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OANDA negative balance policy is particularly attractive because it will guarantee traders to never be in debt against the broker. Or, will it?
There are a lot of reasons why beginners may seek OANDA. Since OANDA allows deposit as low as $1 and lot sizes as small as 0.00001 lot, it is possible for us to start trading with whatever is left from our monthly expenses. OANDA's negative balance policy is particularly attractive because it will guarantee traders to never be in debt against the broker. Or, will it?
There are some important facts regarding OANDA's negative balance policy that you need to know. Here are three summaries to expand your insight:
1. Read the Fine Prints
OANDA United States Legal Documents hide some fine print. Its Risk Warning page is full of common tropes such as "foreign exchange transactions carry a high degree of risk" and "trading on a margin basis means that any market movement will have a proportionate effect on your deposited funds". You won't see any notes about the negative balance policy until you explore the extremely fine prints on the footer.
Right below the "all rights reserved" annotation, you'll see this paragraph:
"Leveraged trading in foreign currency contracts or other off-exchange products on margin carries a high level of risk and may not be suitable for everyone. We advise you to carefully consider whether trading is appropriate for you in light of your personal circumstances. You may lose more than you invest (except for OANDA Europe Ltd retail customers who have negative balance protection)."
With that said, you may get into debt against OANDA if you suffer losses in a higher amount than your capital. That is, unless you specifically sign up through OANDA Europe Limited as opposed to other entities under the OANDA brand.
Traders looking for brokers with accurate precision, OANDA can be an option. That is because OANDA is a broker that provides quotes with 5-digit accuracy and active price movements that follow market developments. Order execution speed is also faster in this broker.
It provides benefits for novice traders, as they can trade with smaller volumes using the calculation system based on currency value, unlike other brokers adopting the lot system.
Founded in 1996, OANDA was built by Dr. Michael Stumm who is a lecturer in Computer Engineering at the University of Toronto, Canada, along with his colleague, Dr. Richard Olsen of The Olsen Ltd., which is one of the leading econometric research institutes. They have a head office in San Francisco, United States.
OANDA branch offices can be found everywhere. Some of these offices are located in the United Kingdom, Singapore, Japan, and Canada. With this number of offices spread, OANDA has increasingly attracted the attention of clients worldwide.
OANDA's company is registered under several well-known jurisdictions in financial trading. They are regulated by CFTC and NFA in the US, FCA in the UK, ASIC in Australia, and many others. Traders do not need to worry anymore about security when trading in OANDA. However, these advantages make trading rules at OANDA more stringent compared to other brokers.
For example, OANDA only allows maximum leverage of 1:20, because the rules in the US and Japan do not allow leverage above that. Besides, the registration procedure is more complex due to various additional requirements that are not submitted by other forex brokers. On top of that, hedging is not allowed in one trading account as the client must open an additional account to hedge.
Nevertheless, OANDA is known for being a leading broker with many advantages offered. OANDA faces increased market risk during periods of price volatility, such as economic and political news announcements. When market spreads increase or decrease, their pricing engine widens or narrows spreads accordingly. That way, traders can get the latest conditions from price movements in the market more quickly.
Prices move very fast in the market. Especially when news releases have a large impact on market volatility. This condition is often exploited by brokers to take advantage of clients with Requotes. However, traders do not need to worry about additional costs when trading with OANDA.
The company never withdraws Requotes so traders can get maximum profit. When traders are unavailable to monitor open positions, they can set take profit orders to lock in profits and Stop Loss orders to help protect against further losses.
As an experienced and well-known online forex broker, OANDA is committed to maintain an efficient trading environment that reduces latency and provid tools to help clients manage the degree of acceptable slippage.
With a fast & reliable trading platform by OANDA, clients' trades are executed in 0.012 seconds. This suits traders who choose brokers based on execution speed.
