Comments on: Is it possible to lose more money than you invest in Forex trading?

By: Elliott

Elliott — Sun, 19 Jul 2009 13:24:14 +0000

Almost all forex brokers will offer you a negative balance protection where they will automatically close your position once you reach a level low enough to bust out. The reason they do this is because they will be liable for the money and may have a hard time recouping it from thousands of clients all over the world.

By: InspectorBudget

InspectorBudget — Fri, 17 Jul 2009 18:59:32 +0000

As the previous answers have noted, your investment in foreign exchange is always leveraged.

Your $50 investment will be leveraging about $5,000 of money, and if the tide turns against you, you could end up losing part, most or all of that $5,000. That’s 100 times your investment.

Unless you are pretty savvy about leverage and options, don’t try it. It is not for most people.

By: shags1_23

shags1_23 — Wed, 15 Jul 2009 07:34:27 +0000

It depends on whether you use margin purchases or not, and on how much leverage you use from your margin.

Stock brokers typically offer 2 to 1 margin, if your account is of a certain size. That means if you have $30,000 in your account you can invest up to $60,000. Forex brokers typically offer something outrageous like a 50 to 1 margin, meaning (you guessed it) $30,000 can purchase up to $1,500,000 worth of securities.

Margin trading is for very advanced, very experienced traders. I refuse to do it. Imagine if you had $30,000, invested $1,500,000, and sustained a 10% loss. You just lost $150,000. You only had $30,000 to start, so now you owe your broker $120,000 ($30,000 - $150,000 = -$120,000), and you owe any fees for borrowing on your margin (margin trading isn’t free). Good luck paying that off.

By: Bleeding Tiger

Bleeding Tiger — Tue, 14 Jul 2009 20:41:16 +0000

i think it is, unlike stock your losses and gains are theoretically unlimited.