Let us first see what Metatrader 4 balance is: Balance in MT4 is the account balance calculated with all closed positions, and the balance does not include the floating loss or profit. On the other side, equity in MT4 is the floating balance, including the current floating loss or profit and equity changes in response to the open positions’ market price.
If you see an MT4 negative balance, can you deposit money in the Metatrader account?
MT4 Negative Balance is a temporary problem in the MT4 account. If you deposit money in an account with a negative balance, your current balance will be no less than the amount you deposit because all Mt4 accounts have a negative balance protected system.
What happens if your forex account goes negative?
The negative balance on the forex trading account could happen if traders do not appropriately set a stop loss (ignored by some traders) to stop excessive losses. By applying Margin Call and Stop Loss levels, the forex trader can avoid a negative balance in most cases. In some cases, the negative balance will appear during high volatility because the price will change and go below/above stop loss quickly. You can cover the exceeded loss by making a new deposit.
In simple words, negative balance forex protection is a preventive measure that brokers take to safeguard their clients. Negative balance protection guarantees that traders will not lose more money than deposited if their account goes into a negative balance due to their trading activity.
For example, USDCHF just dropped 2780 pips in 30mins on 15 January 2015, and my account had a negative balance. Franc jumps 30 percent after the Swiss National Bank dumps the euro ceiling (read our article USD CHF 15 January 2015). All my trades had stop loss, but volatility was so intense, and my broker couldn’t exchange currency pairs. My trading account had a negative balance.
Foreign exchange (Forex) trading is a precarious business since the exchange rate of different currencies can fluctuate greatly due to several factors. While most forex traders will only trade with the balance they have in their account, often, some unexpected events may occur due to which they have an mt4 negative balance in their Forex account. For example, on January 15, 2015, the Swiss National Bank (SNB) unexpectedly decided on floor removal for the EUR/ CHF( Swiss Francs) currency pair. This resulted in thousands of forex accounts used for live trading having a negative balance since they had not anticipated this floor removal.
Though the SNB decision on floor removal resulted in many forex accounts having a negative balance simultaneously, there are other instances when the MetaTrader accounts for forex had a negative balance. If the volatility for a particular forex pair changes rapidly, the trading platform mt4 could negatively balance. Even a large gap in the prices of different currencies could reduce the balance below zero. Trading in Forex is now widely linked to having a below-zero balance. Though precautions like stop-out levels and margin calls are taken to prevent this problem, many forex traders continue to face it.
However, Forex is often advertised as an online money-making option where the trader cannot lose more money than what he deposits in the forex account. Some forex brokers like FXTM offer negative balance protection to all the forex traders who have opened their accounts with them. This is a marketing strategy of the forex broker. Even if the balance is negative, if the forex trader will deposit the amount, he will trade with the entire amount deposited with FXTM; the negative balance is not deducted from the amount deposited. In some cases, the amount in the account may be slightly lower than the deposited amount, and this is because of the payment processor fees.
In many cases, forex traders are mentally prepared for the loss and are willing to take the risk of investing more money since they may have made good profits earlier. So, in this case, they may replenish the negative balance. In other cases, the forex broker has lawyers who will contact the forex trader whose balance has become negative. These traders are now debtors of the forex broker, owing him money. Like all lenders trying to recover money from debtors, the forex broker will also try to recover money from the forex trader, especially if it is large.
People with less experience invest money in forex trading because they are lured by the advertising and promises of quick money. When they find that their account’s balance has become negative, they become discouraged and may stop forex trading in the future. The forex mt4 account will be abandoned with a negative balance. If the negative balance is small, it may also not be feasible for the forex broker to initiate legal action against the trader to recover the amount.
MT4 Negative Balance is a temporary problem in the MT4 account. When you deposit a new amount of money, the current balance will be no less than the amount you deposit – so you are protected as a trader.