RoboForex is a well-established brokerage firm known for its wide range of trading services and tools. One of the crucial aspects of trading with RoboForex, or any other broker for that matter, is understanding the concept of the “stop out level.”
Best Forex Brokers Ranking
| Rank | Broker | Review | Open Account | Bonus | Platform | Minimum Deposit | ECN |
|---|---|---|---|---|---|---|---|
| 1 | Exness |  | Open Exness account | 16$/lot | MT4, MT5, Exness, ... | 1$ | 10$ |
| 2 | IC Markets | | Open IC Markets account | - | MT4, MT5, cTrader | 200$ | 200$ |
| 3 | XM | | Open XM account | 30$ | MT4, MT5 | 5$ | - |
| 4 | XTB | | Open XTB account | 2000$ | MT4, xStation 5 | 1$ | 1$ |
| 5 | FBS | | Open FBS account | 140$ | MT4, MT5, FBS Trader | 1$ | 1000$ |
What is RoboForex?
Before diving into the details of the stop out level, let’s briefly introduce RoboForex for those who may be new to this broker. RoboForex is an international financial broker providing online trading services in various financial markets, including Forex, stocks, cryptocurrencies, and more. The company was founded in 2009 and has since gained a reputation for its innovative trading solutions, competitive pricing, and a user-friendly trading environment.
RoboForex offers multiple account types, trading platforms, and a wide range of trading instruments, making it a popular choice for both novice and experienced traders. However, understanding and managing the stop out level is essential for every trader, regardless of their experience level.
What is the Stop Out Level?
The stop out level is a crucial risk management tool used by RoboForex to protect traders from excessive losses. In essence, it represents the minimum account equity required to keep a trading position open. When your account’s equity falls below this level, RoboForex will automatically close your open positions to prevent further losses, a process known as a “margin call.”
In other words, the stop out level serves as a safety net to ensure that traders do not lose more money than they have deposited in their trading accounts. This mechanism helps safeguard both the trader’s capital and the broker’s interests.
How Does the Stop Out Level Work?
Understanding how the stop out level works is crucial for every trader. To explain it clearly, let’s break down the key components:
- Account Equity: Account equity is the total value of your trading account, which includes your initial deposit, open profits, and losses. It’s calculated by adding or subtracting the profits and losses from your trading positions to your initial deposit.
- Margin Level: The margin level is the ratio of your account equity to the margin used for your open positions. It is expressed as a percentage and is calculated using the following formula: Margin Level = (Account Equity / Used Margin) x 100 If your margin level falls to 100% or lower, your account is at risk of a margin call and potential stop out.
- Used Margin: The used margin represents the portion of your account equity that is “locked” by your open positions as collateral. It’s essential to keep an eye on your used margin to avoid reaching the stop out level.
- Stop Out Level: The stop out level is a specific percentage at which RoboForex will automatically close your open positions. It is typically set at a level that ensures a trader’s losses do not exceed their initial deposit.
RoboForex’s stop out level is usually set at 20%, which means that when your margin level drops to 20% or lower, your open positions will be closed by the system. This level is relatively low, ensuring that traders have a safety net to protect their capital.
Significance of the Stop Out Level
The stop out level plays a vital role in the world of online trading, and understanding its significance is crucial for every trader. Here are some key reasons why the stop out level is important:
- Risk Management: The stop out level acts as a safety mechanism to prevent traders from losing more money than they can afford. It helps traders maintain control over their risk exposure.
- Broker’s Security: It also serves the interests of the broker, as it ensures that traders can cover their losses. This is especially important in volatile markets, where price fluctuations can be significant.
- Preventing Negative Balances: The stop out level prevents traders from accumulating negative balances. In some cases, without a stop out level, traders could potentially owe the broker money, which could lead to legal issues.
- Encouraging Responsible Trading: Traders are encouraged to manage their positions carefully and use risk management tools like stop-loss orders to avoid reaching the stop out level.
- Market Volatility: In highly volatile markets, the chances of a sharp price movement against your open positions are higher. The stop out level acts as a safety buffer during such market conditions.
How to Calculate the Stop Out Level
To calculate the stop out level for your RoboForex trading account, you can follow these simple steps:
- Determine your initial account equity (the total amount of funds you deposited).
- Calculate your used margin, which represents the collateral locked by your open positions.
- Use the formula: Stop Out Level = (Used Margin / Account Equity) x 100 If the result of this calculation falls below 20%, you are at risk of reaching the stop out level.
- It’s essential to monitor your margin level and used margin regularly to avoid unexpected stop outs. Traders can track these values in their trading platforms, ensuring they have full control over their positions.
Risk Management Strategies to Avoid the Stop Out
Reaching the stop out level can be a stressful experience for traders, as it means their positions will be automatically closed, and they may incur significant losses. To avoid this situation, here are some effective risk management strategies:
- Set Stop-Loss Orders: Utilize stop-loss orders to limit potential losses on each trade. This ensures that you have a predefined exit point in case the market moves against your position.
- Diversify Your Portfolio: Avoid concentrating all your capital in a single asset or trade. Diversification can help spread the risk across different instruments.
- Manage Leverage: Be cautious when using leverage, as it can amplify both profits and losses. Lower leverage can reduce the risk of reaching the stop out level.
- Monitor the Markets: Stay informed about market news and events that may impact your open positions. Sudden developments can lead to significant price movements.
- Regularly Review Your Positions: Periodically review and adjust your trading positions to ensure they align with your risk tolerance and overall trading strategy.
- Use Risk-Reward Ratios: Determine a risk-reward ratio for your trades. This helps you evaluate the potential risk against the expected reward before entering a position.
By implementing these risk management strategies, you can reduce the likelihood of reaching the stop out level and protect your trading capital.
RoboForex Stop Out Level in Different Account Types
RoboForex offers various account types, each with its own features, conditions, and stop out levels. It’s essential for traders to understand the differences between these account types to choose the one that best suits their trading style and risk tolerance. Here are some of the commonly offered RoboForex account types and their associated stop out levels:
- Pro-Standard Account: This account type is designed for experienced traders and offers a stop out level of 20%, which is the standard for most RoboForex accounts.
- ECN Accounts: RoboForex’s ECN accounts offer a stop out level of 60%. These accounts are known for their tight spreads and direct market access.
- Prime Account: The Prime account has a stop out level of 60% and is designed for traders who require a higher level of service and market depth.
- R Trader Account: This account type, which is primarily used for trading stocks, has a stop out level of 40%.
These account types cater to a wide range of trading preferences, and the choice of account type can significantly impact your trading experience and risk management.
Conclusion
The RoboForex stop out level is a critical aspect of risk management for traders. It ensures that traders do not lose more money than they can afford and protects the interests of the broker. By understanding how the stop out level works, its significance, and implementing effective risk management strategies, traders can navigate the financial markets with confidence.
Remember that the stop out level is just one piece of the puzzle in successful trading. To achieve long-term success, traders should combine their understanding of risk management with sound trading strategies, market analysis, and discipline. With the right approach, trading with RoboForex can be a rewarding experience, and the stop out level will serve as a valuable tool to protect your capital and minimize potential losses.
