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Stop-out at 50% margin level, worked on a $2,000 account

In the EU and UK, retail CFD accounts have a margin close-out rule: if your equity falls to 50% of the margin required for your open positions, the broker must start closing them. Here's what that looks like with real numbers.

Account balance $2,000. EURUSD at 1.0800, leverage 30:1.

Buy 0.5 lots. Notional is 50,000 euros, $54,000. Margin is $54,000 divided by 30, so $1,800.

Margin level is equity divided by margin, times 100. At the start it's 2,000 divided by 1,800, about 111%.

Close-out happens at 50%, so when equity reaches $900. That's a loss of $1,100. At 0.5 lots a pip is $5, so the close-out comes after a 220 pip move against you.

That sounds far away, but notice what happened: a $2,000 account with one position at nearly full margin. If the trade had a 20 pip stop, the risk would be $100, or 5% of the account. Already high.

Now say you added a second position, 0.5 lots of GBPUSD. Margin doubles to around $3,900 and the margin level starts below 100%, so you can't even open it. Most platforms would reject the order.

The lesson isn't really about the close-out. If you're anywhere near it, your position sizes are far too large for your stop distances. With sensible risk, like 1% on a 10 pip stop, the margin used is a small fraction of the account and the close-out level never comes into play.

Good worked example. It also shows why opening several positions on a small account is risky. If a second position of 0.5 lots is added, the margin doubles and the margin level falls to about 55 percent, very close to close-out. A small move against both positions could trigger it. Keeping the margin level well above 200 percent, for example, gives room for normal moves. For traders outside the EU and UK, the close-out level may be lower, but the principle is the same.

Outside the EU and UK, close-out levels vary. Some offshore brokers set stop-out at 20% or even lower, which lets losses run further before positions are closed. That can sound like more room, but it's really more rope. The lower the stop-out level, the more of the account can be lost before the broker steps in. A higher stop-out level is protecting you, even if it doesn't feel like it. A position closed at a stop-out also tends to be closed at a poor price, since stop-outs happen when the market is moving fast against you. That makes the actual loss larger than the simple margin calculation suggests.

Close-out order matters if you have several positions. Most brokers close the position with the largest loss first, then recalculate. That means your best position might survive while the worst one is closed, or the other way round depending on the broker. If you hold several trades at once, check the close-out policy in the terms, because it decides what you're left with. Some brokers close all positions at once at stop-out, while others close them one at a time. The second approach means some positions might survive. Either way, being close to stop-out means the account is no longer under your control.

Margin level changes with price even on positions in profit, because margin itself depends on the current price. On EURUSD rising from 1.08 to 1.10, margin for 0.5 lots goes from $1,800 to $1,833. Small, but on large positions or volatile pairs it shifts the close-out level. It's another reason not to run near the limits. It's a small effect, but it shows that margin isn't a fixed number. On gold or volatile crosses, a 5% price move changes margin by 5%, which can bring a stretched account closer to stop-out even while the position is winning. The fix is the same: keep margin use low enough that these changes don't matter.

A practical rule: keep margin used under 10% of equity for scalping. At 30:1 leverage that allows a notional of three times your equity. On a $2,000 account that's about 0.055 lots of EURUSD at full use of the rule, which makes it obvious that small accounts can't take large positions without big risk, regardless of leverage. Most small account traders use more than that, which is why they're exposed to margin problems. Starting with micro lots and building up the account is slower but keeps margin use sensible. It also means each trade's risk stays in proportion to the account, which matters more than leverage.

A trader running six positions with fairly high leverage sees a news spike come in. The price moves forty pips against the group in a couple of seconds. The account balance is fine and the margin level looks healthy a moment before. A moment later, the platform shows a margin call and begins closing positions automatically.

What most people miss is that the stop-out doesn't wait for a good price. The platform closes the largest losing position first, at market, during the exact moment when spreads are widest and liquidity is thinnest. Fills come in worse than the stops would have been, and in a fast move the closing process itself can lag.

After the dust settles, the price retraces. The positions that were closed would have recovered. The account is smaller, and the market did nothing unusual. It just did something quickly.

Stop-out levels vary by broker, from around 20 percent up to 50 percent or more. The order of closing varies too. Some brokers close the biggest loser, others the oldest, others everything at once.

The margin level that feels safe on a quiet chart isn't the one that matters during a spike. What matters is how much margin remains after forty pips of adverse movement across every open position at the same time.

That calculation is simple to do and rarely done.

What's the stop-out policy at the current broker, and has it ever been tested live?