What does “Stop Out” mean and how can it be avoided?

A Stop Out occurs when your account equity falls to a certain percentage of your used margin. At that point, the trading system will automatically start closing your losing positions to protect your account from further losses.

The exact Stop Out level depends on your account type:

• Standard Accounts → Stop Out at 30%

• Boost Accounts → Stop Out at 80%

What is a Stop Out?

A Stop Out is triggered when your account equity falls below the required percentage of your used margin.

When this occurs, the system will automatically close your most loss-making positions to stop further losses, protecting the rest of your funds.

Example of a Stop Out on a standard account

Let's suppose that you have a balance of $1,000 in your account. And you have opened a trade with a margin of $100.

Now, let's assume that the market moves against you and you have an unrealized loss of $500. Therefore, your total account equity is now $500 (this includes the $100 margin you have contributed to the trade).

In this case:

• Used margin = $100 (the amount of margin used for the trade)

• Capital = $500 (your total funds in the account if you close the trade)

• Margin level = 500% ($500/$100)

Now, to find out when the Stop Out will be triggered, we calculate 30% of your used margin:

30% of $100 (your used margin) = $30

This means that if your equity falls to $30 or less (total loss = $970), a Stop Out will occur. The system will start closing your positions to prevent further losses.

Example of a Stop Out on a Boost account

• Account balance: $1,000

• Open trade margin: $100

The Stop Out level here is 80% of the margin:

• 80% of $100 = $80

This means that if your equity falls to $80 or less, a Stop Out will occur and the system will close out losing positions.

Since the stop out level is higher (80% vs 30%), there is less room for reduction in a Boost account. It is important to manage trades more carefully to avoid premature closing of positions.

How to actively prevent a stop out:

1. Monitor your margin regularly: Keep an eye on your margin level and don't let it drop too low. You can view your margin level on your LBX terminal to stay informed of any risks.

2. Set stop-loss orders: A stop-loss helps limit losses if the market moves against you. Always set a reasonable stop-loss level when entering trades.

3. Increase your account balance: To support your open positions, deposit more funds if you notice your margin is decreasing, thus avoiding a possible stop out.

4. Use appropriate leverage: While leverage can amplify profits, it can also increase the risk of a stop out. Be careful not to over-leverage and ensure you can handle any market fluctuations.

5. Diversify your positions: Avoid investing all your funds in a single trade. Diversifying your positions can reduce overall risk and prevent a stop out from affecting all your trades at once.

Additional tips for managing risk:

• Consider placing smaller trades to manage your margin more effectively.

• Monitor market volatility, as sudden price movements can put pressure on your margin.

By following these strategies and carefully managing your margin, you can minimize the risk of a Stop Out and protect your account.