Can I lose more than I invest?

In an individual position

On etoro, it is possible to lose more than the amount invested in an individual position*. Risk management tools can be used to minimise the likelihood of this occurring. One such tool is a Stop Loss, which is a non-guaranteed order to close a losing position automatically when the asset’s price reaches a level you choose.

Stop Loss is mandatory across all CFD positions and can be edited to a maximum of 50% of the invested amount when opening the trade.

Read more about the risks of trading CFDs

Once a trade is open, you can extend the stop loss beyond this limit by adding funds to the invested amount as a buffer, which we call the maintenance margin.

But beware! Funds added to the maintenance will be lost if the position closes with a loss that exceeds a 100% Stop Loss, which can happen on leveraged or short positions as outlined in the below example.

Note: the set Stop Loss price is not guaranteed. For example, when there are large market movements, the Stop Loss rate you requested may not be traded in the market. In this case, the Stop Loss will trigger at the next available rate, which can result in a loss exceeding the invested amount and maintenance margin, particularly on leveraged positions.

How might this impact me during a cash distribution?

When a stock issues a dividend or undergoes a similar corporate action, eligible holders of buy CFD positions receive a cash distribution.

However, leveraged positions are subject to Stop Loss, which may cause the position to close if the price moves sharply. In some cases, this can result in a loss greater than the invested amount. If this happens, the excess loss may be deducted from the cash distribution, resulting in a lower payment than expected.

Any applicable tax withholding may further reduce the amount you receive.

Example:

1. You buy one share of an instrument worth $50 using $10 with ×5 leverage (with a Stop Loss placed at 50% of the invested amount, i.e. $45).
2. A large dividend causes the price to drop to $25, triggering your Stop Loss.
3. The broker closes the position at a share price of $40, realising a 100% loss of $10.
4. The dividend is issued at a rate of $25 per share. Before distributing, the broker deducts $15 from the dividend to reflect the difference between the dividend ($25) and the loss already realised ($10).
5. You therefore receive a dividend of $10 minus any withholding tax if applicable.

In the entire portfolio

Negative balance protection applies to your entire account and ensures that classified retail clients do not lose more than the balance on their account.

etoro as a provider of leveraged products such as CFDs are legally required to apply negative balance protection on a per-account basis.

CFD trading involves leverage, meaning you can control a large position with a small deposit. If the market moves sharply against you, etoro will issue margin call alerts as your portfolio value declines. If no action is taken and the balance continues to fall, the account may enter liquidation to reduce the negative balance.

If your account enters liquidation, etoro will close eligible CFD positions to reduce the negative balance. For retail clients, if the balance remains negative, etoro will absorb the loss and reset the account to zero.

With this protection in place, retail clients cannot become indebted to etoro. However, it does not mean that individual positions cannot close at a loss.

*Due to local regulations, retail clients residing in France cannot lose more than the amount invested in any individual position.

**Professional clients are not beneficiaries of negative balance protection.