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    Thread: What is the diffrence between a Margin Call and a Stop Out?

    1. #1
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      Default What is the diffrence between a Margin Call and a Stop Out?

      Can anyone tell us what is the difference between a Margin Call and a Stop Out, or are they the same thing?
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    3. #2
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      I was hoping to have had many answers to this question but since there is none yet, here is my answer.

      Margin call and stop out are often confused one with the other. A lot of traders (not all), think that a margin call is the same thing as a stop out. Often they refer to Margin call as the fact that their account was emptied of all funds as the result of a bad trade. Actually, that was not a margin call, it was a stop out and depending on the stop out level of your broker, you can lose all your money as the result of a bad trade.

      So what is the MARGIN CALL and what is the STOP OUT.

      MARGIN CALL
      This is the warning that your broker gives to you to tell you that the totality of your open trades have fallen below the required percentage of the total allowed margin and you are being called to do one of three things viz (1) Close the very bad trades and leave open the not so bad trades (2) Close all trades at loss and wait for better opportunity with smaller equity or (3) Add more money to your trading account to increase your margin and stop the margin call alert.

      STOP OUT
      A stop out is when the broker totally closes your open trades that have gotten to the stop out level. The stop out level usually a percentage set by the broker and made known to traders and it is the level at which the broker cuts trades that have fallen below the required margin requirement. When a stop out occurs, the worse trades are closed off first and then the other trades are closed when they also hit the stop out level.

      THE DIFFERENCE.

      The Margin call is simply a warning (FLASHING RED) asking to deposit more funds or close the trades before they are stopped out, while a Stop out is a the actual closing of all open trades by the broker when they fall below the stipulate stop out level. So when next you lose all your money, it is not a margin call you but you got a stop out because you did not heed the margin call warning.
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      Thread closed as the contest has ended..
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