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Market Basics

What Is a Stop Out

A stop out is the moment your broker closes your open positions itself to keep the account from going below zero. This paper shows you what it is, the second line it is drawn at under the warning, how both lines become distances in pips on a worked account, how a stop out happened step by step on one real day, which position the broker closes first, and where both lines are written in your account terms.

Difficulty
Beginner
Reading time
7 min
Pages
8
Reviewed by
Saman Rahbar

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The shears

A stop out is the moment your broker stops asking and starts closing. It shuts open positions itself, at whatever price the market is offering, to keep the account from falling below zero. Nobody is consulted and nothing waits for you to reply. By the end of this paper you will know where the line is that triggers it, how it turns into a distance in pips, how it happened on one real day, which of your positions goes first, and where the line is written for your own account.

It runs off the same percentage as the warning in the paper before this one: the equity — what the account is worth right now — divided by the used margin, what its open positions have locked away. The warning is a line across that number and the close-out is a second line, lower down. Brokers commonly put the warning at 100 per cent and the close-out at 50, though plenty use 80 and 30, or 50 and 20. Both numbers are in the account terms, and the gap between them is the only warning you get.

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