The "no margin call" policy in overseas forex trading is actually a system based on zero-cut mechanisms.Even if your account balance goes negative, the broker will cover the negative amount and bring the balance back to zero, soyour maximum loss is limited to the amount you deposited. However, this is not guaranteed or unconditional; there are conditions for its activation, and the timing and handling of its execution vary from broker to broker.
This article explains the mechanism of zero-cut and the legal basis for why it cannot be offered in domestic FX (prohibition of loss compensation under the Financial Instruments and Exchange Act), as well as comparing the zero-cut terms and conditions of eight major companies with the date of verification, explaining why it is called a "trap" and cases in which it does not apply , all based on primary sources
Conclusion | No margin calls or zero cuts in overseas forex trading (as of September 2026)
- "No margin calls" is true. The zero-cut system means the broker covers any negative balance in your account, andfor normal trading within the terms and conditions, your maximum loss is limited to your initial deposit,preventing you from incurring debt.
- The reason why domestic FX cannot offer this service is due to the structure of the law. Article 39 of the Financial Instruments and Exchange Act prohibits compensation for customer losses, while Article 117 of the Cabinet Office Ordinanceobligates brokers to require customers to deposit any shortfalls (margin calls). In reality, in Japan, uncollected receivables = margin calls occur every time there is a sudden market change (for example, during the Swiss franc shock, it amounted to approximately $21,187,500 in one day - according to the Financial Futures Association of Japan).
- There are two types of zero-cut: In the EU and UK, it is a regulatory obligation (ESMA 2018, FCA 2019), but for offshore companies used by Japanese nationals, it isa service provided by the terms and conditions. The conditions and timing of enforcement are determined by the service provider, so it is essential to check the terms and conditions.
- There are cases where it will not be applied: Transactions deemed to be in violation of the terms and conditions, such as hedging across multiple accounts/brokers based on the assumption of zero-cut, or abuse of bonuses, are not covered. The reality that it is called a "trap" is not the zero-cut itself, but this misunderstanding and the actions of some brokers.
- The speed of execution, the order of offsetting with bonuses, and whether an application is required vary from company to company. You can check this in the comparison table of 8 companies in the main text (with terms and conditions and confirmation dates).
Supervisor of this article
Japan Securities Dealers Association Class 1 Securities Sales Representative
Ryota Ito
While a student,CFPand DC Advisor qualifications. I currentlya Class 1 Securities Sales Representativelicense. Subsequently, I worked in the sales and management planning departments of a securities company, and as a president's secretary (during which time I was involved in the sale of investment trusts and stocks, seminar planning, launching an FX business, and establishing an investment advisory company). I also worked in investment banking. In November 2007, I established Skiller Japan Co., Ltd. and became a director. I am currently working as a part-time lecturer at Toyo University's Faculty of Business Administration, Otemae University's Correspondence Education Department, Chiba Institute of Science's Faculty of Crisis Management, and as a financial planner.
*This article was created by the MoneyCharger editorial team in accordance with their content creation policy and supervised by Ryota Ito, who holds a CFP and a Class 1 Securities Sales Representative license (supervised in September 2026). The laws and regulations are based on the current articles of the e-Gov Law Search (Article 39 of the Financial Instruments and Exchange Act and Article 117 of the Cabinet Office Ordinance concerning Financial Instruments Business, etc.), domestic accounts receivable statistics are based on materials published by the Financial Futures Association of Japan, EU and UK regulations are based on official announcements from ESMA (March 2018) and the UK FCA (July 2019), and each company's zero-cut conditions are based on the terms of service and official support page original texts (acquired version, with the confirmation date clearly indicated in the text), all verified on September 4, 2026. Overseas FX brokers are not registered with the Japanese Financial Services Agency, and the Financial Services Agency and the Consumer Affairs Agency have issued warnings against trading with unregistered brokers. This article provides general information and does not endorse the use of any specific broker.
If you are new to overseas forex trading,our complete guide for overseas forex trading beginners.
