What is a stop out level?

Picture an account where every open trade is losing. Your balance has not changed yet, but your equity keeps falling. At a certain point the broker stops waiting for you and closes trades itself.

That point is the stop out level: the margin level at which your broker begins closing your open positions automatically. Its job is to close losing trades before the account falls further, ideally before the balance drops below zero.

What happens when your account reaches stop out?

Your platform recalculates margin level every time the price moves. Margin level is your equity divided by your used margin, times 100.

When that number falls to the stop out level, the broker closes a position at the current market price. There is no extra warning at this stage, and you cannot refuse.

The loss on the closed position becomes real and moves into your balance. The margin it was holding is released, and the platform checks the margin level again.

If the level is still at or below the stop out line, the broker closes another position. This repeats until the level is back above the line or no positions are left.

How is stop out different from a margin call?

Both are points on the same margin level scale. The margin call sits higher and is a warning. The stop out sits lower, and at that point the broker acts.

These levels are examples. Each broker sets its own, and some use one number for both, as the next lesson shows. A later lesson explains why levels differ between brokers.

At what price does stop out hit a single trade?

Here is one trade with round illustrative numbers. The leverage of 1:100, the 100% margin call and the 50% stop out are assumptions, and spread and swap are left out.

1. You have a balance of $1,000 and no other trades.
2. You buy 0.50 lot of EUR/USD at 1.10000. That is 50,000 euros, worth 50,000 × 1.10000 = $55,000.
3. Used margin at 1:100 is 55,000 ÷ 100 = $550.
4. Your starting margin level is 1,000 ÷ 550 × 100 = 182%, rounded.
5. One pip on 0.50 lot is 50,000 × 0.0001 = $5.

Now find the two trigger points. The margin call at 100% comes when equity equals used margin, $550. That is a loss of $450, or 450 ÷ 5 = 90 pips, so the price is 1.09100.

The stop out at 50% comes when equity is half of $550, which is $275. That is a loss of 1,000 − 275 = $725, or 725 ÷ 5 = 145 pips, so the price is 1.10000 − 0.01450 = 1.08550.

The same recipe works for any single trade: allowed loss = balance − (stop out level × used margin), with the level written as a decimal, so 50% is 0.50. Then pips to stop out = allowed loss ÷ pip value.

This example keeps used margin fixed at the opening price. Some platforms recalculate margin as the rate moves, so the real trigger price can sit slightly away from 1.08550.

Stop out acted only after $725 of your $1,000 had gone. A stop loss that you place yourself can close the trade much earlier, at a price you chose.

Which position does the broker close first?

With several trades open, many brokers close the one with the largest floating loss first. The order is the broker's choice, so check its terms.

Take a $1,000 balance with two buy trades, again at 1:100 and a 50% stop out:

• Trade A: 0.30 lot EUR/USD at 1.10000. Margin is 30,000 × 1.10000 ÷ 100 = $330, and a pip is worth $3.
• Trade B: 0.20 lot GBP/USD at 1.25000. Margin is 20,000 × 1.25000 ÷ 100 = $250, and a pip is worth $2.

Total used margin is $580, so stop out comes when equity falls to $290. Say A is down 170 pips (−$510) and B is down 100 pips (−$200).

The floating loss is $710, equity is $290, and margin level is 290 ÷ 580 × 100 = 50%. The broker closes A, the bigger loser.

Your balance becomes 1,000 − 510 = $490. B still shows −$200, so equity stays $290. Used margin drops to $250, and margin level jumps to 290 ÷ 250 × 100 = 116%.

That is above 50%, so closing stops and B stays open. If prices keep falling, B can trigger stop out on its own once equity drops to 50% of $250, which is $125.

Can you lose more than the stop out level suggests?

You can, because stop out closes at the next price the market offers, and that price can be worse than the level.

Prices sometimes jump over a weekend or on major news, with no quotes in between. This jump is called a gap, and during it there is no price at the stop out level to close at.

Go back to the single trade of 0.50 lot. On Friday the market closes at 1.08700, so the trade is down 130 pips, or $650. Equity is $350 and margin level is 350 ÷ 550 × 100 = 64%, still above stop out.

On Monday the market opens at 1.07800. Stop out closes the trade there, 220 pips below entry. The loss is 220 × $5 = $1,100, so your balance is 1,000 − 1,100 = −$100.

Some brokers offer negative balance protection, which resets a balance like this to zero, and some regulators require it for retail clients. Others may ask you to repay the debt, so read your broker's client agreement.

Where do you find your broker's stop out level?

Brokers publish their margin call and stop out levels, usually on the account types page or in the client agreement. The numbers can differ between account types at one broker, so read them before you fund an account.

In MetaTrader, the Trade tab at the bottom of the platform shows your margin level as it changes.

Run the recipe from the single trade example before you open a position, so you know the price where stop out would act. The lesson on how to avoid a margin call covers ways to keep that price far away.