Lost trader's benefits due to a broker's error

Forex is an ocean of investment opportunities. High leverage, low costs, a large number of financial instruments, a lot of analytical tools ... Sounds perfect. But this is not always the case. We trade using the services of an intermediary, which is a broker. This makes our trade to a certain extent dependent on it. Well, as long as we don't look for the ideal, we won't find it. Everyone has their own strengths and weaknesses, but they all have at least one thing in common - they will be "broken down" someday. By the term "failure" I mean problems with the servers, the platform and the price presented on the chart. There can be only one result of this - lost profits or even loss. And we will focus on the price.

"We don't have your mantle and what will the Lord do to us?"

Quoting a Polish classic, this saying often fits the situations we face Forex brokers. Let's assume ... There was a price detached from reality on the platform, having nothing to do with the market valuation of the instrument. As a result, we have a large loss on the account or even overdraft. What now? The broker gave a stain so we file a complaint. The procedure is very simple - usually a short e-mail or phone call is enough. There are times when you don't need to do anything and the broker will react faster.

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The most common solution is to cancel the transaction that caused havoc on the account, restore the account balance from the moment before it was concluded, and adjust the rate on the platform. More than one of us would be happy - in the end, the specter of repayment of the overdraft is forgotten. But what about a transaction that could have made money? The price of the instrument has changed so much that we lost our setup, and the investment opportunities ran away and we cannot duplicate our position.

Some brokers decide to restore open positions but it is quite risky. Even when informing the client about this fact (eg by e-mail) there may be a dangerous situation where the trader can not manage it properly or the instrument will change so that it will do more harm than good.

It happens (though rarely) that the broker in such a situation offers discretionary compensation for the so-called "Lost benefits" - reduction of commission for a given period, return of a pool of funds or other form of "calming down" an upset customer. The problem arises when we felt it would be THIS trade that would bring us a 100-pips profit (worst of all the market will confirm it after 2 days 🙂). No reasonable company will agree to such a compensation, because theoretically, we could do virtually anything with the transaction during these 2 days.

The lack of any precise behavior in the occurrence of such a situation often causes unpleasant misunderstandings at which it is difficult to find a compromise that satisfies both sides.

The holiday agreement

One of the Polish brokerage houses found a solution for this. In its regulations, we read:

“If the incorrect price was caused by the circumstances for which XTB is liable, then XTB is liable to the Client for the damage caused by the incorrect price, but only up to the amount equivalent to 10% Margin, which is the 12th security for the Transaction concluded by the Client at the incorrect price. None of the provisions of the General Conditions shall limit XTB's liability for damages towards Customers for damages caused by XTB through willful misconduct. "

Speaking more humanly - in the event that as a result of, for example, a bad tick or other error for which the broker is to blame (directly or indirectly), which will, for example, reset the account and prevent further trading, in addition to restoring the state pre-run account Stop-Out mechanism we will also receive a compensation of 10% of the Margin for a given position.

Is 10% Margin a lot or a little? There can be only one answer - it depends. The situation may apply to small-volume transactions, which we have held for several months, or it may also be a large day-trading position, which was already relatively negative. But there is one major advantage to introducing such a solution. We know where we stand and what we deserve. We know in black and white what we can demand. And in the face of some compensation for "lost profits" in the absence of any guarantees, it seems to be a very sensible record.