One of the advantages of overseas forex trading is the zero-cut mechanism. Even if there is a large fluctuation in the exchange rate and you incur a large loss, you will not be required to make additional margin calls. However, not all overseas brokers offer this feature, and there may be differences in how they implement it. Therefore, if you are interested in zero-cut, you should carefully read this article and compare different brokers
What does "no margin call" mean in overseas forex trading? | How does the zero-cut system work?
The zero-cut system is a mechanism where, if your account balance goes negative due to trading losses, the broker covers the negative amount and resets the balance to zero.In other words, zero-cut is "insurance that limits the maximum loss to the amount deposited," so users do not incur losses exceeding their deposit, and "no margin calls (i.e., no additional margin is required)" is realized.
First of all, what is a "margin call"? — In domestic FX trading, it is the broker's obligation to request a margin call
A margin call (oishō) is an abbreviation for "additional margin," and it refers to being asked to deposit additional funds when your margin is insufficient.In a broader sense, a "demand for the deficit" when a stop-loss order is not executed in time and the account balance goes negative is also called a margin call, and this is the type of issue that mainly occurs when searching online. The negative amount becomes a debt to the broker, in other words, a loan.
The important point is that margin calls in domestic FX trading are not something that "the brokers are demanding out of spite." Article 117, Paragraph 1, Items 27 and 28 of the Cabinet Office Ordinance concerning Financial Instruments Business, etc., stipulates that itis prohibited for brokers to "continue a contract without requiring the customer to deposit the deficit amount". In other words,a legal obligation for brokers to require the customer to deposit the deficit, and domestic brokers do not have the option of exempting customers from margin calls in the first place.
The process leading up to zero-cut execution | The point of divergence from domestic FX
The zero-cut mechanism is activated when a sudden price fluctuation occurs that cannot be prevented by stop-loss orders. The process can be illustrated as follows:
Normally, losses are limited to the account balance through a stop-loss (forced liquidation) mechanism. However,if prices jump due to economic indicator announcements or gaps at the start of the week, the stop-lossmay not be executed in time, causing the balance to go into negative territory. This is where the difference lies: in overseas forex brokers with zero-cut policies, the negative balance is reset, while in domestic forex brokers, it is charged as a deficit.
The difference between margin call, stop-loss, and zero-cut (3-stage safety mechanism)
The three terms become easier to understand when you categorize them by "which stage of safety device they refer to."
| step | Timing of work | What to protect |
|---|---|---|
| ① Margin Call | When the margin maintenance ratio falls to the warning level | Warning only. Prompts you to deposit funds or close your positions |
| ② Stop-loss | When the maintenance rate falls below the level set by the service provider (e.g., 0-50%) | Close your positions to protect your account balance |
| ③ Zero cut | When a stop-loss order is not executed in time and the balance goes into the negative. | A final safety net that resets negative balances and prevents losses (debt) exceeding the initial deposit. |
In short, zero cut is not a substitute for stop-loss, but rather a last line of defense that only activates when the stop-loss is breached . The level and calculation method of stop-loss are covered in detail in our article explaining stop-loss in overseas forex trading
I'm often asked, "If there's a zero-cut feature, isn't a stop-loss unnecessary?" But the order is reversed. First, a stop-loss protects your capital, and only in sudden changes that even that can't prevent, does the zero-cut feature prevent debt. What you should be mindful of in your daily trading is managing your funds until the stop-loss is triggered
Why do domestic FX brokers have margin calls while overseas FX brokers do not? | Legal Structure
The answer to "Why is there no zero-cut system in domestic FX?" lies not in the willingness of the brokers, but in the structure of the law.In Japan, ① the Financial Instruments and Exchange Act prohibits brokers from compensating customers for their losses, and ② a Cabinet Office ordinance mandates that brokers require customers to deposit any shortfalls in margin. Because of these two factors, it is impossible to create a "domestic FX system without margin calls" under the current system.
Article 39 of the Financial Instruments and Exchange Act: "Prohibition of Compensation for Losses" - It is illegal to assume responsibility for a customer's losses
Article 39, Paragraph 1 of the Financial Instruments and Exchange Act prohibits financial instruments business operators, etc., from "offering or promising to provide financial benefits to compensate or supplement all or part of a loss incurred by a customer in a derivative transaction (including over-the-counter FX)" (Item 1), making such an offer after the fact (Item 2), or actually providing such benefits (Item 3) (e-Gov Law Search - current text confirmed on September 4, 2026). Furthermore, Paragraph 2 of the same article also makes it illegal for the customer to request or receive compensation .
