A stop out is a broker-enforced event where open positions are automatically closed when a trader’s margin level falls below a critical threshold, in order to prevent the account from going into negative balance.
In leveraged trading like Forex, a stop out level is a predefined percentage (set by the broker) that determines when the broker will forcibly close your positions due to insufficient margin.
When your margin level (equity ÷ used margin × 100%) drops below the broker’s stop out threshold (e.g., 20%), the system starts closing trades—usually beginning with the most unprofitable positions—until your margin level recovers.
Stop outs are designed to protect both the broker and the trader from further losses, especially during high volatility or when no stop loss is used.
A trader’s equity falls to $400, and their used margin is $2,000.
Margin level = (400 ÷ 2,000) × 100% = 20%
If the broker’s stop out level is 20%, positions begin closing immediately.
Margin, Margin Level, Margin Call, Free Margin, Equity, Leverage
Forex / Risk Management
To avoid stop outs, always monitor your margin level—especially during high-impact news. Use stop-loss orders and trade with manageable leverage.
