What is a Stop Out Level?

What is a Stop Out Level?

A stop out occurs when your broker automatically closes positions because your margin level drops below a predefined threshold. It is the final backstop that prevents the account from going negative.

How Stop Outs Are Triggered

• Margin level formula: Margin level = (equity / used margin) × 100. Hit the broker’s stop out percentage and forced liquidation begins.
• Priority order: Brokers typically close the largest losing positions first to free margin quickly.
• Volatility risk: Fast markets can widen spreads, accelerating the move toward a stop out.

Preventing Forced Liquidation

• Keep free margin above 100% by controlling position size and margin level.
• Use hard stop losses so trades exit on your terms, not the broker’s.
• Reduce exposure before high-impact news when spreads and swaps can spike.
• Monitor correlated trades; multiple losing positions in the same theme can cascade into a stop out.

Liquidation Sequence

At the threshold, platforms typically close the largest losing positions first to free margin. If that doesn’t restore health, the next positions are closed, and so on. In fast markets you may be filled at worse prices than expected, so don’t rely on stop‑out protection as a risk tool—treat it as a last resort.

Example

Account equity $5,000, used margin $3,000 (margin level 166%). A surprise release widens spreads and price gaps through stops. Equity drops to $1,400 while used margin remains $3,000 (47% level) and the platform auto‑liquidates the largest loser. Avoid this spiral by de‑risking ahead of events and keeping ample free margin.