What Is a Stop-Out Level in Forex? How It Works and What You Need to Know
BY TIOmarkets
|March 24, 2026A stop-out level is the point at which a broker automatically begins closing your open positions because your account equity has fallen too low relative to the margin required to keep those positions open. It is a risk management mechanism that protects both the trader and the broker from an account falling into a negative balance.
Understanding how stop-outs work, how they relate to margin calls, and what triggers them is essential for anyone trading with leverage.
What Is Margin in Forex Trading?
Before explaining the stop-out level, it helps to understand how margin works.
When you open a leveraged position, the broker sets aside a portion of your account funds as collateral. This is your required margin. It is not a fee: it is a deposit held against the open position and released when the trade is closed.
As the market moves against your position, your account equity falls. Equity is the current value of your account balance including unrealised profits or losses on open positions. As equity declines, the ratio of your equity to your required margin also declines. This ratio is expressed as a margin level percentage and is calculated by dividing equity by required margin and multiplying by one hundred.
For example, if your account has equity of $1,000 and your required margin across all open positions is $500, your margin level is 200%. If the market moves against you and your equity falls to $500 while required margin remains $500, your margin level is 100%. If equity falls further to $150, your margin level is 30%.
The margin level percentage is the figure brokers use to trigger both margin calls and stop-outs.
What Is a Margin Call?
A margin call is a warning that your margin level has fallen to a defined threshold, indicating that your account is under stress and that your open positions are at risk of being closed if losses continue.
At the margin call level, the broker notifies you that your equity has fallen to the point where available margin is becoming critically low. This is typically a prompt to deposit additional funds, reduce your position size, or close some positions manually to bring your margin level back up.
A margin call does not automatically close your positions. It is a warning, not an execution event.
What Is the Stop-Out Level?
The stop-out level is the margin level percentage at which the broker begins closing your open positions automatically, without requiring any action from you. It is a lower threshold than the margin call level.
When your margin level falls to the stop-out level, the broker's system begins liquidating positions, typically starting with the largest losing position first, until the margin level rises back above the stop-out threshold. The process continues until sufficient positions have been closed to bring the account back within acceptable margin boundaries, or until all positions have been closed.
The stop-out is an automated process. It does not require the broker to contact you first, and it does not require your approval. By the time stop-out is triggered, the account has already passed through the margin call warning level.
Margin Call vs Stop-Out: The Key Difference
Margin call and stop-out are related but distinct events.
The margin call level is the warning threshold. When your margin level falls to this point, you are alerted that your account needs attention. You retain control over your positions and can respond by adding funds or reducing exposure.
The stop-out level is the execution threshold. When your margin level falls to this point, the broker closes positions automatically. You no longer have the opportunity to respond before execution begins.
The gap between the two levels defines the window of time and price movement within which a trader can act after receiving a margin call before automatic liquidation begins. A narrow gap between margin call and stop-out levels gives less time to respond. A wider gap provides more opportunity to take action after the warning.
How Stop-Out Is Calculated in Practice
Stop-out triggers based on margin level, which is a ratio rather than a fixed dollar amount. This means the actual price movement required to trigger a stop-out depends on your position size, the leverage applied, and how much free margin is in your account when the position is opened.
A larger position relative to account balance reaches the stop-out level with a smaller adverse price move. A smaller position with more free margin in the account requires a larger adverse move to reach the same threshold.
Consider a simplified example. A trader with a $1,000 account opens a position requiring $500 in margin. At a 30% stop-out level, automatic liquidation begins when equity falls to $150 (30% of $500). The trader has $850 of equity buffer before stop-out, which corresponds to the account absorbing an $850 loss on the open position before automated closure begins.
If the same trader had opened a position requiring $900 in margin, the stop-out threshold would be $270. With only $730 of equity buffer before stop-out, a smaller adverse price move would trigger automatic liquidation.
This illustrates why position sizing relative to account balance is a core element of risk management when trading with leverage.
What Happens During a Stop-Out?
When the stop-out level is reached, the broker's system begins closing positions automatically. The order in which positions are closed varies by broker, but the most common approach is to close the largest losing position first, as this frees up the most margin relative to required margin and has the best chance of bringing the margin level back above the stop-out threshold with a single closure.
