To calculate the stop-out price, you need to determine:
The required margin for the trading instrument
The stop-out amount
- Maximum loss before stop-out
After identifying these values, you can apply the profit and loss calculation formula to determine the stop-out price.
Example:
The current account equity is 10,000 USD, with a leverage of 1:500.
Jay is holding 2 lots of XAUUSD (Gold) in a short position, with an entry price of 3,235.25.
At what price level would an increase in price trigger a stop-out?
Margin:
100 × 2 × 3,235.25 ÷ 500 = 1,294.10 USD
Stop-Out Amount (30%):
1,294.10 × 30% = 388.23 USD
Maximum loss before stop-out:
10,000 – 388.23 = 9,611.77 USD
Stop-Out Price Formula:
Entry Price + [(Losable Amount ÷ Lot Size) ÷ Contract Size]
3,235.25 + [(9,611.77 ÷ 2) ÷ 100] = 3,283.31 (XAUUSD)