The "zero-cut" policy, which promises that the broker will cover any losses exceeding the account balance (i.e., customer debt), fits the structure of this article perfectly. Therefore, it isgenerally understood that if a domestic broker offers zero-cut, it may constitute compensation for losses.(Our editorial department has not been able to find any official document from the Financial Services Agency that specifically names "zero-cut" as a violation of Article 39. This explanation is based on the structure of the article.)
This isn't just theoretical; there are real-world examples. In August 2019, the Securities and Exchange Surveillance Commission issued a recommendation to Togo Securities, finding thatthe management's actions of providing a total of approximately $435,625 worth of profits to compensate for the losses of eight customers in exchange-traded FX (Click 365) trading violated Article 39, Paragraph 1, Items 2 and 3 of the Financial Instruments and Exchange Act. In Japan, if a company covers a customer's losses, it can actually become subject to recommendations and penalties from the authorities.
In Japan, "requesting margin calls" is an obligation for brokers - Article 117 of the Cabinet Office Ordinance
The other pillar is Article 117 of the Cabinet Office Ordinance concerning Financial Instruments Business, etc. Paragraph 1, Item 28 of the same articlestipulates that if the margin is insufficient to meet the required maintenance deposit amount at the time of determination each business day, it is prohibited for a broker to "continue the contract related to the currency-related derivative transaction without promptly having the customer deposit the insufficient amount." In other words, it is a legal obligation for brokers to demand the insufficient amount (margin call) from the customer, and they have no discretion to waive it. Furthermore, the "margin rate of 4%" in Paragraphs 7 and 8 of the same article is the basis for limiting leverage for individual investors in Japan to effectively 25 times.
Margin calls (uncollected payments) do actually occur in Japan | Association's published statistics
You might think that margin calls rarely happen, but the Financial Futures Association of Japan publishes information on "uncollected receivables due to stop-loss orders" during sudden market fluctuations—that is, debts incurred by customers to brokers whenstop-loss orders were not executed in time.
| Date of occurrence/event | Total amount of accounts receivable | Number of occurrences |
|---|---|---|
| January 15, 2015: Swiss Franc Shock | Approximately 3.3 billion(approximately $550,000 of which is personal income of approximately $1.9 billion) | 1,229 cases (including 1,137 from individuals) |
| August 24, 2015: China Shock (sudden fluctuations in the South African rand against the Japanese yen, etc.) | Approximately 900 million approx. $118,750 | 4,999 items |
| January 3, 2019: Flash crash (sudden rise in the yen) | Approximately 900 million approx. $268,750 | 6,598 items |
| March 22, 2021: Turkish Lira plummets against the Japanese Yen | Approximately 1.3 billion approx. $506,250 | 3,458 items |
During the Swiss franc shock, it was calculated that approximately $12,187,500 in debt was incurred per day by individuals alone, totaling 1,137 cases, or an average of approximately $10,688 per case . Monthly figures for the occurrence of debt are also published every month, and even during normal times without major incidents, uncollected receivables repeatedly occur (although there are months with zero occurrences). Official statistics confirm that margin calls are a real risk, even with domestic FX trading using 25x leverage
Reasons why overseas forex brokers can and do offer zero-cut protection
Because overseas forex brokers serving Japanese customers operate outside of registration under Japan's Financial Instruments and Exchange Act, the framework of Articles 39 and 117 does not directly apply. Furthermore, the reason these companies offer zero-cut protection is to create a trading environment with "small capital and limited losses" by combining it with high leverage, thereby increasing trading volume . Since the brokers' revenue source is spreads and fees, a system that allows users to continue trading with peace of mind is also in the brokers' own interest. The overall differences in the systems between overseas and domestic forex are summarized in our comparison article of overseas and domestic forex
It's not as simple as "domestic brokers have margin calls = dangerous, overseas brokers don't = safe." Domestic brokers have lower broker risk due to legal regulations and trust protection, while overseas brokers have lower debt risk, but you bear the risk of choosing the wrong broker. The right choice depends on what risks you want to take on and what you want to avoid
There are two types of zero-cut policies: "Regulatory obligations" and "Services based on terms of service."
