The Margin Stop Out level is where your position, or positions will be automatically closed when your Margin Level reaches or falls below the Stop Out level. This is a protective measure that helps traders, and ThinkMarkets, to manage their risk, and to prevent further losses. The Stop Out level is set to 50% for all Account types.
This means if your account equity reaches 50% or below the margin required to maintain your open trades, then your positions are at risk of being closed immediately at the market price.
The calculation for the Stop Out percentage level is current account equity (account balance +/- any running profits and losses) divided by the margin requirement.
Let’s look at an example on a Standard Account, imagine if your account balance was $1,000 and you opened a trade on EURUSD that required $500 in initial margin. If the market went against you and your losses totalled $750 ($250 remaining account equity) or more, then you would be at risk of being closed out automatically ($250 equity/$500 margin requirement = 50%).
Account balance $1,000
Running loss -$750
Total equity (balance +/- running profits or losses) $250
Margin requirement $500
Margin level 50%
Traders can monitor their Margin Level within the trading platforms to ensure it remains above the Margin Stop Out level.