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If I trade on leverage, can my account go negative? Is there a protection?

When using margin the worst case scenario is that you lose all your cash and owe the amount borrowed plus interest because the stocks crashed to zero before they could be liquidated.


Example

You have US$10,000.00 in ABCD stocks, which would give you another US$10,000.00 in buying power. You then decide to invest this US$10,000.00 in the stock ZWYX. In the next few days something happened, and the price of both stocks ABCD and ZWYX went to US$0. Now your account will be negative US$10,000.00 (which is the money you “borrowed” from Passfolio). You then must deposit US$10,000.00 plus interest to pay the debt and keep using Passfolio.



Margin trading entails greater risk, including, but not limited to, risk of loss and incurrence of margin interest debt, and is not suitable for all investors. Please assess your financial circumstances and risk tolerance before trading on margin. Margin credit is extended by DriveWealth, LLC. Member FINRA, SIPC.

If your margin equity falls below a certain amount based on the amount you have borrowed, then the account is issued a margin call. You may be required to sell securities or deposit funds to meet the margin call, and in some cases securities may be sold without notification to you.

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