Because of this exceptional execution service, it is not surprising that OANDA won many awards, including the winner of the world's Best Retail FX Platform at the prestigious e-FX awards. The broker is also voted number 1 for Consistency of filling trades at quoted prices, Execution speed, and Reliability of platforms.
There is no minimum deposit or minimum balance required to open an OANDA account. Deposit and withdrawal can be done easily. OANDA provides a variety of payment method facilities, including Paypal, Wire Transfer, Credit Card, and Debit. Traders can adjust it to the region where they live.
OANDA provides more than 100 trading instruments, including 71 currency pairs, 16 indices, 8 commodities (Brent Crude Oil, Copper, Corn, Natural Gas, Soybeans, Sugar, etc.), 6 Bonds, and 23 Metals.
The fxTrade and MetaTrader platform are available at OANDA. These platforms can be used for Desktop and Mobile. Another plus is they have an OANDA Technical Analysis that exists in collaboration with a technical analysis provider called Autochartist.
With these platforms, clients can monitor price movements easier and automatically recognize patterns created on charts, as well as receive alerts when the awaited patterns appear. Access to this technology can be enjoyed free of charge.
In conclusion, OANDA is an ideal broker for traders in need of fast execution backed by many years of experience. The company is also a good alternative for those looking for a well-regulated broker with flexible trading and deposit conditions.
2. OANDA's Margin Rules May Prevent Negative Balance
After learning about those fine prints, do you feel cheated? No worries. OANDA enforces one of the strictest margin call policies in the industry. Therefore, it is quite difficult for any trader to suffer negative balance apart from exceptional cases such as the SNB Black Thursday 2015.
What does margin call mean? It is a notification from the broker that will be sent when your account fails to comply with margin requirements. OANDA's US entity establishes margin rates and maximum leverage in accordance with US National Futures Association (NFA) requirements. The rule may change from time to time, but it is still stricter than any margin requirement required by a non-US regulatory body.
Furthermore, OANDA's margin call policy is also quite emphatic. As mentioned in its website, OANDA will send daily margin call emails to all accounts that fall below margin requirements at 3:45 pm ET. When an account remains under-margined for 2 consecutive trading days, all open positions will be automatically closed using the current fxTrade rates at the time of closing.
If trading is unavailable for certain open positions at this time, they will be automatically closed using the current fxTrade rates when the markets for those instruments re-open.
OANDA will observe margin requirement compliance every 3:45 pm ET. If you managed to fulfill the margin requirement during the day but it falls below the threshold at 3:45 pm, your account will be considered undermargined.
With all things considered, OANDA traders are more likely to suffer margin call terror and forced sell rather than negative balance. You may not need to care about OANDA's negative balance policy at all.
3. Inactivity Fees Won't Result in Negative Balance
OANDA charges inactivity fees for accounts with no trading activity for a period of 12 months. It will be applied on the third last weekday of each month until the account is closed, you resume trading on your account, or the balance on your account is zero.
Therefore, OANDA's inactivity fees won't result in negative balance. You can even claim rebates for up to 3 months' worth of inactivity fees when you are starting to trade again. Otherwise, you can just withdraw all of the available funds when you are losing the passion for trading or looking to move your trading plan elsewhere.
Bottom Line
Well, those are some important facts that you need to know about OANDA before signing up. Are you still interested in joining this world-famous forex broker? Or will you compare their policies to other top forex brokers first?
There are a lot of things that one needs to consider before committing to any forex broker. Apart from the negative balance policy, there's also the issue of customer support and trading fees. Look for more information on OANDA, and make sure you are confident with your choices.
31 Comments
Dion
Nov 8 2022
In the article, it mentioned the possibility of a negative balance during events like the SNB Black Thursday in 2015. Can you explain what exactly happened during that time? Dude, I'm also curious if there are any risks associated with negative balances, especially when it comes to high leverage. I mean, high leverage is like money borrowed from brokers, right? So, if a trader experiences extreme slippage and loses all their funds, does it affect the broker since they provided such high leverage? Can anyone explain that to me? Thank you!
