Zero cut (negative balance protection) is a mechanism under which, when a sudden market move means the stop out (loss cut) cannot be executed in time and the account balance turns negative, the broker absorbs the negative amount and resets the balance to zero. Because no margin call (a request to deposit additional funds) arises, your loss is in principle limited to the funds you deposited.
Domestic (Japan-registered) forex brokers, by contrast, have no zero cut: a balance that goes negative is billed to the customer as a margin call. This article sets out the difference between zero cut and a margin call, why domestic brokers do not offer zero cut, how zero cut is applied, the cases where it is not applied, and how bonuses are treated. The broker table lists only what we could confirm on official pages and in this site's verified data; anything we could not confirm is marked 'check the official terms'.
What is zero cut? How offshore forex avoids margin calls
In forex, when the margin level falls below a set threshold, positions are force-closed by a stop out (also called a loss cut). Normally the loss stops at that point, but when prices jump, such as around economic releases or at the weekend market open (a gap), execution may not keep up and the loss can exceed the account balance. That excess is the negative balance.
Brokers that offer zero cut (negative balance protection) do not bill this amount to the customer and reset the balance to zero. In other words, what you can lose is limited to the funds you put into the account, and you do not, in principle, owe anything beyond that. Note, however, that this is not a system that protects the funds you deposited.
Zero cut only covers the excess when the balance turns negative despite the stop out. Funds lost up to the stop out are not returned. Even with zero cut, you can still lose the whole of the funds you deposited.
Offshore forex stop out calculation: how to work out margin level and broker levels →
Zero cut vs margin call: what differs between domestic and offshore forex?
A margin call (additional margin requirement, or shortfall) is the obligation to pay the shortfall to the broker when losses exceed margin and the account turns negative. Zero cut is the reverse: the broker takes on that negative amount. In the same situation of a negative balance, the party that bears the loss is opposite, and that is the difference between the two.
| Item | Zero cut (most offshore forex) | Margin call (typical domestic forex treatment) |
|---|---|---|
| Excess loss (minus 50,000 yen) | Absorbed by the broker; balance reset to zero | Paid by the customer to the broker as a shortfall |
| Customer's maximum loss | Up to the deposited funds (100,000 yen) | Can exceed the deposited funds (150,000 yen in this example) |
| Additional payment | In principle none (if the terms are met) | Yes (deadline and method are set in each broker's terms) |
| Maximum leverage | Several hundred to several thousand times, depending on the broker | Up to 25 times for individuals |
| Where to check | Each broker's terms and official help pages | Terms and conditions (handling of shortfalls) |
※ This is a simplified example for illustration. Actual execution prices, slippage and fees change the amounts. The handling of shortfalls at domestic brokers differs by broker's terms.
Offshore forex offers high maximum leverage, so the same funds can carry a much larger position. Even if zero cut spares you a debt, the margin level can fall rapidly and funds can be lost in a short time. Position size should be worked back from the loss you can tolerate, not on the assumption that zero cut will apply.
Why domestic forex has no zero cut: the 25x leverage rule and the ban on loss compensation
Domestic over-the-counter forex operators are subject to the Financial Instruments and Exchange Act (FIEA) and the related Cabinet Office ordinance on financial instruments business. According to the Financial Services Agency (FSA) explanatory page, individuals trading over-the-counter forex must deposit and maintain margin of at least 4% of the transaction amount for any currency pair, which converts to leverage of 25 times or less (verified on 10 October 2026).
The same page explains that operators set stop out rules to prevent losses from growing and force-close positions when unrealised losses reach a predetermined level. It also warns that when the market moves sharply, losses exceeding the margin can arise; at domestic brokers, that excess becomes a shortfall (margin call).
Another reason is the ban on loss compensation. Article 39 of the FIEA in principle prohibits financial instruments business operators from compensating customers for losses. Exceptions exist, such as compensation for accidents, but absorbing losses caused by market moves at the operator's own discretion is not permitted. For this reason, a registered domestic operator promising in advance to cover losses in the form of zero cut is, in principle, not permitted under the structure of the law.