It's often overlooked, butthere are two types of "zero-cut (negative balance protection)": those mandated by law and those offered voluntarily by the service provider. This difference directly impacts "how much you can rely on it."
In the EU and the UK, it's a "regulatory obligation"—but it comes with a ban on high leverage
In 2018, the EU's securities regulator, ESMA,mandated Negative Balance Protection. Simultaneously, it imposed leverage limits (30x for major currency pairs), mandatory liquidation at 50% margin, and restrictions on bonus offerings. The UK's FCA also made these measures permanent in 2019, requiring brokers to provide protection that "customers will not incur losses exceeding the total funds in their CFD accounts" (both official announcements from the authorities, confirmed September 4, 2026).
In other words, an environment where zero-cut is guaranteed by regulationsis always accompanied by a ban on high leverage and bonuses. The combination of "several hundred times leverage + zero-cut" is only possible in jurisdictions with lax regulations.
For offshore companies targeting Japanese nationals, this is a "service stipulated in the terms and conditions"—therefore, it is necessary to check the clauses
On the other hand, Japanese people actually open accounts withFXGT(Seychelles corporation), andHFM(Saint Vincent corporation)offshore companies. Our editorial department has not been able to find any evidence that these jurisdictions have regulations mandating negative balance protection. In other words, zero cut isa "service" that each company provides voluntarily in its terms of service and official FAQ, and the conditions, execution timing, and exclusions are determined by the broker in their terms and conditions.
Even within the same brand, the nature of protection varies depending on the legal entity —for example, accounts with the EU subsidiary of the group are subject to regulatory protection, while accounts with offshore corporations targeting Japanese customers are subject to terms and conditions —this is the structure of overseas forex trading (this concept of "legal entity you contract with" is explained in detail in the financial licensing article ). That's why it's important to check "where zero-cut is written in your broker's terms and conditions," as discussed in the next chapter
A cross-sectional comparison of zero-cut clauses and enforcement conditions of 8 major companies
compiles information so you can easily find out "where and how your company's zero-cut policy is written."Because information on the internet regarding "X hours until execution" varies from article to article, this table is based solely on the original terms and conditions and official website information of each company, and the date of verification is clearly indicated.
| Contractor | Explicit basis for zero cut | Explicit statement of the timing of execution | Application required | Exemptions/Points to note |
|---|---|---|---|---|
| XMTrading | Article 39.9 of the Terms and Conditions– Account-level Negative Balance Protection (limiting maximum losses to account funds) is formalized as a policy.Source: Client Agreement (version obtained June 2024) | Not specified in the terms and conditions (automated processing) | Not specified (automatic) | The right to not apply the NBP if there are signs or suspicions of arbitrage, trading without market risk, coordinated internal hedging, or abuse of the NBP , and the right to offset negative balances with funds in a separate account (Article 39.9, latter part). |
| Exness | There is no explicit clause in the terms and conditions. The official website provides information on the provision of NBP.Source: Full text of the Client Agreement (May 2025 version) was reviewed. The official explanation page was not accessible due to access restrictions. | Not specified | — | There is a clause to remove illicit profits. It's important to note that there is no warranty clause in the terms and conditions, which is a difference from other companies |
| FXGT | Article 14.12 of the Terms and Conditionsexplicitly states that "If the margin falls below zero, the company will waive its claim to the balance (Negative Balance Protection)." Article 14.13 explicitly states that slippage does not affect NBP.Source: Terms and Conditions v1.14 (Official CDN) | Not specified in the terms and conditions (automated processing) | Not specified (automatic) | Abuse of NBP bonuses by AI, software, etc., will result in profit deduction, transaction cancellation, and account termination (Articles 8.5 and 8.6). "Abuse of NBP policy" itself is grounds for termination |
| TitanFX | Not mentioned in the terms and conditions.Official"System to compensate for negative balances and restore balance to zero"(updated June 4, 2026) | Compensation will be provided on the next business day following any negative balance | Automatic. If you want to expedite the process, you can apply using the "Zero-Cut Compensation Request Form" | "To be applied after scrutiny by the Trade Operations Department" — Officially stated that no compensation will be provided for transactions deemed to be abusive or misused |