Hobbs
May 17 2023
Hey, dude! So, in that article, they mentioned the risk of negative balances during events like the SNB Black Thursday in 2015. Basically, some traders lost more money than they had in their accounts when the Swiss franc went crazy. It was a rough time for everyone, including brokers.
Now, let's talk about the risks of negative balances and high leverage. High leverage is like getting a loan from your broker to control bigger trades with less money. It can be cool for making big profits, but it also means bigger losses. If there's wild market volatility or slippage, your losses can exceed your account balance, and that's when you end up with a negative balance.
Brokers have safety measures, but during extreme market conditions, those might not fully protect you from going negative if your losses are huge. If that happens, it can affect the broker too because they have to manage their own risks.
So, be aware of the risks of high leverage, set sensible stop loss levels, and keep an eye on your trades. And make sure you understand your broker's policies and risk management practices. Being informed and cautious can help you avoid getting hit with negative balances.
Stay smart, dude, and watch your risk!
Kate
Jan 7 2023
Mario
Jan 7 2023
Kate
Jan 7 2023
Josh
Jan 7 2023
Kate
Jan 7 2023
Charles
Feb 20 2023
This is such a brilliant feature from the broker. Is negative balance protection available with all brokers too?
Keith
Feb 22 2023
Charles: Afaik, I don't think so. Not all brokers offer negative balance protection. Please check your broker for this feature if you trade with high leverage or during volatile market conditions.
Johan
Feb 28 2023
As the article mentioned, traders may be more worried about margin calls and check OANDA. So having a broker that really cares about negative balances while trading is very good.
This is the benefit of negative balance protection, which prevents traders from borrowing more money than they have deposited in their trading account, protecting them from financial ruin. You can tell that OANDA really cares about this issue and has tried to prevent it. Negative balance protection is also especially useful in volatile markets and events, such as market crashes and sudden price movements, where losses can grow and traders risk losing more than their account balance. You should also know this feature it is very extremely important.
Alex
Feb 28 2023
Sorry to said about this. I am really confused to read about the terms and agreement of OANDA (although it is very importasnt, because of my bad Engllish, I am little bit confused), But at least, because of this article, I have know that OANDA really has negative balance account and really commitment to avoid the situation where the traders being debt with OANDA. Talking about the debt, actually it is very good to avoid debt, either trader prespective or broker prespective. SO, yeah negative balance protection is really good feature. Beside we need to read the terms and agreement in the broker before trading, how can we know that broker has negative balance protection feature or not??
Rashford
Feb 28 2023
Alex: I think I have some tips:
By the way, if reading some terms bothers you, it's better to stop this habit. However, if you really want to know without reading the terms and conditions, follow tip 2 and contact customer support team that broker offered.
Leah
Feb 28 2023
What is an inactivity fee? I mean, inactivity fees occur when you are not trading within a certain time limit and you know your broker will charge these fees. The same goes for your insurance policy. If you don't make a deposit for a while, your balance will be charged. If for some reason you didn't trade there you would be charged but I don't understand why they have to charge an inactivity fee. I mean, there are many factors that cause traders to stop trading for a while. It is not fair that inactivity fees are charged because the traders are not actually trading and there are no trading fees occured to the broker, right?
Mendy
Feb 28 2023
Leah: Dude, an inactivity fee is basically a fee that some brokers charge to clients who have had no trades or account activity for a period of time.The duration varies by broker, but it's usually 6 months to a year . This means that traders who stop trading for six months to one year may lose focus on forex trading. You must admit that you will lose the ability to track and analyze the market.
The main reason brokers charge inactivity fees is because they cover their own expenses. Brokers have ongoing costs associated with maintaining client accounts, Customer Support, Account Management, and Regulatory Compliance. If a client does not generate income for the broker from their trading activity, the broker may charge an inactivity fee to cover these costs. This is because account maintenance is required and may incur costs.
