Negative cash balance is formed when you purchase an instrument in a currency that is not physically available on your account.
You have 10,000 EUR in cash on your account.
You decide to purchase 500 XYZ stocks on the New York Stock Exchange (NYSE), each costing 2 USD. As a result, you will notice a negative position in USD cash equal to - 1,010 USD (commission included). This occurred because you didn't have sufficient USD cash reserves on your account.
Important Note: Keep in mind that turning off leverage will not protect your account from having a negative cash balance.
What to do with negative cash?
It is your responsibility to choose whether or not to keep negative cash. However, keep in mind that negative cash is charged with interest. The interest rates are found in the Client's area and are calculated as follows:
Position.Value * (Rate(%)/360) * days = Interest amount
How to avoid negative cash?
There are several ways to avoid negative cash:
- Enable Autoconversion. This will automatically convert your negative cash into the selected base currency.
- Convert currencies in advance. Go to the 'Instruments' module → select 'Cash' from the list of instruments, then buy it with the currency you'd like to exchange
- Go negative and convert afterwards. In this scenario, the most convenient way to convert your negative cash is to use the desktop version of the platform and the module 'Account summary'. Open the module → right-click on the negative position and select the desired currency.
All the methods are described in our tutorial.