What Is a Stop-Out? How a Broker Closes Your Positions
A stop-out is when your broker closes your positions for you because there isn't enough money in your account. Here's when it happens and how to avoid it.
What it is
A stop-out is the forced closing of positions by a broker when your margin level drops below a threshold. Leveraged trades are held open by collateral — margin. If losses eat up the collateral, the broker closes positions so your balance doesn't go negative.
How it happens
| Stage | What happens |
|---|---|
| Losses grow | Free funds keep shrinking |
| Margin call | A warning: add funds or reduce your position |
| Stop-out | The broker closes trades, starting with the biggest loser |
Each broker sets its own threshold, and it's listed in the account terms. In crypto, a similar mechanism is called liquidation.
How it differs from a stop-loss
You set a stop-loss yourself, with a small loss known in advance. A stop-out happens when there was no stop and the broker closes the trade, usually at a big loss. How to set a stop — in our article on take-profit and stop-loss.
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- A stop-out is the broker closing your trades due to insufficient margin.
- It's usually preceded by a margin call.
- Your protection is your own stop-loss and low leverage.
Frequently asked questions
Can a stop-out be canceled?
No, it's an automatic broker rule. You can only avoid reaching it: add funds or close some positions in advance.
Why was the wrong position closed?
Brokers usually close the biggest losing trade first. The order is described in the broker's rules.
Can I end up owing money after a stop-out?
During a sharp gap, the price can jump past the threshold and your balance can go negative. Many brokers protect against this, but you need to check the terms.
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