Zero cut can be offered because offshore entities that are not subject to Japan's FIEA set their own rules for negative balances in their terms. The FSA has published warnings about overseas operators that solicit Japanese residents without registration. The legal position and risks are covered in more detail in a separate article.
Is offshore forex illegal? What the FSA warnings mean and how to check →
How zero cut is applied: automatic at some brokers, by request at others
The flow of zero cut is roughly the following four stages. Whether a negative balance is handled automatically or only on the customer's request differs by broker.
- 01Prices jump on a sudden move
Prices move sharply around economic releases, the weekend open or thin-liquidity hours, and the stop out is executed at a worse price than expected.
- 02The balance turns negative despite the stop out
As a result of the forced closing, the loss exceeds the account balance and the balance is shown as negative.
- 03The broker checks the negative amount
Many brokers review trading history and similar records under their terms and then treat the negative amount as covered.
- 04The balance returns to zero
Some brokers adjust it automatically; others adjust it only after you apply to support. Until it is adjusted, you may not be able to open new trades.
| Broker | Zero cut treatment | Source and notes |
|---|---|---|
| AXIORY | Yes. The official page states that losses beyond the account balance are automatically reset to zero with no margin call (Alpha account = physical shares and ETFs are excluded) | Official page (as stated on this site's broker page and columns, verified on 19 September 2026) |
| DecodeFX | Yes, but the official FAQ states that an application is required every time the account goes negative (application-based) | Official account types page FAQ (verified by this site) |
| Vantage Trading | Yes. The official trading page states that zero cut is adopted. Check the client agreement for the conditions | Official trading page (verified by this site) |
| Monaxa | The official page says to check the conditions of application. Check the terms for details | Official page (verified by this site, 26 September 2026) |
| HFM | Listed on this site as 'Yes*'. The official account types page has no detailed description; check the official terms for the conditions | This site's broker page |
| XS | Listed on this site as 'Yes*'. The official Standard account page does not mention it by name; check the official terms for the conditions | This site's broker page |
| Axi | In this site's broker data: 'check the conditions'. Check the official terms for the conditions | This site's broker page |
| XMTrading | In this site's broker data: 'check the conditions in the official terms'. Check the official terms for the conditions | This site's broker page |
| Exness | In this site's broker data: 'check the conditions'. Application may differ by entity and region, so check the official terms | This site's broker page |
| INFINOX | In this site's broker data: 'check the conditions'. Check the terms of the applicable entity | This site's broker page |
※ * The terms of each broker take precedence for conditions and exceptions. Before opening an account, check the official terms and help centre for whether an application is needed, which accounts are covered and which trades are excluded. Items marked 'check the official terms' are those where this site could not confirm a uniform statement on the official page.
When is zero cut not applied? Typical exceptions and points to watch
Behind the search 'offshore forex zero cut not applied' is the worry that zero cut should exist but the loss was not covered. Whether it applies is decided by each broker's terms, so no general statement is possible. The points below are those where conditions or exceptions are commonly set in terms, organised as items to check.
| Case | What can happen | What you can check beforehand |
|---|---|---|
| You did not apply at an application-based broker | The negative balance is not adjusted, affecting new trades and withdrawals | Check in the help pages whether an application is needed, the deadline and the method |
| Trades suspected of breaching the terms or of fraud | Zero cut is not applied and the negative amount may be billed | Check the prohibited practices, such as hedging (opening opposite positions) and arbitrage |
| Excluded accounts, products or instruments | Treatment differs by account type or product (such as share CFDs) | Check the scope of application for each account type |
| A different entity or region applies | The terms of the entity assigned at registration differ | Save the entity name and terms on the registration screen |
| Brokers that do not offer zero cut | A margin call can arise | Check the terms before opening an account |
※ The table above is a general list of points to check. It does not state that any particular broker falls under these cases, and whether zero cut actually applies depends on each broker's terms.