Khalid
Mar 11 2023
I've heard a lot about OANDA which is said to be friendly for novice traders, but I still don't know much about OANDA. Every beginner trader, in my opinion, likes trading at relatively cheap prices because they still don't have much experience in trading. but low cost is the second factor for me in recovering the trading platform, safety in trading is also an important aspect I said. because the more regulations this broker has, the more traders feel safe depositing their money.
After reading this article, to be honest, I still don't understand OANDA's system for its clients. In your opinion, is this broker worthy of being called a safe broker? Are there several regulators who have supervised this broker? if anyone knows who can help answer yes... thanks.
Paden
Mar 11 2023
Khalid: Ok friends, let me help explain a little about the security of our OANDA account. In my opinion, OANDA is one of the forex brokers that has been around for a long time since its establishment in 1997. Well, it's quite a long time, in my opinion, because most of the new Forex brokers were established in the 2000s. The good news is that the OANDA regulator itself is regulated by 8 top-level international regulators, namely:
OANDA Europe Limited is authorized and regulated by the Financial Conduct Authority in the UK.
Marcail
Mar 11 2023
Paden: OANDA is generally regarded as a safe and reliable forex broker. It is regulated by a number of financial authorities, including the National Futures Association (NFA) in the US, the Financial Conduct Authority (FCA) in the UK and the Australian Securities and Investments Commission (ASIC).
Monitoring of their activities by various regulatory bodies provides additional protection for client funds and helps ensure that brokers operate in a transparent manner and in accordance with industry standards.
However, as with all financial services, there are always risks and traders should always consult a broker before investing their money. It is also important to follow a risk management strategy and never invest more money than you can afford to lose. So if you want to keep this account as a trading broker, that's fine, but you may want to know more to avoid any doubts.
Coinneach
Mar 11 2023
Khalid: hello, I also want to help answer is the OANDA broker safe for trading. My answer isn't very secure either. because apart from being regulated by more than 7 international regulators (ASIC, FCA, MAS, IIROC, B.V.I FSC, FSA-Seychelles). B has only one drawback, namely negative balance protection. OANDA Global Markets Ltd does not offer negative balance protection, so traders can lose more than they invested.
but the positive side of this broker is that the trader's money is kept separately. So, if you want to keep this account as a business broker, that's fine, but you may know more to avoid doubts. Hopefully, my explanation can help you choose the right broker for trading.
Bennica
Mar 11 2023
Coinneach: Although OANDA does not offer negative balance protection, traders may lose more than they invested. However, it cannot be denied that OANDA is a good broker, especially for traders who trade with high volumes and scalpers in trading.
Apart from that, Education at OANDA Brokers has also received several awards from prestigious awards in the field of trading.
OANDA has won numerous awards for its services and products over the years, such as Best Educational Material 2018 (Investment Trends – US Foreign Exchange Report) and No. 1 Forex Broker. 1 in Singapore 2017 (Investment Trends Singapore CFD & FX Report). Recently, OANDA was voted Most Popular Broker and Best Forex and CFD Broker 2020 by TradingView clients in the company's inaugural TradingView Broker Awards. TradingView is one of the world's largest social networks for traders, with over 15 million registered users worldwide.
Taeyang
Mar 11 2023
What I like most about OANDA is the free deposit. This is very useful because sending in dollars, my currency, requires a larger amount, and when I receive payment from a deposit it affects me, and I think the deposit fee is free, which is a very good idea and can be a plus. . for OANDA.
Is OANDA really regulated by the US? Since there aren't many unregulated brokers out there, and actually I wonder why there are so many unregulated brokers in the US, here are their trading terms. But if you have different regulations, global traders will get different terms, which may be different and more liberal, right? I know that US trading conditions are difficult and very unpleasant, especially for traders who need more leverage and smaller deposits, and lots of bonuses.
