What is a Stop-Out and How Is It Calculated?
When trading with leverage, it’s crucial to understand how a stop-out works and why it matters. A stop-out is a risk management mechanism that protects your account from falling into a negative balance. It happens automatically when your margin level becomes too low to sustain your open positions.
How Stop-Out Works at Bullwaves
At Bullwaves, the stop-out level is set at 50% across all trading platforms. This means that when your margin level drops to or below 50% of the required margin, the system will start closing your open positions automatically, beginning with the one currently showing the largest loss.
This automated process is designed to protect your remaining equity and minimize further risk. It’s important to actively monitor your margin level, especially during volatile market conditions.
How to Calculate Your Margin Level
You can calculate your margin level using the following formula:
Margin Level = (Equity / Used Margin) × 100
For example, if your account equity is $1,000 and your used margin is $2,000, your margin level would be:
(1000 / 2000) × 100 = 50%
Since this is the 50% threshold, your trades would remain open. However, if it drops to 50% or lower, the stop-out will be triggered.