| AXIORY | Margin clause (g) of the terms and conditions— explicitly states that "no claims will be made for losses due to inability to settle in abnormal market conditions." Source: Terms on Investment Services (December 24, 2025 edition) | Restore to zero within 7 business days(the only company among the 8 that explicitly states the deadline in its terms and conditions) | Automatic. If it is not returned within the deadline, the customer should contact us | Arbitrage, abuse of market disruption, and excessive high-frequency trading are subject to cancellation and payment withholding (Sections 14.6(a) and 30.6) |
| BigBoss | Official "Zero Cut System" page (Terms of Use are not publicly available)Source: Zero Cut explanation page on the official website | Automatic processing within 4 hours after the execution conditions are met. | Unnecessary | If you deposit funds while holding a position, the deposit will be offset against the negative balanceand will not be eligible for zero-cut. / If you have open positions with unrealized gains, processing will be put on hold. / Withdrawals and fund transfers are not possible while you have a negative balance. / Transactions deemed to be fraudulent will be excluded. |
| HFM | Article 17.4 of the Terms and Conditions– "Negative balances resulting from stop-outs will be fully adjusted" is explicitly stated.Source: Account Opening Agreement (January 2023 edition) | Not specified | Not specified | The wording of the article specifically limits losses to those resulting from stop-outs. Prohibited trading (arbitrage, hedging to profit from gaps, etc.) is subject to profit confiscation (Article 27.1) |
| ThreeTrader | Announced on the official blog (the terms and conditions do not explicitly state that NBP will be provided, but rather stipulate the right to offset negative balances between multiple accounts ) Source: Official blog, Client Agreement (September 2023 edition) | Automatic reset within 1 business day | Not required (no additional deposits are needed while waiting for a reset) | Transactions intended to exploit the zero-cut system are prohibited by the terms and conditions. Transactions deemed to be "manipulations" will be invalidated (Article 9.7) |
*The article numbers and content are based on the version obtained by our editorial department on September 4, 2026. The terms and conditions for XMTrading (2024 version),Exness(2025 version),HFM(2023 version), andThreeTrader(2023 version) were obtained via archives because the official websites are under access restrictions, and may differ from the current versions. "Not listed" means that the description could not be found in the obtained document. Always check the current terms and conditions and official support of your contracting provider for final terms and conditions
There are three key points that can be gleaned from this table. First,brokers can be divided into those that guarantee zero cuts in their terms and conditions (XM,FXGT,AXIORY,HFM) and those that offer it in official announcements outside of their terms and conditions (TitanFX,BigBoss,ThreeTrader,Exness). If it's written in the terms and conditions, it's easier to assert as a contractual promise, while if it's only in an official announcement, there is relatively more room for changes in operation. Second,explicitly state the deadline for execution, whileAXIORY(7 business days),BigBoss(4 hours), andThreeTrader(1 business day)most only state that it is "automatically processed." Third,Exness, have explicit clauses excluding abuse, andExnesscan also address this with a clause for eliminating unfair profits.
In practice, you should pay particular attention to the specific rules, such asBigBoss's "deposits made while holding positions are not eligible for zero-cut." If you have a negative balance, the safest order is to "deposit after the reset process is complete" before hastily making a deposit (some brokers, like TitanFX, provide a deposit form for before the process is completed)
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The benefits of zero-cut and the concept of "maximum loss"
The ultimate benefit of zero-cut is just one thing:the maximum loss is predetermined, equal to the amount deposited into the account.This leads to three practical advantages.
Three benefits of zero cut
- No debt– no matter how drastically the market fluctuates, you will never be charged more than your deposit (you won't incur negative balances like uncollected receivables in domestic FX trading).
- A strategy of small amounts x high leverage is viable—it allows for a capital allocation based on limiting losses, where you deposit only what you can afford to lose and bet big.
- The psychological burden during sudden changes is small—even if the balance swings into negative territory due to gaps at the start of the week or the release of economic indicators, we know that in the worst-case scenario, it will stop at the amount of deposits.
