Stop-out

Stop-out is the point where the broker stops asking. Positions close automatically, server-side, at whatever price is available in that moment. ### What closes, and in what order Alpari's documentation describes stop-out as the broker closing the least-profitable open positions in order to free up margin, and notes that the stop-out "will firstly occur on the positions that carry the biggest loss". The ordering is deliberate, because dumping the biggest loser reclaims the most margin fastest. It also means the trade you were most emotionally invested in, the one you were certain would come back, is the first one killed, and it is realised at its worst point. ### Why the fill is usually terrible A stop-out is a market order fired into conditions that are already hostile. The same things that dragged your margin level down (a news release, thin liquidity, a session gap) are the things that widen spreads and produce slippage. A stop-out does not pick its moment. It inherits one. ### It is a starting line, not a floor This is the part that costs people everything: the stop-out level is where liquidation *begins*, not a guarantee of where you finish. When the Swiss National Bank abandoned its cap on the franc on 15 January 2015, price gapped so violently that liquidation could not happen anywhere near the usual thresholds. FXCM reported that clients were left with negative equity balances owed to the firm of approximately $225 million, and [Alpari UK entered insolvency](https://www.swissinfo.ch/eng/fxcm-faces-losses-as-swiss-shock-leaves-alpari-uk-insolvent/41219974), stating that the majority of its clients sustained losses that exceeded their account equity, with the shortfall passed on to the company. On those accounts the stop-out level was not a floor. It was only where the closing began. ESMA's product intervention measures, now carried into national rules across the EU, require negative balance protection on a per-account basis for retail clients, so a retail loss cannot exceed the money in the account. That is a regulatory backstop bolted on afterwards. It is not a market mechanism, and it does not exist under every regulator. ### The real lesson Everything above is downstream of a decision made much earlier. A stop-out is simply what a position-sizing failure looks like once it has finished playing out. Accounts that never come close to one are not lucky. They are sized so that a normal, expected run of losses does not get near the threshold.