Risk & Money ManagementMargin Close-OutForced Liquidation
Stop Out
The margin level at which a broker automatically begins closing open positions to stop losses growing further.
What Stop Out means
The stop-out level sits below the margin call level, commonly at 50 percent, and unlike the call it is acted on by the broker rather than by the client. When the threshold is breached the platform typically closes the position with the largest floating loss first, recalculates equity and used margin, and repeats the process until the margin level is back above the threshold. Some venues instead close positions in the order they were opened, so the exact policy needs checking in the account terms.
ESMA rules adopted by the UK's FCA and mirrored by ASIC require a 50 percent margin close-out for retail clients, applied on a per-account basis, and pair it with negative balance protection. Even so, liquidation happens at whatever price is available, which during a gap or a thin session can be far worse than the theoretical level. A stop out is therefore best treated as a failure of position sizing rather than as a safety net that reliably preserves half the collateral.
Worked example
With the same two-lot EUR/USD position tying up 7,233 dollars of margin, equity falling to about 3,617 dollars puts the margin level at 50 percent and the broker starts closing positions at prevailing market prices.
Related terms
- Margin CallA broker notification that equity has fallen to a defined percentage of used margin and the account needs more funds or smaller positions.
- Margin LevelEquity divided by used margin, shown as a percentage; the ratio brokers monitor to decide margin calls and stop outs.
- Negative Balance ProtectionA rule or policy under which a client's losses cannot exceed the funds in their account, so no debt is owed to the broker.
- EquityThe live value of a trading account: balance plus the floating profit or loss of every open position.
- SlippageThe difference between the price a trader expected on an order and the price at which it was actually executed.
Frequently asked questions
What does Stop Out mean in forex trading?
The margin level at which a broker automatically begins closing open positions to stop losses growing further.
How does Stop Out work in practice?
ESMA rules adopted by the UK's FCA and mirrored by ASIC require a 50 percent margin close-out for retail clients, applied on a per-account basis, and pair it with negative balance protection. Even so, liquidation happens at whatever price is available, which during a gap or a thin session can be far worse than the theoretical level. A stop out is therefore best treated as a failure of position sizing rather than as a safety net that reliably preserves half the collateral.
What is an example of Stop Out?
With the same two-lot EUR/USD position tying up 7,233 dollars of margin, equity falling to about 3,617 dollars puts the margin level at 50 percent and the broker starts closing positions at prevailing market prices.
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