Maximum Loss Simulation by Leverage Level (Assuming a margin of approximately $625.00)
We will examine the relationship between the perception that "high leverage is dangerous" and "zero-cut limits losses" using theoretical values for taking a position up to the maximum limit with a margin of approximately $625.00 and a USD/JPY rate of approximately $0.94
| Leverage | Maximum number of positions that can be built | Loss when the market moves against you by approximately $0.01 | Actual amount to be paid |
|---|---|---|---|
| 25 times(domestic standard) | Approximately 16,000 currencies | Approximately $206.25 | Approximately $206.25 (within the balance; however, if a sudden change occurs and a stop-loss order cannot be executed in time, a claim for the deficit may be made) |
| 500 times | Approximately 330,000 currencies | Approximately $4,125 | The price will be capped at approximately $625.00(zero cut). |
| 1,000 times | Approximately 660,000 currencies | Approximately $8,313 | The price will be capped at approximately $625.00(zero cut). |
*This is a theoretical value assuming you hold the position with full leverage. In reality, stop-loss orders will be triggered at some point, so you won't actually lose this much in normal market conditions
It's easy to misunderstand, but zero-cut isnot a "mechanism to reduce losses," but rather a "mechanism to limit losses to the amount deposited." The approximately $625.00 you deposited could easily be lost entirely. Controlling daily losses is ultimately about managing your funds up to the stop-loss level; think of zero-cut as an extra layer of insurance.
Furthermore, the points often cited as disadvantages of zero-cut, such as "it becomes easier to neglect risk management" and "the cost of zero-cut is effectively priced into the spread," are better addressed in the next chapter, as organizing them into reasons why they are called a "trap" reveals their true nature rather than simply listing disadvantages
Five reasons why the zero-cut system is called a "trap"
The suspicion that "no margin calls sounds too good to be true" is half right and half wrong.There is no trap in the zero-cut system itself, but situations that make you feel like you've been trapped can actually occur. We will break down the true nature of these situations into five points.
Reason ① Misunderstanding of activation conditions - It's not "unconditionally protected."
This is the most common issue. Transactions deemed to be misuse are excluded (see below), the time until execution varies from broker to broker, andsome brokers will offset deposits made with a negative balance, thus excluding them from coverage(BigBossofficially states this). If you think "zero cut = you're protected anytime, no matter what you do," you'll be tripped up by the detailed rules.
Reason ② Zero cut only works if the company has the financial resources
Zero-cuta system where the broker bears the entire amount of the customer's negative balance. During the Swiss franc shock in January 2015, major US-listed broker FXCMincurred negative customer balances of approximately $225 million in a single day(confirmed in the 8-K and original press release filed by the company with the SEC), and was forced to take out emergency loans due to concerns about violating capital adequacy regulations. Major UK broker Alpari (UK) becameinsolvent andwent bankrupt due to the same sudden change (official statement from the UK FCA, January 19, 2015). In addition, several media outlets reported that there was an overseas broker (FXDD) that, while advertising "zero-cut support," demanded payment for negative balances (our editorial department has not been able to verify the primary sources).The promise of "no margin calls" is based on the broker's ability to pay—this is the core of what is called a trap.
Reason ③ Doing the same thing domestically would be illegal — "Zero cut even though it's domestic" is a danger signal
mentioned above, if a company in Japan assumes the losses of its customers, it falls under Article 39 of the Financial Instruments and Exchange Act, which concerns compensation for losses, and in the case of Togo Securities, this actually led to a recommendation from the Securities and Exchange Surveillance Commission. Conversely,if a company is registered with the Financial Services Agency in Japan and advertises "no margin calls and zero-cut protection," that itself is a signal that it is illegal or false.
