A stop out level in Forex is a specific point at which all of the active positions of a trader in the foreign exchange market are closed automatically by their broker, because of a decrease in their margin levels, meaning that they will not support the open positions.
If a trader fails to try to do what the broker suggests, and therefore the margin level goes below a particular point, the stop out level begins – it is usually at 50% stop out occurs. The broker then starts automatically closing the open positions (usually the foremost ineffective ones) – a process called stop out.
The stop out occurs when the existing positions are going against the traders, which means they are losing money and the available equity is slowly reducing. When the margin level gets to 50%, a broker will automatically start closing the positions until the previous level is restored.
A stop out may be a process of liquidating (closing) open positions automatically. This happens because the available equity on the balance is neither enough to maintain even the existing positions, nor to open the new ones.