Stop out: What is a Stop Out Level?

earnings announcement

You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. A hard stop is a price level that, if reached, will trigger an order to sell an underlying security.

We’re also a community of traders that support each other on our daily trading journey. Remember, YOU, and YOU alone, are responsible for monitoring your account and making sure you are maintaining the required margin at all times to support your open positions. If this level is reached, your broker will automatically start closing out your trades starting with the most unprofitable one until your Margin Level is back above the Stop Out Level. This liquidation happens because the trading account can no longer support the open positions due to alack of margin.

Investopedia does not include all offers available in the marketplace. Michael Logan is an experienced writer, producer, and editorial leader. As a journalist, he has extensively covered business and tech news in the U.S. and Asia. He has produced multimedia content that has garnered billions of views worldwide. Don’t be crying to your broker when your position gets auto-liquated.


The phrase can also refer to a long-running trade that was profitably exited by the use of a trailing stop that is triggered after an abrupt pullback in price. If your Margin Level is at or below the Stop Out Level, the broker will close any or all of your open positions as quickly as possible in order to protect you from possibly incurring further losses. Learn how to trade forex in a fun and easy-to-understand format. 84% of retail investor accounts lose money when trading CFDs with this provider.

The Stop Out Level is meant to prevent you from losing more money than you have deposited. When your position is closed, the Used Margin that was “locked up” will be released. Your broker’s customer support team will probably NOT be able to help you aside from lending an ear while you weep loudly over the phone.

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Once the liquidation process has started, it is usually not possible to stop it since the process is automated. Determine significant support and resistance levels with the help of pivot points.

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stop out ​Definitions and Synonyms

The risk is that the whipsaw never occurs and the stock continues to move in the wrong direction. When they do finally exit the trade, the loss is worse than it might have been. In many ways, mental stops negate the entire purpose of using stop-loss points to mitigate risks since there’s no guarantee that the trader will remember or choose to actually sell shares.

Sounds like you love gambling so here’s an example of how the liquidation process would work if you had two or more positions open. Find the approximate amount of currency units to buy or sell so you can control your maximum risk per position. Exinity Limited is a member of Financial Commission, an international organization engaged in a resolution of disputes within the financial services industry in the Forex market. A stop order is an order type that can be used to limit losses as well as enter the market on a potential breakout. A stop-limit order is a conditional trade over a set time frame that combines features of stop with those of a limit order and is used to mitigate risk. BUT this is a popular approach and will at least give you a good idea of what kind of horror you might experience if you’re trading too BIG.

Each broker has its own specific liquidation process so be sure to check with yours. At this point, your position will be automatically closed(“liquidated”). Our gain and loss percentage calculator quickly tells you the percentage of your account balance that you have won or lost. Please enable JavaScript or switch to a supported browser to continue using You can see a list of supported browsers in our Help Center.

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By contrast, the state of being stopped out in securities markets is the direct result of the trader’s instructions having been followed. Suppose a trader buys 100 shares of stock at $100 per share and sets a stop-loss at $98 and a take-profit order at $102 ahead of a key earnings announcement. Suppose also that the earnings announcement happened during the trading day .

Securities market

Swing trading is an attempt to capture gains in an asset over a few days to several weeks. Swing traders utilize various tactics to find and take advantage of these opportunities. Traders are often stopped out when a market whipsaws, or moves sharply in one direction before returning to its original state. For example, a stock may whipsaw during an earnings announcement or other market moving event. There have been suggestions, in this second case, that market fluctuations have led to an excessive number of traders being stopped out.

After the earnings announcement, imagine the stock moves sharply lower to $95, and then rapidly rises in price back up to $103. Unfortunately for the trader, they would have would have been stopped out. Another technique is to use use options or other forms of hedging as an alternative to stop-loss orders. By using put options, for example, traders can hedge a stock position without actually selling the shares. A trader who owns 100 shares of a stock may purchase a put option on those shares with a strike price equal to the desired stop-loss point. If the stock were to whipsaw, the option trade would protect against downside without prematurely selling the shares.

If the trader, then, doesn’t start closing his least-profitable positions and experiences further losses that bring him down to 20%, FXTM will start closing these positions for him because of Stop Out. Stop out is an expression with two different meanings in different financial markets. The first is to use a mental stop, meaning that they keep a stop-loss price in mind rather than placing an actual order. By doing so, the trader can avoid being stopped out during a whipsaw.

Though earnings announcements typically happen before or after trading hours, this same scenario can play out over the course of two separate trading days. Many traders try to avoid being stopped out unnecessarily by employing one or more techniques. Traders have a couple different options to avoid getting stopped out, but none is without risk. You may have heard about both types of stop outs from investment guides or in discussions about how to minimise losses and maximise profits. Traders can be stopped-out while being either long or short in any type of security where stop-loss orders can be placed.

Stopped out is a phrase that usually means traders had to exit their position with a loss on a stop-loss order. If you had multiple positions open, the broker usually closes the least profitable position first. The value of shares and ETFs bought through a share dealing account can fall as well as rise, which could mean getting back less than you originally put in. The foreign currency market developed in parallel to the securities markets, so it is unsurprising that the same expression should have been used, very differently, by those trading in one or the other. If the share price made an orderly drop to $95, stepping down a bit at a time along the way, the trader would have been stopped out at $98 due to the stop-loss order they had placed. However, even if the price dropped all at once directly to $95, the trader would have not only been stopped out, but would have had to take a price of $95, not $98.

Now that you know what Margin Call and Free Margin are, it’s time to find out what Stop Out means. This is the point at which the broker starts closing the least-profitable open positions, in order to free up more margin. Every broker sets their own Stop Out level, and at FXTM you can see exactly at what point Stop Out would be triggered for each account in the Trading Accounts Overview section of the website. This account has a Stop Out level of 20% and a Margin Call of %40%, which means that once a trader reaches 40% of his Margin Level, he will receive a Margin Call.

Such orders, or their equivalent manual technique, are often used by day traders in the equity, options and index futures markets. In forex trading, a Stop Out Level is when your Margin Level falls to a specific percentage (%) level in which one or all of your open positions are closed automatically (“liquidated”) by your broker. Most of the time that exit will come by the use of a stop-loss order. This order is an effective tool for limiting potential losses, even if they are unexpectedly executed during times of high volatility. Often times, the term stopped out is used in a negative connotation when a trader’s position is unexpectedly sold, because it implies the trader made a loss. We introduce people to the world of trading currencies, both fiat and crypto, through our non-drowsy educational content and tools.

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