HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
Vantage information and reviews
Vantage
85%
XM information and reviews
XM
82%

Can A Stock Go Negative?


There are numerous professional stock traders who have made a name for themselves in the dynamic stock market. However, it is essential to keep in mind that the stock market is also prone to numerous factors that influence stock prices, which makes traders wonder, can a stock go negative? The simple answer is, no.

Even if stock prices fluctuate or fall drastically, they can never attain a negative value (less than zero). While stock values cannot attain a negative value, book values can go negative. This means that investors can lose more than the capital invested and even end up in debt. This typically happens when companies go bankrupt.

If a company lacks funds to pay off its creditors, stockholders earn zero compensation, and their stock may become worthless. In some cases, investors end up losing their entire investment.

However, stock prices rarely fall to zero even when companies go bankrupt, because the stocks still retain some value. Low-trading shares are typically delisted by stock exchanges before prices get to near-zero levels.

Can losses exceed your investment?

Going short or trading on margin exposes you to high risk and you can easily lose more than your entire investment. For example, with short selling, you can lose money when stocks appreciate. When trading on margin, traders buy stocks using money borrowed from brokers to increase their capital size and leverage their trades. Therefore, losses will be multiplied by the leverage and you can lose your own money.

When going short, you can lose more money than you had invested if you go short on a stock and it unexpectedly appreciates by more than 100%. This typically happens when investors take short positions on stocks from companies that are performing poorly. Short selling relies on the premise that prices will fall. Therefore, if stock prices rise, you may end up losing more money than you had invested because you have to repay what you’d borrowed.

Factors that determine the value of stocks

A company’s earnings, supply and demand, and investor perception can all influence the prices of stocks. When a company has turned consistent profits in previous years, investors have a positive perception towards it and the stock can be in demand driving up stock prices. However, if investors perceive the stock value to be low, prices can fall.

When the number of investors looking to buy a particular stock is higher than those looking to sell, stock prices rise, and vice versa. The company’s earning is also a major factor that affects a company’s value. If a company turns in profits consistently, it has a positive future outlook and shares can appreciate. However, if profits fall short, share prices drop.

The bottom-line

There are several ways to protect yourself from losing more money than your initial investment. However, it can still happen because markets are unpredictable.You can protect your investment from the impact of negative price movements by using stop loss orders and diversifying your portfolio. It is essential to keep in mind that stock prices can fluctuate drastically and sometimes it is impossible to predict the price movement as well as the optimal time to sell or buy. However, even during the most volatile price fluctuations, stocks cannot go negative.

#source


RELATED

How To Set Financial Goals In A Crisis

Clearly setting goals is an important step on the road to financial success. They, unlike abstract desires, will definitely work. At all times, you need to be serious and conscious about this question...

Six New Year Resolutions for Traders in 2023

The year 2022 is coming to an end, and the time has come for a fresh start in 2023. The end of the year is a great time for traders to review their 2022 trading performance...

Why User Identification and Verification Are Vital for Trading

When you join FBS, or any other financial company, for that matter, you need to pass a verification process to get full access to the services. You may feel...

Unknown facts about the US dollar

The US dollar is the most popular currency in the world. About 90% of all financial operations are conducted with the US dollar on exchanges, and the rate of this...

Investing in the stock market as a beginner

Historically, investing in stocks has been the best way to earn, increase savings, combat inflation and make sure your money is working for you. However, the sheer price of company stocks...

What is a Share Split?

Companies may occasionally, conduct share splits, this is when the company lowers the price of its shares by splitting each existing share...

How to place your first trade in Forex?

Forex is a unique financial platform. It gives traders an opportunity for both incredible profit and equally incredible loss. Thousands of people every day decide...

Fiat Money: Definition and Examples

In the complex world of finance and economics, fiat money plays a central role as the lifeblood of modern economies. It is the currency we use every day, the medium...

Q2 2022 Earnings Season Explained

Earnings season is a few weeks when most public companies share their quarterly performance in their earnings reports. It takes place every three months...

An Introduction To Forex News Trading

Political and economic news is a powerful source of fluctuation in global financial markets. Even rumors of events such as falling central bank interest rates, lawsuits by governments...

Cryptocurrency Trading for Beginners: Best Strategies and Patterns

Today, there are almost 19 thousand cryptocurrencies in the world. On the one hand, this is a huge opportunity! For comparison, only a few thousand companies...

What Affects Forex Rates?

Currency exchange rates have always been a considerable factor used to determine a country's economic health and stability. This is typically defined as the rate at which one...

Forex Market Hours

Other than being the largest and most talked about financial market out there, Forex has a very appealing characteristic - around-the-clock operation. Being available...

Get Exposure in Amazon Stock Via CFDs: Insights for Traders

Amazon is unarguably one of the world's most successful companies. Amazon is a marketplace for vendors and buyers of different products from across the globe...

What is the financial market?

By definition, the term financial market refers to any marketplace where financial products are traded. These include the stock market, bond market, foreign exchange market...

Mastering Forex Trading with ModMount: A Comprehensive Approach

ModMount invites traders to conquer the Forex market, offering an expansive selection of over 45 CFDs on various Forex currency pairs. This wide range includes major, minor, and exotic pairs, catering to a broad spectrum of trading preferences and strategies...

Why every trader needs a trading strategy

A trader without a trading strategy (TS) is like a driver with no map. Whatever your strategy is, it will help you deal with the chaos happening in the markets. This article...

How to Scale up a Small Trading Account in Forex?

Many aspiring Forex traders have one really important question: how to scale up a small trading account in Forex more successfully? This is an important question...

An Introduction to Technical Indicators

Technical indicators are calculations derived from price and volume data. They have plotted either as overlays on a price chart or below a price chart. Indicators...

Forex Market Structure

The Forex market is close to being a textbook example of a perfect market that humanity created. Namely, a market is any place where buyers and sellers meet...

FP Markets information and reviews
FP Markets
81%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%
FXNovus information and reviews
FXNovus
75%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.