Stop Out and Negative Balance

Most of the time the stop out does its job: positions are closed before the losses eat through everything you’ve put in. This page is about the times it can’t, and what happens then.

The stop out

When your margin level falls to 50%, the platform starts closing your positions for you, largest loser first, until the margin level is back above 50%. There’s a warning at 80% first, the margin call, if the market moves slowly enough to give one. The Margin Call and Stop Out Calculator shows where those two points sit for your account.

How a balance goes below zero

A stop out closes positions at the next price the market offers. Normally that’s close to the 50% level. In a gap, it isn’t.

Prices can jump over the weekend, around major news, or when a market reopens. If the first available price is already far past the point your account could absorb, the position closes there, and the loss can be bigger than the money in the account. The balance ends up negative.

Negative balance protection

XBTFX may reset a negative balance to zero, so that you don’t owe more than you deposited in the account that took the loss. That’s negative balance protection. It’s set out in section 20 of the Terms of Service, and a few things about it are worth knowing before you rely on it.

It’s discretionary, not automatic. Each negative balance is reviewed, and XBTFX decides whether to apply it. The review typically takes up to 30 calendar days, longer in complicated cases. You’re told the outcome by email, in the platform or on a statement.

It’s meant for normal market movement. The Terms list the cases where it doesn’t apply:

• exceptional market conditions, such as extreme volatility, significant price gaps, a market with no liquidity, or a trading halt
• events outside XBTFX’s control that stop positions being closed normally
• margin that couldn’t be met because the market moved faster than the system could react
• trading that XBTFX judges to be abusive, or designed to take advantage of the protection itself

It looks at you, not just one account. Balances across all your accounts, and accounts XBTFX considers linked to you, are taken into account. A deficit on one can be recovered from money in another. This applies whether the positions were your own or came through copy trading, PAMM or MAM.

If it isn’t applied, the deficit is yours. You remain liable for the negative balance, and XBTFX can take steps to recover it.

Leverage before weekends and holidays

Under section 14 of the Terms, XBTFX may cut the leverage on an account to no more than 1:100 from three hours before the market closes ahead of a weekend or a holiday. More margin is then needed to hold the same positions, which brings the margin level down. It’s there because weekends and holidays are when gaps tend to happen.

What decides how far it goes

Two things set how close an account gets to a stop out: how much margin is in use, and how far the market moves against the open positions. A gap affects the second, and the size of what’s open when it happens decides how much of the account it takes. The risks are set out in full in the Risk Disclosure Notice.