Stop out

When a trader's open positions incur losses that reduce their account equity to a critical percentage of the required margin, a stop out occurs. The broker automatically closes the most unprofitable positions, or all positions, to prevent the account balance from becoming negative. This process is designed to protect both the trader from further debt and the broker from unrecoverable losses. The stop out level is set by the broker and varies.

For a retail trader, a stop out means the forced closure of trades, often resulting in realized losses that could have been avoided with better risk management. It signifies that the account's available margin is insufficient to maintain open positions. Proper position sizing and setting a stop-loss order for each trade are crucial to manage risk and prevent reaching the stop out level, protecting capital.