you can end up with a negative balance account.

I‌n such a case you are responsible against your broker for this negative balance.

pvangils4
203
pvangils4  
Ok, thank you both for the quick reply. My broker does indeed offer NBP so I guess I shouldn't worry ;)
Waseem Raza
9994
Waseem Raza  
After Swiss Frank happen mostly brokers avoiding to give negative balance protection 
Eleni Anna Branou
Moderator
6554
Eleni Anna Branou  
Waseem Raza:
After Swiss Frank happen mostly brokers avoiding to give negative balance protection 

That's correct Waseem.
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