Newton
Oct 30 2023
@Taeyang: OANDA's provision of free deposits is a modern-day convenience that many traders appreciate, particularly those dealing with the intricacies of currency conversions. In terms of regulation, OANDA is indeed regulated by US authorities, specifically the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA). These regulators ensure that OANDA adheres to rigorous financial standards and maintains transparency and security for its clients.
The differences in trading conditions around the world are primarily shaped by regulatory requirements. In the United States, regulations are known for their stringency compared to some other regions. This can lead to trading terms that appear less flexible, especially in areas such as leverage, deposit requirements, and bonuses. However, these regulations are designed to safeguard traders by reducing the risk of significant losses and ensuring a fair and transparent trading environment. They aim to balance the opportunities for traders with the protection of their interests.
Danang Tuktuk
Apr 8 2023
Seriously tho, in this day and age, negative balance protection isn't exclusive anymore to Oanda, so many other Forex Broker (most of them are off-shore, but who cares) also has this policy. It's like it's a crime already if there's any broker out there letting their user went deep into debt cuz of this negative balance.
So my real questions is, are there any limitations or drawbacks to OANDA's negative balance protection policy that traders should be aware of, compared to many other run-of-the-mill brokers out there...
Hengky
Apr 9 2023
@Danang Tuktuk: as you know, the backdraw of OANDA negative balance protection is they cannot cover you in extreme situations like crazy market volatility or force majeure events.
Also, it's always smart to consider a broker's overall reliability and reputation when it comes to honoring their negative balance protection. Sure, Oanda has a good rep in the industry, but if you're looking at other brokers, especially offshore ones, do your homework and make sure they're trustworthy.
Don't forget, it's not just about negative balance protection. You should look at the whole package. Compare different brokers' policies, check if they're regulated, think about their trading conditions, customer support, and what kind of trading platforms they offer.
And hey, regardless of the broker's negative balance protection policy, it's always smart to manage your risks responsibly. Use proper position sizing, keep an eye on your trades, and don't let things get too out of hand. That way, you'll be on top of your game, no matter what.
Tracey
Apr 8 2023
Wow, really? In what situations can a trader's account balance become negative? In many times I've been trading, I've never gone to this negative balance account condition. Probs bcuz I use a rather small margin (1:1000 ish, yeh, it's still considered small compared to other off-shore brokers)
If this negative balance can actually happen in the foreseable future, how do we (as retail trader) prevent this from happening?
Cholo
Apr 14 2023
@Tracey: For real, your trading account can actually go into negative balance, and that's a scary thought! Basically, it can happen when you use a lot of leverage and the market moves against you. So let's say you have $100 in your account and you use a leverage of 1:1000, which means you can trade with $100,000. If the market suddenly drops, and you lose more than $100, your account balance can go negative.
But don't panic just yet! As a retail trader, you can protect yourself from this by setting up a "stop-loss" order, which is basically an order to automatically sell your asset if it drops below a certain price. This way, you limit your potential losses and can prevent your account from going into negative balance.
It's also a good idea to keep an eye on your account balance regularly and monitor your trades closely. Don't risk more than you can afford to lose, and always have a solid risk management plan in place.
MAguire
Apr 14 2023
As a trader who prefers to use a smaller lot size of 0.0001 for trading, I was surprised to learn that even with such a conservative approach, there is still a possibility of incurring a negative balance. While the negative balance protection feature is designed to prevent this scenario from happening, it is still a concern for traders who are trying to manage their risk and protect their capital. In the event that a trader does experience a negative balance, the consequences can be severe, particularly if their broker does not offer negative balance protection. In such cases, the trader would be held responsible for covering the deficit and could end up owing a significant amount of money to their broker. Therefore, it is crucial for traders to be cautious and vigilant when trading, and to carefully a reputable broker with robust risk management features, such as negative balance protection, to minimize the risk of such a scenario occurring
Jack
Apr 16 2023
@MAguire: I totally get where you're coming from as a trader who prefers smaller lot sizes. It's surprising to think that even with such a conservative approach, there's still a chance of ending up with a negative balance. That's why negative balance protection is so important - it's meant to prevent exactly that kind of situation.
