If you receive a margin call, but the losses on your open positions continue to increase, you may have a stop out. Stop out is the closing of your positions by the broker.
Stop out allows you to protect you from losing even more money, which may exceed the size of your deposit. That is, you will never lose more funds than you have on your deposit.
For example, when the stop out is set by the broker at 20%, the system automatically closes your losing trades if the free margin level reaches 20%. The most unprofitable positions are liquidated first. Typically, after closing one losing position, the free margin increases. However, if your losses on other positions continue to increase and the margin level drops back to 20%, the system will automatically close the next most unprofitable trade.
Why does the broker close your positions when the free margin reaches the stop out level? The broker cannot allow you to lose more than the money you deposited. The market may go against your positions for a long time, and you will lose all the money you have on deposit, and then have a negative balance if no one covers your losses. If you had a negative balance, the broker would have to pay your debt to the liquidity provider. Therefore, brokers close unprofitable positions of traders if the size of the free margin reaches the stop out level in order to protect themselves and the trader from a negative balance.
Position canceled by broker
Let's imagine a situation where you have open positions and a certain number of limit or stop orders. What happens when the market reaches where these orders are placed and you do not have enough funds in your trading account to provide margin on these positions? In this case, pending orders are not launched and are automatically canceled by the broker. You will see “Canceled by Dealer” in your terminal.
Some traders don't know what “cancelled by dealer” means and start complaining when they see that their pending order hasn't been filled. They believe that the broker failed to meet its obligations because their liquidity providers did not have enough funds or because their broker is bad. But the truth may be that the pending orders were not executed due to insufficient free margin in their trading account.
You must have free funds on deposit so that you can open new positions. Focus on the free margin level that you see in your terminal. If it does not fall below 120%, you still have the opportunity to open new trades. Of course, different brokers have different margin requirements, but generally you need at least 120% free margin to be able to enter the market.
