What is A Stop Out Order? – Bex500 School

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In cryptocurrency futures or derivatives trading, you may hear about “stop out”. It is a signal given by the trading platform system to force close a position when a trader doesn’t have inadequate free equity (margin) to support the open trade.

Stop out also refers to automatically exiting a position when the margin ratio falls to a specific percentage level, for limiting potential losses. Stop out can protect traders from losing all balance in the trading account, if betting on the wrong market direction.

  • When will Stop Out be Triggered in Bex500?

In Bex500, when the maintenance margin is lower than 0.5%*Initial Position Value, the positions will be stopped out.

Maintenance Margin

A maintenance margin represents the amount of money currently in the trading account.

Maintenance Margin = Balance + Floating Profits/Losses

Stop Out Level

Stop out Level = 0.5 % * Initial Position Value

Calculation of Stop Out Price

For example, you deposited 1 BTC in trading account. Then, you opened a 1 BTC long position at the price of $8,000 with 100x leverage. And you just have this Single position open for 1 day.

It is clear that when your maintenance margin is lower than 0.005 BTC (0.5% * 1 BTC), the open position will be liquidated. So what price Bitcoin plunged to will trigger the Stop Out?

1 + [(X — $8,000)*1]/X — 0.001–0.0009 ≤ 0.005

X ≤ 4013.85

Note: X represents Stop Out Price. The fee for BTC/USD is 0.001 BTC and the 1-day interest is 0.0009 BTC.

When BTC reaches $4,013.85 or lower, your position will be liquidated.

Bex500 provides low Stop out Level so that your loss positions will not be liquidated easily. In addition, you have more chance to hold the position until the market reverses.

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