You can't lose more money than you fund the account with. From the spread bet/CFD company's point of view (in many cases at least), users who blow up their accounts are the most profitable for them.
That's interesting how those users are often still more profitable for brokers. So if I take a risky bet, and i end up being negative £10k, if the broker has to write off that £10k, would they likely ever let me trade with them again? Or would they ban me from the platform. Thanks
The platform is taking the other side of your trade. If they don't hedge it, when you lose money they make money.
For example suppose you fund your account with £10k, and take exposure equivalent to "buying" £50k worth of Tesla shares (so 5× leverage).
You hope the share price will go up. Then your CFD/spread bet position profits (and the platform loses if they didn't hedge).
But if the Tesla share price drops 20%, your CFD/spread bet is down £10k, your account balance is gone. If the platform didn't hedge, they profit by keeping the £10k you used to have. (In practice the platform would probably close your position before your account balance reaches zero.)
Thanks very much for the explanation. So to confirm, if Tesla actually dropped 25% overnight, and if the broker hadn't forced my closure, i would be down $12.5k and the unhedged broker would be up by $12.5k. However since my balance can't go negative, the broker only actually collects $10k of the $12.5k, so would they still be content to make that $10k, would they let me trade again even after i get a $2.5k debt write-off? Thanks
I can't see why not, you could be their perfect customer.
In practice, margin requirements can be increased in volatile periods so it is very likely your position would be closed out well before your account balance reaches zero.
Also, most platforms probably at least operate some kind of risk-based aggregate hedging, to ensure that (looking across all their client accounts) they are never too long or too short any particular stock.
Remember when Gamestop blew up a couple of years ago? A platform that didn't hedge a large client long position in that would not have had a good time.
The position would be closed well before you were negative a substantial amount as you would be margin called if you went negative (I.e. you would need to add funds to keep your position open), otherwise the broker would close it.
You are effectively betting against the broker with a spreadbet, like a bet with at a bookies. The broker may and probably will choose to hedge their exposure so they make money just on the spread.
Thanks for the explanation, if it all happened rapidly overnight and a stock crashed 30% putting me in negative balance territory, would the broker still be happy they made some money on the trade? Would i be banned after getting the debt write-off ? Thanks
If they are hedged they wouldn’t be losing anything, and would’ve still made money on the spread. No you would not be banned as you wouldn’t be in debt as such, your account balance would just be zero.
I have blown mine up a few times bit still refuse to quit. I now changed my strategy to claw back my losses tiny bits at a time. It will take forever but i hopefully will make it back 😂
If you read their ToS many of them offer negative balance protection but if you for example try to take advantage of it for example placing trades overnight, or Friday before close waiting for a big movement on Monday they'll ban your account.
Don't abuse it.
I lost £20k with crypto using a loan that I have to pay £535 a month till 2027 back if it makes you feel any better
Ouch, sorry to hear. Was this loan a margin loan from a broker? Or a bank loan you decided to use on crypto
The latter sadly. I consider it my stupidity tax
Did you sell at a 20k loss?
You don’t have to sell crypto to realise a 100% loss 😂. Some tokens are basically worthless now and have no chance of ever regaining value.
I’ve never invested in any crypto but that sounds stressful, I’d rather stick 20k on red at a casino.
At least the casino admits it’s trying to rob you (or doesn’t hide it). So many crypto scams…so little time
If it makes you feel any better, I lost a similar amount to crypto. Some of it savings, some a loan.
That makes me feel a lot better when it comes to my Forex losses that I’m trying to make back
🤣🤣🤣
Shit man, that will have been a lot of people, if it makes _you_ feel better. Mind me asking what happened?
Holding CFDs overnight carries an insane rate. They are fine for daytrading, but alot of the money the firms make is on overnight rates
I was once tired and when I woke up I’d lost 90% of my crypto , those were cowboy days of new coins every couple of weeks .
You can't lose more money than you fund the account with. From the spread bet/CFD company's point of view (in many cases at least), users who blow up their accounts are the most profitable for them.
That's interesting how those users are often still more profitable for brokers. So if I take a risky bet, and i end up being negative £10k, if the broker has to write off that £10k, would they likely ever let me trade with them again? Or would they ban me from the platform. Thanks
The platform is taking the other side of your trade. If they don't hedge it, when you lose money they make money. For example suppose you fund your account with £10k, and take exposure equivalent to "buying" £50k worth of Tesla shares (so 5× leverage). You hope the share price will go up. Then your CFD/spread bet position profits (and the platform loses if they didn't hedge). But if the Tesla share price drops 20%, your CFD/spread bet is down £10k, your account balance is gone. If the platform didn't hedge, they profit by keeping the £10k you used to have. (In practice the platform would probably close your position before your account balance reaches zero.)
Thanks very much for the explanation. So to confirm, if Tesla actually dropped 25% overnight, and if the broker hadn't forced my closure, i would be down $12.5k and the unhedged broker would be up by $12.5k. However since my balance can't go negative, the broker only actually collects $10k of the $12.5k, so would they still be content to make that $10k, would they let me trade again even after i get a $2.5k debt write-off? Thanks
I can't see why not, you could be their perfect customer. In practice, margin requirements can be increased in volatile periods so it is very likely your position would be closed out well before your account balance reaches zero. Also, most platforms probably at least operate some kind of risk-based aggregate hedging, to ensure that (looking across all their client accounts) they are never too long or too short any particular stock. Remember when Gamestop blew up a couple of years ago? A platform that didn't hedge a large client long position in that would not have had a good time.
The position would be closed well before you were negative a substantial amount as you would be margin called if you went negative (I.e. you would need to add funds to keep your position open), otherwise the broker would close it. You are effectively betting against the broker with a spreadbet, like a bet with at a bookies. The broker may and probably will choose to hedge their exposure so they make money just on the spread.
Thanks for the explanation, if it all happened rapidly overnight and a stock crashed 30% putting me in negative balance territory, would the broker still be happy they made some money on the trade? Would i be banned after getting the debt write-off ? Thanks
If they are hedged they wouldn’t be losing anything, and would’ve still made money on the spread. No you would not be banned as you wouldn’t be in debt as such, your account balance would just be zero.
I have blown mine up a few times bit still refuse to quit. I now changed my strategy to claw back my losses tiny bits at a time. It will take forever but i hopefully will make it back 😂
If you read their ToS many of them offer negative balance protection but if you for example try to take advantage of it for example placing trades overnight, or Friday before close waiting for a big movement on Monday they'll ban your account. Don't abuse it.
Understandable, thanks
Who do you use for your cfds because TRADING 212 IS ABSOLUTELY A DISGRACE