What is a stop-out?

If a margin call is the warning light, a stop-out is the emergency brake slamming on. It's the broker stepping in to protect itself — and, in a way, you — when losses get too deep. Let's understand it.

What a stop-out is

A stop-out happens when your losses push your margin level below a second, lower threshold (the stop-out level, often around 50 percent, though it varies by broker). At that point, the broker automatically closes your open positions, usually starting with the biggest loser, until your margin level is back above the danger zone.

You don't choose this. It's automatic. The broker isn't asking anymore — it's acting.

Margin call vs stop-out

They're two stages of the same slide:

Stage	What happens	Typical level
Margin call	A warning; you can still act	~100% margin level
Stop-out	Broker force-closes trades	~50% margin level

The margin call is your chance to fix things. The stop-out is what happens if you don't — or if the market moves so fast it blows through both at once.

Why brokers do this

A stop-out exists to prevent your account going deeply negative. If losses kept mounting unchecked, you could end up owing the broker money. By force-closing positions, the broker caps the damage. Many regulated brokers also offer negative balance protection, ensuring you can't lose more than your account balance — a feature well worth having.

A worked example

You have 2,000 dollars and open large positions. The market moves hard against you:

1. Losses mount, equity drops, margin level falls toward 100 percent → margin call (warning).
2. You do nothing. Losses deepen, margin level hits ~50 percent → stop-out.
3. The broker closes your positions automatically, locking in those losses.

The painful part: a stop-out crystallises your losses at possibly the worst moment, right when the market is spiking against you. If it then reverses, you're already out.

How to never see a stop-out

A stop-out means several things went wrong before it. Prevent it upstream:

• Use a stop-loss on every trade. Your own stop-loss closes trades on your terms, long before the broker's stop-out. This is the single best protection.
• Trade small. Big positions relative to your account are the number-one cause of stop-outs.
• Keep free margin. Don't commit all your capital; cushion buys survival.
• Don't add to losers hoping for a bounce. 'Averaging down' on a losing CFD often accelerates a stop-out.

The bottom line

A stop-out is your broker automatically closing trades once losses breach a low margin threshold, to stop your account going negative. It comes after the margin-call warning and locks in losses at a terrible moment. The way to never experience one is boring but reliable: trade small, keep free margin, and set your own stop-loss on every single trade so you exit on your terms, not the broker's.