If you are new to the Forex market, you should first learn the basic vocabulary of forex trading, as this will help you comprehend trading better. Today, we would like to introduce you to an interesting term: “Stop out.”
What Is a Stop Out?
Stop out or stop out Level has the same meaning as margin call level.It happens when the margin Level falls below the set level of the broker. Before the stop out is reached, the broker will send a margin call to warn the trader, but only if the order has not been closed. Portfolio will enter the stop out range provided by the broker to automatically close all orders. As a result, all of the money in our portfolio will be gone.
However, the broker with whom you create an account determines whether or not a stop out occurs. This is because each broker has a different stop out percentage. For instance, a broker with a stop out of 10% will close all pending orders if the margin level falls below 10%. This indicates that the whole money in the portfolio has been spent on trading.
The Ways to Avoid a Stop Out
You must be careful not to allow the margin Level to go below the broker-specified stop out. When the money in a portfolio falls below the broker's limit, a margin call is often issued as a warning that the portfolio is in the range. In fact, the most basic techniques of prevention are as follows:
1. Close Orders That Will Result in a Large Loss.
You just need to examine whether holdings in your portfolio can result in portfolio wiping out. The order should then be closed to avoid a stop out. This could be a simple strategy, but our thoughts and hearts continue to believe that orders can be profitable. Consequently, the best way to avoid liquidation is to close the position.
2. Deposit Money in the Port.
Margin call is a notice to the broker that extra margin is needed before a stop out occurs.
You must add sufficient money to the port so that the margin level is higher than the broker-specified stop out. In this method, you are able to avoid wiping out of the portfolio.
Stop Out is seen as a highly hazardous phase for the port. If you don't plan your protection effectively during margin call, it will result in a stop out instantly.
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