Reason ④ There are unscrupulous businesses that use the promise of "zero cut" as bait
The Cross-Border Consumer Center has issued a warning after receiving complaints from overseas forex brokers regarding issues such as "inability to withdraw funds" and "inability to contact the broker" after depositing funds . Furthermore, "no margin calls and zero-cut protection" are common marketing slogans for overseas forex brokers, making them easily used by companies with no real substance. Choosing a broker based solely on the presence or absence of zero-cut protection will lead you into this trap. Consider this in conjunction with safety checks, such as checking whether it is stated in the terms and conditions, the company's operating history, and membership in dispute resolution organizations
Reason 5: Overconfidence in "not incurring debt" leads to the abuse of high leverage—a trap of behavior
It's not a systemic trap, but a trap you set for yourself. The reassurance that losses will stop at your initial deposit can, conversely,you to repeatedly use full leverage, thinking "I can just deposit more if I lose it all," thusinducing behavior that causes you to continue losing money. If you've been hit with zero-cut multiple times, you're not being protected; your funds are continuously decreasing. Whether you can view zero-cut not as an "offensive tool" but as "insurance against unavoidable circumstances" is the deciding factor for surviving in overseas forex trading.
In summary, the trap is not the zero-cut system itself, but rather① misunderstanding of the activation conditions, ② indifference to the lender's ability to pay, ③ the misconception that it's available domestically, ④ carelessness in choosing a lender, and ⑤ overconfidence on one's own part. Conversely, if you keep these five points in mind, the zero-cut system is a genuinely powerful safety measure.
Cases where zero-cut does not apply | Clauses regarding violations and abuse of terms and conditions
Seven out of eight major companies explicitly state in their terms and conditions that they have the right not to apply zero-cut to transactions they deem to be abusive(Exnessdoes not have an NBP clause in its terms and conditions, but deals with this through a clause on the removal of fraudulent profits). Many of the troubles where "margin calls were requested even though there were no margin calls" fall into this category. In particular, the following three types of transactions will be subject to measures as stipulated in the terms and conditions (exemption from application, cancellation of profits, account freezing) if detected, even if the account holder did not have malicious intent.
Three typical examples where zero-cut does not apply
- ① Hedging based on zero-cut– This involves taking an opposing position in a separate account, a family member's account, or an account with another broker, and then using zero-cut to cut the losses. XM explicitly states in Article 39.9 that NBP is not applicable and that offsetting with funds in another account is permitted.FXGT Article 2.6,HFM Article 27.1, andThreeTrader Article 9.7 also prohibit this.
- ② Arbitrage trading that exploits communication delays and price errors—methods that profit from price differences without taking risks are subject to invalidation of the trade itself and forfeiture of profits, even before zero-cut measures are implemented.
- ③ Abuse of bonuses– obtaining bonuses through multiple accounts, and trading strategies that combine bonuses and zero-cut to cut losses (FXGTexplicitly states "abuse of NBP policy" as a reason for cancellation).
If misuse is detected, the measures taken are not limited to the non-application of zero-cut; most terms and conditions include invalidation of related transactions, forfeiture of profits, and account freezing . Details of the clauses and what to do if your account is frozen are explained in "Causes and methods of unfreezing overseas forex accounts," and the overall debt risk, including cases of debt in overseas forex trading and countermeasures, are explained in " Cases of debt in overseas forex trading and countermeasures ."
The idea that "since there's a zero-cut feature, you can just discard the losing account" is prohibited by almost all brokers in their terms and conditions, almost by name. Brokers detect this through terminals and trading patterns, and if discovered, profits will be canceled along with the transaction. Think of zero-cut not as a strategy tool, but as insurance to protect against unforeseen circumstances
Frequently Asked Questions about No Margin Calls and Zero Cut in Overseas Forex Trading
Does Zero Cut always activate?
It's not unconditional. Each company has a policy of not applying zero-cut to trades that they determine to be in violation of or abuse of the terms and conditions (such as hedging based on the assumption of zero-cut, arbitrage, or bonus abuse). It is basically applied when a trade becomes negative due to a sudden market change during normal discretionary trading. Please check the cases in which it does not apply
How long will it take until the execution?
Only a few brokers specify a deadline;BigBossstates it's within 4 hours of fulfilling the conditions,ThreeTraderwithin 1 business day, TitanFX anytime after the next business day, andAXIORYwithin 7 business days. XMTrading andFXGTonly state "automatic processing" without specifying a time. Negative balances may remain for several days, so caution is advised when making additional deposits before the reset (see next question)
What happens if I make a deposit while my balance is negative?
