By Darrell Martin
Normally, people insure things like cars, houses and boats against loss.
A few have been able to insure such strange things as hands (Harvey Lowe), taste buds (Egon Ronay) and legs (Michael Flatley and Betty Grable).
But when it comes to insuring Retail Foreign Exchange Brokers, there is no insurance.
With the happenings of last week which caused people as well as brokers to lose massive amounts of money, you may have wondered why there was not insurance to cover the losses.
After all, your money is insured by the FDIC at your bank and you can “insure” your stock portfolio by hedging against your open positions.
When the gap crash happened, let’s suppose you only had $1000 and lost $500 or maybe $4500 including margin. You don’t have it. Now put that into the scale of a six-figure account holder.
You can see that if the account holder does not have the money to cover the loss then the broker will not have the money either, if this scenario is repeated with numerous account holders. However, the bank still wants the money but the broker doesn’t have it, so the broker has to shut down.
If there were no margin requirements then that would solve all of this mess, wouldn’t it? When you trade or hedge using a fully defined and capped risk trade through Nadex, you are protected against margin calls and loss.
Your amount of risk is known when you place your binary option or spread trade. It will not exceed your expected risk regardless of whatever ups and downs the market may throw at you.
There will be no one calling you requesting more money for your margin account. Since Nadex is an exchange, no one is calling requesting money to cover losses. Everyone wins in this situation!
If you are ready to trade without margin and would like help in knowing how, go to www.apexinvesting.com. Apex Investing Institute offers free education, and free access to the Nadex Binary and Spread Scanner Analyzers. Member traders are invited to trade in the chat rooms, take advantage of trade signal services, use key indicators and access the Apex Forum. The forum content is updated daily and includes over 10,000 members. In a supportive learning community of seasoned as well as up and coming traders, traders of all levels learn how to trade Nadex binaries and spreads in depth, as well as futures, forex, stock and options, and gain an edge for successful trading overall.