Stop-Out
Margin & Leverage
A stop-out is the automatic closing of a trader's positions by the broker when the margin level drops below a set threshold, to prevent the account going negative.
What is a stop-out?
A stop-out is the point at which a broker’s trading platform automatically closes one or more of a trader’s open positions because the account’s margin level has fallen below a set minimum threshold — the “stop-out level.” Unlike a margin call, which is only a warning, a stop-out is an enforced action: the platform itself starts closing positions without needing the trader’s confirmation.
Stop-out levels are set by each broker and disclosed in the account terms — commonly somewhere in the 20% to 50% margin-level range, though this varies.
A worked example
Suppose a broker sets its margin-call level at 100% and its stop-out level at 50%. A trader has $1,000 of equity and $1,000 of used margin — margin level exactly 100%, triggering a margin-call warning.
The market keeps moving against the position and equity falls to $500, while used margin (for simplicity) stays near $1,000:
Margin Level = ($500 ÷ $1,000) × 100% = 50%
At this point, the stop-out threshold is hit. The platform automatically closes the losing position (usually starting with the position carrying the largest loss, if there are several open) to free up margin and stop the account from deteriorating further. If a single closure isn’t enough to bring margin level back above the threshold, more positions may be closed in sequence.
Why stop-outs matter
A stop-out is the broker’s last line of defense against an account’s equity being driven all the way to zero or below by a losing trade. It caps further damage automatically, at a level the trader did not choose in the moment — which is exactly why watching margin level and responding to margin calls proactively (rather than waiting for a forced stop-out) is a core risk-management discipline. Traders on accounts without negative balance protection should be especially aware that, in extreme fast-moving markets, a stop-out may not always execute in time to prevent a negative balance.
Quick recap
- A stop-out is an automatic, broker-triggered closure of positions once margin level falls below a set threshold.
- It follows a margin call if the account isn’t brought back to a healthier margin level in time.
- Exact stop-out levels are set by each broker and disclosed in account terms.
- It limits — but in extreme conditions may not fully prevent — an account balance going negative.