Stop out refers to the percentage of margin set by the broker to protect against large risks. When the account margin percentage falls below 50%, HotTrades will instantly close the deal. To avoid a negative balance on the account, the broker will terminate the orders with the highest minus value first, followed by the order with the second largest minus value, and so on.
Example of stop out:
In one case, a client has $100 in his account, he opens three EUR/USD orders where each order is 0.1 lot.
The client places a pending order in the following order:
1.Order A 0.1 lot
2.Order B 0.1 lot
3.Order C 0.1 lot
Let’s say order A has a value of minus $30, order B has a value of minus $25, and order C is minus $15.
When the margin percentage level drops to 50%, the broker will automatically close order A, if the margin percentage level is still below or equal to 50%, the broker will close orders B, and then C. This will continue until the margin percentage level is at a value of 50% or more.
Clients can calculate appropriate lot sizes for their accounts.
The following formula can be used by the client to calculate the lot value depending on the volume of funds in the account:
Margin = “Equity” / “Margin%” x 100
LOT = “Margin x Leverage level” / “Contract size x Price of currency pair x Unit conversion in dollars”
* The above formula is for trading accounts denominated in USD and trades are made on currency pairs followed by USD, for example EUR/USD, GBP/USD, AUD/USD, XAU/USD and more.
* For products followed by USD, the dollar conversion value unit is always 1.
If a client has $1,000 USD in his trading account, and then wants the margin percentage to be above the 1500% level, the client can choose his leverage level to be 500:1 and only trade on the EUR/USD currency pair.
The lot value to be applied to the client will be:
Total amount to be opened = “66.67 x 500” / “100,000 x 1.20000 x 1” = 0.27 lots
* Equity in this case is equal to 1,000 because the account has not placed an order.
* The calculation example above applies only to currency pairs ending with USD.
Trade anywhere, any time and keep everything under constant control.