Stop-out

What stop-out means

Stop-out is the point at which a broker automatically starts closing your open positions because your account no longer has enough equity to support them. It applies to leveraged accounts, mainly forex and CFD trading, where you control a large position with a small amount of your own money, called margin.

The level is normally expressed as a margin level percentage. If your margin level falls to the stop-out threshold, the broker's system closes positions without asking you. The goal is to prevent your losses from exceeding the money in your account and to protect the broker from a negative balance.

Stop-out sits at the end of a chain of warnings. First comes a margin call, a notice that your free margin is low. If the account keeps losing value, the stop-out level follows. Different brokers set different thresholds, and the figure often differs between retail and professional accounts, so you must read your own account terms.

How it works

Three account figures drive the process.

• Equity: your balance plus or minus the floating profit or loss of open trades.
• Used margin: the money set aside to hold your open positions.
• Margin level: equity ÷ used margin × 100%.

The broker publishes two levels. The margin call level, such as 100%, triggers a warning. The stop-out level, such as 50%, triggers forced closing. Some platforms use lower or higher figures, and some regulated retail accounts apply a standard close-out at 50% of required margin.

When margin level reaches the stop-out figure, the platform begins closing positions. Many systems close the position with the largest loss first, then re-check the margin level, and stop when the level climbs back above the threshold. Others close everything or follow another order. Because prices move fast, the real closing price can be worse than the price at which stop-out was reached.

A worked example

The following numbers are illustrative. You deposit 2,000 USD and open a long position in EUR/USD of 1 standard lot (100,000 units) at 1.1000 with leverage of 1:30.

• Position value: 100,000 × 1.1000 = 110,000 USD
• Used margin: 110,000 ÷ 30 = 3,667 USD

That margin is larger than the deposit, so the order would be rejected. Use 0.4 lots instead.

• Position value: 40,000 × 1.1000 = 44,000 USD
• Used margin: 44,000 ÷ 30 = 1,467 USD
• Initial margin level: 2,000 ÷ 1,467 × 100% = 136%

Now the market falls. Each pip on 0.4 lots is about 4 USD. If the price drops 100 pips to 1.0900, the floating loss is 400 USD.

• Equity: 2,000 - 400 = 1,600 USD
• Margin level: 1,600 ÷ 1,467 × 100% = 109%

Say the stop-out level is 50%. Equity would have to fall to 50% × 1,467 = 733 USD, which means a loss of about 1,267 USD, or roughly 317 pips on this position. At that point the platform starts closing. The example shows that a small account with a large position gives very little room. A smaller position or lower leverage would widen the distance to stop-out considerably.

Why it matters

Stop-out decides how much room your trades have to move against you. It tells you whether a normal market swing will force you out at a loss. It also sets how much protection exists against a negative balance: if losses escalate faster than positions can be closed, an account can still go below zero, depending on the broker and region.

Stop-out is different from a stop-loss. A stop-loss is your own order at a price you pick. Stop-out is an account-level safety mechanism run by the broker, triggered by margin level, and it can close positions you would have kept.

Brokers differ in the thresholds, the closing order and the communication around them, and these differences can matter during volatile markets.

How to use it in practice

1. Find the margin call and stop-out levels in the account terms or trading conditions of your broker.
2. Calculate the margin level at which your open positions would be stopped out, in terms of equity loss and price distance.
3. Keep free margin well above the minimum so that normal swings do not bring you near the threshold.
4. Use your own stop-loss orders so that you exit by choice before the account reaches stop-out.
5. Reduce leverage or position size when volatility is high or before major data releases.
6. Check how the platform picks which position to close first.
7. Find out whether the broker offers negative balance protection.

Common mistakes and misconceptions

• Confusing margin call and stop-out. The first is a warning and the second is forced closing.
• Assuming the stop-out level is the same at every broker. It varies by broker, account type and sometimes instrument.
• Thinking stop-out closes you at exactly the threshold price. Fast moves and gaps can cause worse fills.
• Using maximum leverage and relying on stop-out as your risk control, which leaves almost no buffer.
• Forgetting that adding new positions raises used margin and lowers margin level for all trades.
• Believing that a stop-out means the account is protected from all further loss, when a gap can cause a negative balance in some set-ups.

Risks and limitations

Stop-out limits damage but does not prevent losses. It tends to close positions near the low of a move, locking in the loss just before a possible recovery. In gaps or in illiquid markets the closing price may be far below the threshold, and on some accounts clients can owe more than they deposited. Retail clients in some jurisdictions have negative balance protection, but that is a legal or contractual feature that depends on the entity you open the account with. Leveraged trading carries a high risk of rapid loss.

How Brokeli looks at it

We record the margin call and stop-out levels stated in each broker's terms, along with the leverage caps and whether negative balance protection applies for each client category and entity. These facts come from published research snapshots and can differ by country. Rather than rank brokers by a single threshold, we show the figures next to the regulatory and account context so you can compare like for like.