Support staff for retail brokers know that one of the more troublesome conversations with customers is answering margin related stop out questions. Losing money is always frustrating, and for customers seeing their positions automatically closed when their margin balances drop below minimum requirements is never a comfortable feeling.
Part of the confusion also occurs when broker systems are programmed to only close certain types of positions such as the most unprofitable trades first, while leaving others opens.
For brokers, this can lead to conversations with angry customers of why they closed positions that ended out rebounding or were actually hedged with another trade.
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Providing a simplified solution to margin related automatic position closures, Spotware Systems has announced the release of the ‘Fair Stop Out’ feature on cTrader. Rather than being based on position profitability, the new feature bases its stop-outs on descending margin usage. As a result, trades using the largest margin are closed first. According to Spotware, by applying this method, they believe it extends the lifespan of existing positions as it focuses on freeing up available margin and isn’t based on P&L.
Commenting on this Alexander Strelnikov, Product Manager at Spotware Systems, stated that “cTrader’s new stop-out method protects trader margins and increases the lifespan of a trader’s balance.”
He explained further that the new stop-out algorithm “closes positions in descending order of margin used, so that as each position is closed, traders have a better chance at securing what they can from their remaining deals. Stop-outs are never a pleasant occurrence for the trader, but the least we can do is ensure they have maximum chances of recovery.”