Stop Out

The meaning of Stop Out

Stop Out is a signal to close a position forcibly, which is sent by the server, if the client finds that there are not enough funds on the account to maintain an open trade. The size of stop out is set by each broker individually. As a rule, losing trader”s positions are closed at the current market price. If the trader has gone into deficit on several positions, the forced closing begins with the most unprofitable of them.

Agreement on installation and use of stop out

It is advisable not to wait for the forced closure of a position and close the order on a message about the possible lack of funds to maintain it. Such signal is called a Margin call. It is usually sent to the trader when the loss exceeds 50-70 percent of available funds.

Can a stop out deposit go into deficit if it does not work?
Usually it happens for two reasons:

  • Weak collateral for an open position, when large leverage is used for trading and the volume of transaction significantly exceeds the trader’s deposit.
  • The occurrence of a gap – a stop out may not work if there is a price gap, sometimes its value reaches several tens of points. Which leads to a negative deposit.
deactivation

By setting the Stop out level on his trading account, the Client consents to the fact that the Company will have the right to fully or partially liquidate open positions in trading, when the amount of available funds on the trading account of the Client becomes less than or equal to the Stop out level

ACCEPTANCE

By depositing funds into the trading account in accordance with this offer, the Client acknowledges that he has read, understood, unconditionally accepted and undertakes to comply with these terms of use of Stop out offer

right to modify

The Company reserves all rights to modify, replace, suspend, delete or terminate this Stop out offer, at any time and in its sole discretion, without prior notice.

appropriate use

When the Stop-out level is reached, the Client must release the Stop-out in order to be able to open new positions on the trading account.

Let’s consider such a situation on a concrete example

The stop out level is 10%, the trader’s deposit is 1000 dollars, the used leverage is 1:100. The deal is opened with volume of 1 lot, at that all trader’s funds are pledged. Unfavorable situation has arisen on the Forex market, and the loss on the open order is gradually growing, as soon as it has reached the amount of 900 dollars, the position has automatically closed. In this case, the trader’s account does not necessarily remain exactly 100 dollars, because it also takes time to close the position, and the price does not stand still.

Stop out is a kind of stop loss order, but only from the broker’s side, it allows to save the trader from losses, in case the trader cannot deal with the situation on his own.

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