Equity falls beneath the line:positions close, by the platform's design.
The margin level at which a broker begins closing open positions automatically because equity no longer covers the required margin.
It follows the margin call level and exists to limit further losses on the account.
In plain words
Leveraged positions need a deposit called margin. The margin level compares the account’s equity, which is its balance plus or minus the result of open positions, with the margin in use. If losses push the margin level down to the broker’s stop out level, the broker starts closing positions automatically.
margin level = equity ÷ used margin × 100%
See it move
Margin level has crossed Stop out level: Positions closed
Why it matters
Stop out is the point at which the trader no longer decides which positions close or when. It usually comes after a margin call, a warning at a higher level, and it exists to stop the account’s losses running further.
Worked example
An example only. The figures are round and invented for the arithmetic: they are not market prices.
An account has 2,000 US dollars of equity and 1,000 of used margin; suppose, for the example, that the broker’s stop out level is 50%.
- 1Margin level2,000 ÷ 1,000 × 100% = 200%.
- 2Open positions lose 1,500, so equity drops to 2,000 − 1,500 = 500.
- 3Margin level500 ÷ 1,000 × 100% = 50%.
At 50% the margin level has reached the assumed stop out level and positions begin to be closed, commonly starting with the one showing the largest loss.
A common mistake
Stop out does not ensure that the account ends above zero. In a gap or a very fast market, positions can be closed at prices worse than the level implies, and the balance can go negative.
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Educational information, not investment advice or a recommendation to trade.