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Risk management

Stop out

By Jarosław Wasiński • Published: • Updated:
The automatic reduction or closure of positions when an account reaches the applicable margin-closeout threshold. Rules depend on the broker entity, product and client category. A warning is not guaranteed before closure, and gaps or slippage can worsen the realised loss. Stop-out is not a substitute for controlling position size or a guarantee against a negative balance.
Example. For an illustrative account with $400 used margin and a 50% closeout threshold, $200 equity reaches that threshold: 200 ÷ 400 × 100 = 50%. This is an example, not a universal broker rule.

Common mistake: waiting for a warning

Fast markets can move through warning and closeout levels before you can act. The broker may close positions without contacting you first. Price gaps can produce losses beyond the amount estimated at the threshold.

Apply it

Read the closeout rules for your exact account and keep a margin buffer. A stop-out threshold is not a planned risk budget and should not replace position sizing.

Threshold and remaining portfolio

For fixed used margin of USD 400 and a 50% closeout rule, USD 200 equity reaches the condition. Closing a position can change used margin, equity and the next condition. The sequence and quantity closed follow the actual policy; a one-position example is not a complete portfolio liquidation algorithm.

FAQ

Does forced closeout always happen exactly at the threshold price?

No. Triggering, order processing and actual fills are separate; gaps and delays can worsen the result.

Does closing one position leave used margin unchanged?

Not necessarily. Quantity, offsets and pricing can change the margin calculation for the remaining portfolio.

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Put this term into practice

Use your broker’s contract specifications and current exchange rates. Calculators illustrate assumptions; they do not guarantee execution prices or returns.

A margin call is a warning or demand for additional collateral; stop-out is forced position closure under the broker’s rules. Do not assume you will receive a warning before liquidation. Thresholds depend on the entity, product and client category.

Commonly confused terms →

Jarosław Wasiński

Editor-in-chief, ForexMechanics.com • Macro & FX analyst

Independent analyst and practitioner with over 20 years of experience in financial markets. Actively involved in Forex since 2007, with a focus on fundamental analysis, OTC market structure, and disciplined capital risk management.

  • Creator and editor-in-chief of MyBank.pl, providing reliable financial education since 2004.
  • Author of hundreds of in-depth market commentaries, structural analyses, and educational materials for traders and investors.
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All content is educational and informational only – it does not constitute investment advice or a recommendation. Remember: leveraged trading (Forex/CFD) carries a high risk of rapid capital loss.