But hey, let's face it: if you do happen to get stuck with a negative balance and your broker doesn't offer protection, things can get pretty dicey. You could be on the hook for covering that deficit, and trust me, that's not a fun place to be. You could end up owing a hefty chunk of change to your broker, and nobody wants that.
That's why you gotta be smart and careful when you're trading. It's all about finding a reputable broker that's got your back with solid risk management features, including negative balance protection. You want a broker that's got your best interests at heart and won't leave you high and dry if things go south.
So, my friend, stay cautious, stay vigilant, and make sure you choose a broker that's got your back with robust risk management measures. That way, you can minimize the risk of ending up in a sticky situation where you owe your broker a ton of money. Keep your capital safe and trade smart!
John
May 17 2023
With that said, you may get in debt against OANDA if you suffer losses in a higher amount than your capital. That is, unless you specifically sign up through OANDA Europe Limited as opposed to other entities under the OANDA brand.
Dude, what could lead to owing debt to OANDA? I mean, if we hit our stop loss in trading, it shouldn't result in a negative balance, right? Moreover, OANDA has a stop-out feature that closes trades when the margin reaches a certain level to prevent further losses. So, I don't think signing up through OANDA Europe Limited is necessary, right?
Ananda
May 18 2023
Dude, when it comes to owing debt to OANDA, it typically happens if your losses exceed the amount of capital you have in your trading account. So, let's say you have a certain amount of money in your account, but if your losses exceed that amount, you might end up owing OANDA the difference. It's important to manage your trades and risk wisely to avoid accumulating debt.
Now, regarding the stop loss (SL) in trading, it's designed to limit your potential losses by automatically closing your trade when it reaches a predetermined level. So, if you set a stop loss, it helps protect your account from excessive losses. However, keep in mind that slippage or market volatility can sometimes cause the execution of your stop loss order at a different price, which may result in a small loss beyond your intended stop level.
Additionally, OANDA's stop-out feature is indeed a useful tool. It kicks in when your margin falls below a certain threshold, and it automatically closes your trades to prevent further losses. This helps protect your account from going into a negative balance. It's a great risk management mechanism provided by OANDA to help safeguard your funds. However, the feature is not enough to protect you from slippage situation.
Carlos
May 18 2023
Bro! All the protector either SL and Stop Out will not protect you at all. And it is because of slippage! Slippage can be a factor that affects the execution of your stop loss order and potentially leads to a slight deviation from your intended price level. Slippage occurs when there is a rapid price movement or low liquidity in the market, causing your order to be filled at a different price than expected.
In the context of stop loss orders, slippage can have a minor impact. Let's say you set a stop loss at a specific price to limit your losses. In normal market conditions, your trade will be closed near that price. However, during times of high volatility or fast market movements, the execution of your stop loss order may occur at a slightly different price due to slippage. And it is also occured with the stop out level as well
Linda
Nov 18 2023
Whether someone got cheated or not, delving into the nitty-gritty of OANDA's terms and conditions is a must for traders. This Negative Balance Account situation seems like a pretty weighty issue. If a slew of traders find themselves in the negative, it implies that brokers have to foot the bill to cover those losses, potentially stirring up more complications for them. Let's face it, trading is all about taking risks, and this is just par for the course.
According to the article, OANDA is proactive in managing this potential pitfall. They fire off daily margin call emails to accounts that fall below the required levels. It's a kind of heads-up, you know? Now, here's the kicker: if an account stays in the under-margined zone for two consecutive trading days, all open positions get the automatic boot, closing up shop. So, if you're wearing the trader hat, it's not just advisable but downright smart to thoroughly read and understand all the conditions laid out. It's your roadmap to navigating the trading game without getting caught in the fine print pitfalls.