Stop out happens when your margin level reaches 0%, and the system automatically closes positions to prevent further losses. Since your leverage determines your margin, it plays a huge role in impacting stop out.

Leverage increases your buying power but also increases risk:

• Higher leverage: Requires a lower margin to open order. This means you can trade larger amounts with less money, but it also makes your orders more sensitive to market changes, increasing the risk of stop out.
• Lower leverage: Requires a higher margin to open an order. While it limits your buying power, it reduces sensitivity to market fluctuations, lowering the chance of a stop out.

Examples

Higher leverage (1:500)
With 100 USD in your account and 1:500 leverage, you can open a 50,000 USD trade (100 USD × 500 = 50,000 USD). The required margin for this trade is 100 USD, leaving no extra equity. If the market moves against you by 1%, your loss is 500 USD (1% of 50,000 USD). Since your account only has 100 USD, your loss is capped at 100 USD. Your equity drops to 0 USD, and your margin level falls to 0%, triggering a stop-out.

Lower leverage (1:50)
With 100 USD in your account and 1:50 leverage, you can open a 5,000 USD trade (100 USD × 50 = 5,000 USD). The required margin is still $100, but the trade size is smaller. If the market moves against you by 1%, your loss is 50 USD (1% of $5,000). After the loss, your equity becomes 50 USD, and your margin level becomes 50%. Since your margin level is above 0%, no stop-out occurs, and the trade remains open.