All You Need to Know about Frozen Account in Forex Trading

If you experience a frozen account, you won't be able to trade. Here are the reasons and what you can do to unfreeze it.

Have you ever heard of a frozen account? Or have you experienced it yourself? The primary signs of a frozen trading account are the sudden inability to execute trades or transactions at all. It can also be characterized by limited access to the account or viewing trading history.

A frozen account in forex trading refers to a situation where a trader's trading account is temporarily restricted from making any new trades.

This restriction can happen for various reasons. What are those reasons? Is it only forex brokers that can freeze trading accounts?

Who Can Freeze Trading Accounts?

First and foremost, you should know who has the authority to freeze a trading account. As you might expect, forex brokers are one of the parties with this authority. However, you should also know they are not the only ones.

The government or a court order can also freeze someone's trading account. This can happen if there are legal or national issues involved.

Additionally, a regulatory body can freeze your trading account too, since forex trading is an activity regulated by supervisory authorities. Your forex broker even has to operate with their permission. So, if you or your broker encounters regulatory issues, it would mean trouble for your trading account.

What Causes Frozen Accounts?

As mentioned earlier, there are various reasons why your account might be frozen, and all of these are related to the authorities or entities with the power.

Suspected of Illegal Activities

Once you open an account with a broker, they automatically closely monitor your account's activities. Therefore, whatever you do, they can know.

Illegal activities could include money laundering, terrorist financing, identity theft, market manipulation, and so on. The forex broker will undoubtedly take immediate action and freeze your account if they detect irregular transactions that are typically associated with said illegal activities.

Insufficient Funds

A broker can freeze your trading account if you have no sufficient funds. This can occur when your account balance falls below the margin level, a condition known as a margin call.

Therefore, be cautious when using leverage, manage your position sizing correctly, and keep a close eye on your open trades to avoid going through this.

Violating the Broker's Policy

Every broker has its own set of rules. If a trader breaches them, they have the right to take actions. Freezing the violator's account would be one of them.

For example, if you provide information or documents that don't belong to you during verification, it can result in your account failing the process and being frozen.

Additionally, if you engage in disruptive trading that leads to abnormal market functioning, such as excessive scalping, your account can also be frozen.

Long-term Inactivity

If you've been inactive on your real account for a significant period, the broker could temporarily freeze your account. Typically, the broker will attempt to contact you first, send notifications, or something similar to inquire whether you're still actively trading.

If you don't respond, the broker will deactivate your account. Each broker has its own specified duration for inactivity. If you wish to reactivate a frozen account, you can follow the instructions provided in the client area or contact customer support directly.

Technical Issues

Sometimes, a broker's trading platform encounters technical glitches, such as server downtime or disrupted connectivity. These issues can occur unexpectedly.

In such situations, the broker may temporarily freeze your account as a protective measure. Once the issue is resolved, the broker will unfreeze your account, and you can use it as usual.

The Broker Is Caught Up in Legal Issues

As previously mentioned, regulatory bodies also play a significant role in freezing traders' accounts as broker operations fall under their comprehensive regulation and supervision.

In case your broker encounters bankruptcy or regulatory issues, they will initiate legal proceedings with the regulatory authority, potentially resulting in the suspension of client accounts. Therefore, it's crucial to ensure that you trade with a regulated and reliable forex broker.

Court Order

An account freeze can occasionally result from court-ordered garnishments. While this is a rare occurrence, the court possesses the power to freeze a trader's account under certain circumstances, particularly if the account is linked to a bank account or funds subject to legal seizure.

Forex trading accounts are primarily funded by the deposits you've made, and brokers usually lack the authority to access these funds. Nonetheless, if you utilize leverage and have outstanding debts to the broker, they may possess the entitlement to seek these funds if they go unpaid. During this process, your account may be frozen.

Government Actions

In some cases, if you encounter issues with a broker that escalate to civil disputes or legal claims, the government can also play a role in freezing your trading account as a temporary measure during the legal process.

