Stop Out Level
Stop Out Level is the level at which an open position will be forced to close immediately when the margin (%) level is lower than the required margin. This may close some or all positions. It will close the position automatically by the broker.
Margin is also called liquidity. A Stop Out is a lack of liquidity that is sufficient to hold a position. Therefore, the broker was forced to close the order. It starts from closing the most losing order to the least losing one. or until the margin level is returned above the required level.
Therefore, the trader cannot stop the process until the margin has been replenished beyond the required stop out level.
Stop Out takes place after the Margin Call, which is a level that warns traders that the margin level is too low at this time and there is a risk of being stopped out.
For example, the broker sets Stop Out level at 20% and Margin Call at 100%, so when you trade your losses until your portfolio drops to the margin used to open a position (Used Margin). At that time, the Margin Level(%) figure was exactly at 100% , if it dropped below 100% it would alert the trader to top up the margin (Margin Call). But if you don’t top up your margin and let your losses continue, when the Margin Level (%) is at 20% you will get Stop Out immediately.
Stop Out Level Calculation :
Stop Out Level(%) = set by the broker, for example 20%
Margin Level Calculation :
Margin Level (%) = ( Equity / Used Margin ) x 100
If Margin Level (%) reaches 20%, it will be stopped out.