A Stop Out is an automatic risk control mechanism that activates when a trader’s margin level falls to or below the broker’s predefined threshold.
At HYCM, the Stop Out level for our clients under FCA is 50%.
The margin level is calculated as:
Margin Level (%) = (Equity / Used Margin) × 100
When the margin level reaches 50% or lower, the system automatically begins closing open positions, starting with the most unprofitable position, in order to prevent further losses and protect the account from going into a negative balance.
Example:
Account Balance: $1,000
Used Margin: $500
Margin Level = (Equity / 500) × 100
If open losses reduce the account equity to $250, then:
Margin Level = (250 / 500) × 100 = 50%
At this point, the Stop Out mechanism is triggered, and the system will automatically close positions until the margin level rises above 50%.
How to Prevent Reaching Stop Out
To avoid triggering a Stop Out, traders should actively manage risk and margin exposure:
1. Use Stop Loss Orders
Always define maximum acceptable loss per trade.
2. Avoid Overleveraging
High leverage increases margin usage and accelerates margin level decline during adverse price movements.
3. Monitor Margin Level Regularly
Keep margin level comfortably above 50%. Many professional traders aim to maintain levels well above 100–200% to create a safety buffer.
4. Reduce Position Size
Smaller trade sizes require less margin and reduce exposure to market volatility.
5. Add Additional Funds
Depositing additional funds increases equity and improves margin level.
6. Close Losing Positions Early
Managing losses proactively can prevent automatic liquidation at unfavorable levels.