In financial market trading, risk management is of utmost importance. Trendo Broker uses margin call and stop-out levels to protect traders' capital from severe losses, and by implementing automatic mechanisms, it prevents account balances from going negative.
In Trendo Broker, a margin call occurs when the losses from open positions reach a point where the account’s margin level decreases to 100%. In this situation, the trader can no longer open new positions, but the current open positions remain active. At this stage, the user can increase the account balance or close some of the open positions to raise the margin level and prevent reaching the stop-out level.
A stop-out is triggered when the account’s margin level drops to 70%. In this case, the broker automatically closes the positions with the most significant losses to prevent the account balance from going negative.
Example:
Assume that your account balance is $1,000, and you have a losing position. If the loss from this position reaches $700 (i.e., 70% of the account balance), the margin level will decrease to 70%, and the stop-out will be triggered. In this case, the broker will automatically close the losing position to prevent further reduction in the account balance.
Effect of Leverage on Stop Out: Higher leverage means a lower margin requirement to open trades, but the risk increases. When using high leverage, the likelihood of reaching the stop-out level increases.
Hedging Positions: In hedging (opening both buy and sell positions on the same symbol), if one position is closed, the other will exit the hedge and may result in a stop-out.