CFD trading is known for its flexibility and potential for high returns — but it also carries significant risk. One of the most pressing concerns for new traders is:
“Can I lose more than I deposit?”
The short answer is: Yes, it’s possible — but it depends on your broker’s policies and whether risk protections are in place. Let’s break it down.
Understanding Leverage in CFD Trading
CFDs are leveraged products. This means you can control a large position with a relatively small deposit, called margin.
While leverage amplifies potential profits, it also magnifies losses and this is where the risk of losing more than your initial deposit comes in.
Example:
If you deposit R5,000 and use 1:20 leverage, you’re controlling a R100,000 position.
If the market moves sharply against you, your losses can exceed your R5,000 margin — unless safeguards are in place.
When Can You Lose More Than Your Deposit?
1. Market Gaps
Markets sometimes “gap,” meaning the price jumps over your stop-loss level without triggering it at the intended price.
If this happens, your position might close at a much worse price than expected.
2. Extreme Volatility
Highly volatile markets can move so quickly that your losses accumulate faster than your broker can close your position.
3. No Negative Balance Protection
If your broker doesn’t offer negative balance protection, you are liable for any losses beyond your deposit.
You could owe the broker money, turning a losing trade into debt.
What Is Negative Balance Protection?
Negative balance protection is a feature that prevents your account from falling below zero.
With this protection in place, the broker will automatically close your positions before your losses exceed your balance — ensuring you can’t lose more than you deposited.
This protection is required by law in some regions (like the EU), but not all brokers offer it in South Africa unless explicitly stated.
How to Protect Yourself From Excessive Losses
1. Choose a Broker With Negative Balance Protection
Always read your broker’s terms or contact support to confirm this feature is active.
2. Use Stop-Loss Orders
While not foolproof during market gaps, stop-loss orders are an essential tool for limiting loss.
3. Monitor Leverage
Avoid using maximum leverage. The higher your leverage, the faster a small price move can wipe out your deposit.
4. Trade During Liquid Market Hours
Avoid trading illiquid or low-volume instruments, especially outside major market hours, as these are more prone to gaps.
5. Understand Margin Calls
Know what happens when your margin level drops too low — many brokers will issue a margin call or forcibly close your positions.
Final Thoughts
Yes, you can lose more than your deposit in CFD trading — but it’s preventable.
With proper risk management, the right broker, and a disciplined trading approach, you can avoid the worst-case scenarios.
Before you go live, make sure you understand your broker’s margin policies and whether your account is protected from negative balances. Risk is part of trading, but with the right knowledge, it can be controlled.
