Negative Balance

What a negative balance is

An account normally does not lose more than it holds, because the broker closes positions at the stop out level while there is still equity left. Two things can break that. One is a gap: the market jumps from one price to another with no trading in between, so a position cannot be closed at the price you wanted. The other is a fast move where the broker's closing orders fill at progressively worse prices. In either case, the loss can pass the equity and the balance goes below zero.

Leverage is what makes it possible. A $15,000 position on a $1,000 account moves $150 for each 1 percent in price. The account is exposed to 15 times its own size, so a move of 6.67 percent is enough to wipe it out, and anything beyond that is borrowed money.

A worked example: a gap past the stop out

This is a made-up account. Balance $1,000. One long position worth $15,000 at 30:1 leverage, so used margin is $15,000 / 30 = $500. Margin level starts at 200 percent. Take the stop out level as 50 percent, which is an example and not any broker's rule.

• The stop out level is reached when equity falls to $250, a loss of $750. As a share of the position that is $750 / $15,000 = 5.0 percent.
• If the price fell smoothly, the position would be closed at that 5.0 percent loss, and $250 would be left.
• If price gaps instead, the position closes at the first price available after the gap. The table shows the result for different gap sizes. Calculated by us on 27 Oct 2026, exact, costs ignored.

A 5 percent move closes the account with $250 left, as designed. A 6 percent gap leaves $100, so the gap has already taken $150 more than the level promised. At about 6.67 percent the balance reaches zero. An 8 percent gap leaves -$200, and a 10 percent gap leaves -$500. At 15 percent the shortfall is $1,250, more than the whole starting balance.

Everything above is for one position and a single clean gap. Real gaps happen on opens, on news and in thin markets, and they are not usually that clean, but the arithmetic of what leverage does to a gap is exactly this.

Negative balance protection

Some retail trading accounts carry a protection that limits the client's loss to the money in the account. If a gap leaves the balance below zero, the provider resets it to zero instead of asking for the difference. Whether such protection exists depends on the broker, the account type and the country, and on whether the account is classed as retail or professional. Some accounts have no protection at all, and the client is liable for the shortfall. This page does not say which rule applies to any person or place. Read the terms of your own account, look for the words "negative balance", and ask the provider if they are not clear.

Two cautions. First, protection, where it exists, is about what you owe. It does not undo the loss: you still lose everything in the account. Second, it is the broker's rule or policy and has its own conditions, so do not count on it as part of a strategy.

Crypto futures: a different shape

On crypto futures the closing process is usually called liquidation, and the position is closed when the margin falls to a maintenance level. Details differ by exchange, but the following ideas are common in general terms:

• Isolated and cross margin. With isolated margin the position can lose only the margin assigned to it. With cross margin the whole account balance backs the position, so a bad position can use all of it.
• Liquidation before zero. The exchange tries to close a position while its margin is still positive. If the close fills at a worse price than planned and the margin goes below zero, there is a shortfall.
• Insurance fund. Many exchanges keep a reserve funded from liquidation outcomes, and it covers some shortfalls so they do not reach other users.
• Auto-deleveraging. If the reserve is not enough, an exchange may close some profitable positions on the other side, at a set price, to cover the loss. This depends on the exchange and its published rules.

The practical point is the same: a liquidation price on a screen is the price where the process starts, not a promise about where it ends. Use the liquidation price calculator to see where the process begins for your position, and read the exchange's rules on shortfalls.

How it hits bots

• Grid and martingale bots hold their largest exposure just when price is far from where they started. A gap at that point is the worst case, because the stack is big when the jump arrives.
• Bots that hold over weekends are exposed to the gap on the reopen, when no order can fill in between.
• Bots on thin or small instruments can see a price jump through several levels in one print.
• Bots that reopen after a stop out may start again on a balance that is already negative or near zero, depending on the account.

How to check before you run a bot

• Read the account terms for negative balance, stop out and liquidation. Write down who bears a shortfall.
• Compute the loss from a gap of 5, 10 and 20 percent on the largest position the bot can build. If the loss is greater than the balance, a gap can cause a negative balance.
• Reduce leverage or size until a gap you consider plausible leaves a positive balance.
• Check whether the bot holds over weekends and news, and whether it can be set not to.
• Do not rely on a stop loss alone: a gap fills it at the next price, not at the level.

What it does not tell you

It does not say how likely a gap is. The example sizes are chosen to show the arithmetic and are not forecasts. It also does not show what any particular broker or exchange does. The numbers use a made-up account and ignore costs, and a real close includes spread and slippage, which usually make the result slightly worse.