Depending on the broker, your deposit may be offset against your negative balance and therefore not eligible for zero-cut protection.BigBossofficially states that "if you make a deposit while holding a position, that deposit will not be eligible for zero-cut protection."As a general rule, the safest order is to make a deposit after the reset process is complete. Some brokers, like TitanFX, provide an application form for deposits made before the process is finished.
What is the relationship between bonuses (credits) and zero-cut?
The order in which losses are absorbed varies from broker to broker. For example,BigBossofficially states that for accounts with multiple balances, "credit bonuses will be used only after cash has been depleted." How losses incurred from trading using bonuses are handled depends on each company's bonus terms and conditions, so it is recommended to check the relevant terms and conditions when using a promotion
Is there a limit to the number of times zero cuts can be performed?
We did not find any mention of transaction limits in the terms and conditions or official announcements of the eight companies we checked. However, trading patterns that result in multiple zero-cuts in a short period of time should be reviewed from a risk management perspective and may be subject to scrutiny by the broker
Are there any domestic FX brokers that offer "no margin calls"?
No. This is because Article 39 of the Financial Instruments and Exchange Act prohibits compensation for losses, and Article 117 of the Cabinet Office Ordinance obligates brokers to require customers to deposit the amount of the margin deficit. Even in Japan, when market fluctuations are sudden, stop-loss orders are not executed in time, resulting in uncollected payments (margin calls), and the Financial Futures Association of Japan publishes statistics on this. Please see the explanation of the legal structure
If there are no margin calls, wouldn't you absolutely never incur debt with overseas forex trading?
Zero-cut means that you will not be charged more than your deposit amount due to trading losses, but the deposited funds themselves can still be lost entirely. Also, zero-cut does not prevent charges for violating the terms and conditions, overspending on credit card deposits, or using living expenses, which are the entry points into debt. For more details, please see our article on cases of debt in overseas forex trading and countermeasures
Does the amount compensated by the zero-cut affect my taxes and tax return?
Zero-cut is a process that resets a negative balance to zero, and since it does not increase your assets, it is generally not considered a taxable profit (our editorial department has not been able to confirm the National Tax Agency's official stance on this point). Furthermore, losses from overseas forex trading can only be offset against miscellaneous income in the same year and cannot be carried forward to the following year. For details, we recommend consulting an overseas forex tax guide or a tax accountant
Summary | "No margin calls" is true. However, this is contingent on understanding the terms and conditions and choosing the right broker
Key points of this article
- The "no margin call" policy in overseas forex trading is actually a system based on zero-cut principles . Maximum losses are limited to the amount deposited.
- The reason why domestic FX cannot offer this service is, specifically Article 39 of the Financial Instruments and Exchange Act (prohibition of compensation for losses) and Article 117 of the Cabinet Order (obligation to deposit deficit amounts). In Japan, uncollected receivables, or margin calls, are a recurring reality.
- zero-cutpolicies: "regulatory obligations" (EU and UK) and "services based on terms and conditions" (offshore companies for Japanese customers). Accounts for Japanese customers fall under the latter category. The conditions are determined by the broker in their terms and conditions.
- guarantee zero-cut protection in their terms and conditions,FXGT,AXIORY,HFMwhile others only offer it in official announcements, and only some explicitly state the enforcement deadline. Check your broker using the comparison table of 8 companies.
- Transactions deemed to be misuse (hedging, arbitrage, bonus abuse) are exempt. The "trap" lies not in the zero-cut itself, but in misunderstandings of the activation conditions and in choosing the wrong broker.
Zero-cut, when understood correctly, is the ultimate safety feature in overseas forex trading. Choose a broker whose terms and conditions clearly state that zero-cut is offered, manage your funds at the stop-loss level on a daily basis, and reserve zero-cut as insurance in case of sudden changes—if you use it this way, you can confidently take advantage of the "no margin call" benefit. For overall broker safety, please also refer to the overseas forex broker safety ranking and evaluation criteria
The fundamental principle is to trade without relying on zero-cut features. Aim to develop a profitable trading style by consistently practicing to avoid losses
＼ Even with the same vendor, transaction costs change if you go through a cashback program ／
