Trading and risk
Leverage, margin call and stop-out: how you can lose your whole deposit in a day
Calculations for a USD 1,000 deposit from 1:2 to 1:500 leverage, when a stop-out hits, ESMA limits, gaps and negative balance protection.
Stop-out: what it means
A stop-out is the broker closing your positions by force when the margin level falls to the minimum allowed.
A stop-out is the broker automatically closing your positions without your consent when your account no longer has enough funds to support the margin. Positions are closed at the current price, usually starting with the most loss-making one.
For retail clients of EU brokers, the regulator ESMA set the close-out at 50% of the minimum required margin. If your whole deposit is used as margin, a 1.67% price move is enough to trigger a stop-out at 1:30 leverage.
A stop-out closes the position where the broker decides. To limit a loss where you decide, traders use a stop loss.
In detail, with examples: Leverage, margin call and stop-out: how you can lose your whole deposit in a day
Related terms
Margin call Leverage Stop loss
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