What is stop out?

What it means

Brokers close positions at stop out to protect themselves from an account going negative. Typically the largest losing position is closed first, then the next, until the margin level recovers above the threshold. You do not choose which trades close or at what price.

Why it matters

The outcome is worse than the equivalent voluntary exit, and predictably so, because a stop out happens during the fastest and thinnest conditions — the same conditions that produced the drawdown. Slippage on forced liquidation is routinely much worse than normal.

What this changes in practice

Many jurisdictions require negative balance protection, which means the account can reach zero but not go below it. That is a genuine protection and it is also the last one — by the time it applies, the account is gone. The only real defence is sizing that makes the threshold unreachable, which is what a hard daily loss limit is for.