Margin call and Stop out - what's the difference?

In the trading conditions of each company that provides the opportunity to trade on , whether it is broker or DCThere are such concepts as Margin call and Stop out levels. At first glance, it seems that they are synonyms, but there is a difference in them. Let's take a closer look.

The concept of Margin Call in the Russian language is very firmly tied to the position liquidation procedure, although this is not quite correct. The procedure of position liquidation in case of margin shortage is called just the following Stop Out or Close Outwhile Margin Call historically - is a call from a broker who wishes to notify a client that a liquidation level is approaching, to determine the liquidation order, should it occur, and to give the client an opportunity to fund the account.

Since the market uses very high leverage by traders (vs. stock marketwhere the concept came from Margin Call), the probability that the client's deposit will reach zero before the client has time to replenish it is very high, so such calls to clients are not usually practiced by brokers, which is always reflected in contracts - it is usually indicated that the broker will not make any margin requests and warnings, but will simply close trades at the first available price when the Equity/Margin ratio reaches a certain level.

Approaching Stop Out level can be tracked by the value of the "Level" parameter in the "Trading" tab of the MetaTrader 4 Client Terminal. This parameter represents the percentage ratio of the weighted value of your assets (Equity) and collateral (Margin). If the broker specifies 30% as the position liquidation threshold, the trades will be liquidated immediately after the "Level" parameter reaches any value below 30.

To summarize

So, Margin call is a telephone or other message from a dealer to a customer that there are insufficient funds on his deposit to continue to maintain the accumulated uncovered losing positions. It is assumed that the client can, if desired, deposit additional funds into the account to continue waiting for the market to reverse.

Stop out - is the level of loss as a percentage of the required margin, agreed upon by the dealer or broker, upon reaching which there is an automatic forced closing of positions.

Most often, these two characteristics are on the same level in the brokers which is why they seem synonymous to many people.