Stop Out is a term used in the context of margin trading. It refers to the automatic liquidation of a trader's open positions by their broker, when the value of their margin account falls below a certain level, called the stop out level. The stop out level is set by the broker and is typically a percentage of the minimum margin requirement.When a trader's account falls below the stop out level, the broker will close out the trader's open positions to prevent further losses and to protect themselves from the risk of the trader defaulting on their margin loan. The goal of the stop out level is to prevent traders from incurring large losses and to limit the risk of default.It's important to note that the stop out is different from margin call, which is a warning given by the broker to the trader when the account equity falls below a certain level, usually the maintenance margin requirement, and the trader is required to deposit additional funds or close some of the positions to bring the account back to the minimum margin requirement.In summary, the stop out level is an automatic action taken by the broker to protect themselves and traders from incurring large losses, while margin call is a warning given to traders to take action to bring the account back to the minimum margin requirement.
