A stop out level is often referred to as “stop-out”, “Liquidation Margin”, “Margin Closeout Value”, or “Minimum Required Margin.” This is a term that is very close to the margin call level. When you are interested in Forex trading, the level starts when the margin level decreases to a certain percentage level. At this point, the broker will close one or more of your open positions.

This is mostly because the trading account will no longer afford open positions. There is a shortage of margin to blame for this. Here are some more specifics about how the trading operation is influenced by a stop-out level.

What is a stop out level?

A stop-out level often exists where the equity is less than a specific percentage of the used margin. When you hit that particular stage, the broker will continue to shut down your positions, from the least lucrative. This phase ends once again when the margin level is over the stop-out level.

The broker will automatically close your positions in order to shield you from any future risks. In brief, it’s the process of liquidating the positions. It is also worth mentioning that after the process of closing positions has begun, it cannot be reversed or halted. It’s basically because it’s an automatic operation.

The problem can be much worse if you have several open positions. In any event, the safest option when you’re in that situation is to have a chat with your broker. Fully understanding their correct plan helps a lot. Typically, the position that has the highest unrealized loss is going to be the first. Then the next one, and the next one, and so on.

This continues until the margin level goes up to 100% or above. In certain circumstances, all of the open positions can be closed, so you need to be very vigilant.

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By Ricardo Martinez

Ricardo Martinez has been active in the financial markets for around 10 years. In the early days in his career he was a trader and worked as market analyst in different online brokers advising clients on key decisions of trading instruments in foreign exchange and commodity markets. Ricardo is currently working as independent trader with diversified portfolio over different markets. His writing for LearnMarketonline is part of his commitment to share knowledge with traders.