If closing one position is sufficient to bring the margin level above the stop-out level, the process stops. If it is not sufficient, the next position is closed, and so on until the margin level recovers or all positions have been liquidated.
Because stop-out execution occurs at the best available market price, the actual closing price may differ from the price at which the stop-out was triggered, particularly during fast-moving market conditions. This is especially relevant during major news events or periods of low liquidity when prices can move rapidly.
Negative Balance Protection
Stop-out mechanisms are designed to prevent accounts from going into a negative balance by closing positions before losses exceed the deposited funds. However, in extreme market conditions, such as very fast price movements or significant price gaps between sessions, it is possible for an account to pass through the stop-out level before positions can be closed at an acceptable price, resulting in a balance below zero.
Negative balance protection is a feature offered by some brokers that limits the client's loss to the funds deposited, ensuring that the account cannot go below zero regardless of market conditions.
Stop-Out Levels at TIOmarkets
TIOmarkets operates the tiomarkets.com domain under TIO Markets Ltd, authorised by the Mwali International Services Authority (MISA) in the Comoros Union.
At TIOmarkets, the margin call level is set at 100% across all account types. This means a margin call is triggered when your equity equals 100% of your required margin.
The stop-out level is set at 30% across all account types, with one exception. On the Standard account when operating at 1:2000 leverage, the stop-out level is 40%.
These levels apply to the Standard, Raw, VIP Black, and Nano accounts. They are subject to change depending on market conditions and applicable regulatory requirements.
To summarise the levels in plain terms: if your equity falls to 100% of your required margin, you receive a margin call. If your equity then continues to fall to 30% of your required margin (or 40% on Standard at 1:2000), your positions begin to be closed automatically.
Negative balance protection is confirmed at TIOmarkets.
A Standard account is created automatically on registration. Raw and VIP Black accounts are opened separately via the client area. All accounts are available on MT4 and MT5 and support hedging. A swap-free Islamic account is available: contact TIOmarkets for eligibility and instrument details. Copy trading is also available, allowing followers to copy strategy providers in real time across MT4 and MT5.
How to Avoid Stop-Out
Avoiding stop-out comes down to managing the relationship between position size, leverage, and available account equity.
Using position sizes that leave adequate free margin in the account means adverse price movements have more room to develop before the margin level falls to critical thresholds. Trading with a small portion of account equity on any single position limits the damage from a single losing trade.
Setting stop loss orders on open positions defines the maximum loss on each trade and closes the position before it can contribute further to margin level deterioration. A stop loss order does not guarantee execution at exactly the specified level, particularly during fast-moving conditions, but it defines an intended exit point and limits the extent to which a single position can draw down the account.
Monitoring open positions and account margin levels during active trading sessions allows early action if conditions deteriorate. Rather than waiting for a margin call, reducing position size or closing positions when equity begins to fall gives more control over the outcome than waiting for automated liquidation.
Avoiding excessive leverage relative to account size is the single most effective long-term protection against stop-out. Leverage amplifies both gains and losses, and using the maximum available leverage on a full account balance leaves almost no buffer between the current margin level and the stop-out threshold.
FAQ
Risk disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Never deposit more than you are prepared to lose. Professional client’s losses can exceed their deposit. Please see our risk warning policy and seek independent professional advice if you do not fully understand. This information is not directed or intended for distribution to or use by residents of certain countries/jurisdictions including, but not limited to, USA & Countries included in the OFAC sanction list. The Company holds the right to alter the aforementioned list of countries at its own discretion.
TIOmarkets offers an exclusively execution-only service. The views expressed are for information purposes only. None of the content provided constitutes any form of investment advice. The comments are made available purely for educational and marketing purposes and do NOT constitute advice or investment recommendation (and should not be considered as such) and do not in any way constitute an invitation to acquire any financial instrument or product. TIOmarkets and its affiliates and consultants are not liable for any damages that may be caused by individual comments or statements by TIOmarkets analysis and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his/her investment decisions. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances, or needs. The content has not been prepared in accordance with any legal requirements for financial analysis and must, therefore, be viewed by the reader as marketing information. TIOmarkets prohibits duplication or publication without explicit approval.
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