Offshore forex prohibited practices: hedging, account freezes and profit forfeiture →
When coverage becomes disputed, execution history and the relevant clause of the terms are the basis. Saving the terms when you open an account, and saving screens and trading history when zero cut occurs, makes it easier to explain your position when contacting support.
What happens to bonuses under zero cut? How credit disappears
For accounts that hold credit such as deposit bonuses, each broker sets the order in which losses are processed. As one example, the terms of AXIORY's 15th Anniversary Real Trading Starter Pack (verified on 19 September 2026) state that losses are deducted from the balance before the credit, and that if zero cut applies, the remaining credit is used to cover the loss. Credit lost through trading is not reissued.
In other words, a bonus acts as a cushion against losses but can disappear when zero cut occurs. Credit is not money you can withdraw as it stands, and separate withdrawal conditions apply to profits, so check the terms before accepting a bonus.
- Check whether losses reduce the credit or the balance first
- Check whether the credit is used to cover the loss or disappears in full when zero cut applies
- Check the conditions under which withdrawing reduces or deletes the credit
- Check the withdrawal conditions for profits earned with the bonus (deposit amount and trading volume)
Frequently asked questions
Q. What is zero cut?
A. It is a mechanism under which, when a sudden move means the stop out cannot be executed in time and the account balance turns negative, the broker absorbs the negative amount and resets the balance to zero. The loss you bear is in principle limited to the funds you deposited, but the conditions of application differ by broker's terms.
Q. What is the difference between zero cut and a margin call?
A. The difference is who bears the amount by which the balance went negative. With zero cut the broker bears it; with a margin call the customer pays it to the broker as a shortfall. Domestic forex has a maximum leverage of 25 times for individuals and margin calls, while most offshore forex brokers adopt zero cut.
Q. Why does domestic forex have no zero cut?
A. Because Article 39 of the FIEA in principle prohibits operators from compensating losses. In addition, individual over-the-counter forex is regulated to a maximum leverage of 25 times (margin of at least 4%), and a loss exceeding margin after the stop out is treated as a shortfall (FSA, verified on 10 October 2026).
Q. Can zero cut fail to apply at offshore forex brokers?
A. Yes. It may not be applied, or may need checking, if you did not apply at an application-based broker, for trades suspected of breaching the terms, for excluded accounts or products, or where a different entity applies. Check the individual conditions in each broker's terms.
Q. Is zero cut applied automatically?
A. It depends on the broker. AXIORY states on its official page that the balance is reset to zero automatically, while DecodeFX states in its official FAQ that an application is required every time the account goes negative. For the other listed brokers, check the official terms for whether an application is needed before opening an account.
Q. Does zero cut protect the funds I deposit?
A. No. Zero cut only covers the excess when the balance turns negative, and funds lost up to the stop out are not returned. Bonus credit can also be used to cover the loss and disappear when zero cut applies.
Sources and conditions
- Financial Services Agency (FSA), 'About so-called foreign exchange margin trading' (verified on 10 October 2026) →
- e-Gov Law Search, Financial Instruments and Exchange Act, Article 39 (prohibition of loss compensation) (verified on 10 October 2026) →
- Securities and Exchange Surveillance Commission, FAQ (handling of loss compensation) (verified on 10 October 2026) →
- AXIORY official: 15th Anniversary Real Trading Starter Pack terms (verified on 19 September 2026) →
- AXIORY account and zero cut conditions (this site, verified on 10 October 2026) →
- DecodeFX account types and zero cut conditions (this site, verified on 10 October 2026) →
- Vantage Trading trading conditions (this site, verified on 10 October 2026) →
- Offshore forex stop out calculation (column) →
FX Textbook is an independent information site, not a broker or provider of personal investment advice. Forex and CFDs involve risk. You may lose some or all of your invested capital. No trading result is guaranteed.
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