Contrary to the Margin Call broker, many traders dont even know the term Stop Out. This rarely used term is no less important than Margin Calls. If you have experienced a large loss in your trading, by a position suddenly lost and followed by lost funds, it is a Stop Out.
Most traders think that if the funds run out and the broker close the position, then what they experience is a Margin Call.
Then, What is the Difference Between Margin Call Broker and Stop Out？
Margin Call broker is a warning system from the broker if the equity you have is not sufficient to the margin needed to hold the position. Whereas Stop Out is a forced closing of a trading position because equity funds have decreased and do not meet the margin needed to hold the position. Thus, the forced closure that you experience is not called the Margin Call broker, but Stop Out.
Margin Call broker and Stop Out arises from the many interests of the public to participate directly in financial market trading. To carry out this trade, you need large capital because the minimum transaction base reaches thousands and even hundreds of thousands of US Dollars in each transaction. Then, the brokers deal with margin trading.
Margin trading is a solution from a broker. Thus, an investor with small capital can still participate and take advantage of the financial market. The margin itself is a security deposit that we provide so that you can maintain your position.
So how do you know the values of the broker‘s Margin Call and Stop Out？ These values have been set by each broker you use in forex trading. There are various Margin Call broker values. You can see this value on the account specifications page on the broker’s website.
How to Avoid Margin Call Brokers？
Choose Leverage Wisely
Leverage is a double-edged sword for financial market participants. It can help us to get maximum profits only with capital that tends to be small. On the other hand, leverage can also kill us because it causes things like overtrading, overlapping, etc. In using high leverage, there are tricks and tips for getting high profits. However, beginners should use small leverage.
Good Money Management
Money Management is an important factor in protecting accounts from Margin Call brokers and Stop Outs. Because it can manage lots and the number of funds that are ready to be lost in one position. Besides, additional positions must also be calculated well in terms of Margin and capital endurance. Always remember that overlaps and overtrades have killed many traders accounts because they can invite broker Margin Calls faster.
Use Stop Loss, Acknowledge Error
Most traders are reluctant to use Stop Loss just because they expect the price to turn around and turn the current loss into a profit. The feeling of not wanting to admit mistakes in analyzing this is also often the cause of Margin Call brokers or Stop Outs on trading accounts.
To avoid this, make it a habit in yourself to always calculate the risk that can be obtained in each position. Besides, you should use a Stop Loss to prevent losses that swell and can not be dammed again. According to Investopedia, most investors can benefit from implementing a stop-loss order.