The government may also intervene to freeze your account on their own behalf if you become entangled in tax matters. Yes, the income you derive from forex trading can be subject to taxation.

If you are found to be evading taxes on your trading income or engaging in manipulation, the government can follow up by freezing your trading account to secure funds that may be due as taxes or until the legal process concludes.

How Long Will the Trading Account Be Frozen?

Normally, if your account is frozen due to insufficient funds, inactivity, or technical issues, it won't stay frozen for long. The same rapid reactivation applies to an account frozen due to extended inactivity. In the case of technical issues, your account will be promptly restored once the problem is resolved.

However, if the freeze is a result of you violating broker rules and the like, the duration of the recovery can vary, depending on the broker's or relevant authority's policies. It could range from 30 to 90 days or even be permanent.

A permanent freeze can occur if your forex broker faces bankruptcy or severe licensing issues to the point of closure. Typically, if there's a case of fraudulent licensing, the broker may simply disappear, shutting down its website and all services.

How to Unfreeze Forex Trading Accounts

You can unfreeze your trading account through various methods, which vary depending on the issue. Here are some actions to consider when addressing a frozen trading account:

1. Stay Calm and Contact Customer Support

First, calm yourself down, don't panic. Panicking will only make things worse. If your account suddenly freezes without any violation, contact your broker's customer support. Usually, a good broker will respond 24/7 to address their clients' concerns.

Ask them what caused your account to be frozen all of a sudden. Then, inquire about how you can get it back to normal. Customer support will surely assist you right away.

2. Review the Broker's Terms and Conditions

During the initial registration of your live trading account, you were likely required to sign various documents that outline the agreement between you and the broker.

Re-examine these documents to determine whether the account freeze is indeed connected to any possible violations on your part. Also, check your account verification.

Make sure you've gone through proper verification with complete documents, genuine information, and up-to-date data.

3. Check Your Broker's Notifications

Review any notifications or alerts that may have been sent to you but overlooked. Check your email, spam folder, or other communication channels.

It's possible that the broker has already informed you about the account freeze along with the reasons. Typically, brokers will also provide guidance on how to unfreeze it, whether you can do it yourself or with the assistance of customer support.

4. Make a New Deposit

If your trading account is frozen due to margin or funding issues, you can make a deposit using the provided methods. Ensure that you deposit the required amount.

Typically, your account will be reinstated promptly. This method can also be employed if you've been inactive for an extended period.

5. Seek Legal Assistance

If your issue cannot be resolved on your own, such as problems involving the broker, regulations, or taxes that require you to take legal action, then promptly seek a lawyer.

Issues related to the government or regulatory bodies are often more complex and lengthy than you might imagine, especially if the broker is proven to have engaged in a scam and disappeared suddenly.

How to Avoid Account Freezes

To avoid experiencing a frozen account, you can take several preventive steps:

1. Carefully review the agreement documents when registering with a broker.
2. Avoid activities that violate broker rules.
3. Refrain from actions that lead to illegal acts.
4. Submit documents and complete verifications correctly.
5. Avoid margin calls.
6. Stay active.
7. Regularly check the stability of your account and perform updates.
8. Trade with reputable and experienced brokers.
9. Pay taxes and comply with trading-related regulations.
10. Keep a record of your trades and financial transactions for proper accounting and tax reporting.

Bottom Line

Experiencing a frozen account can certainly disrupt your trading activities, detract from your focus, and consume valuable time.

However, don't panic too much when it happens suddenly. You don't need to worry if you're confident that you haven't violated any rules. Many things can trigger a frozen account, even minor issues like connectivity problems.

Nevertheless, with the preventive steps we've discussed above, you can now minimize the likelihood of your trading account being frozen.

By choosing the best forex broker, you can minimize the likelihood of experiencing a frozen account. You should also double-check their credibility by validating the license.