[Overseas Forex] What is a stop-loss? Explanation of its meaning, calculation method, and levels for beginners

When starting overseas forex trading, one thing you need to understand correctly is "stop-loss."

Beginners in particular may incur significant losses if they are unaware of how stop-loss orders work

Therefore, this article will provide a thorough explanation of everything from the mechanism and meaning of stop-loss orders in overseas forex trading, to calculation methods, terminology such as stop-loss levels, and important points to note

If you're planning to start trading with overseas forex brokers, please refer to this article

, we recommend you read this complete guide for overseas forex trading beginners

What is the mechanism and meaning of stop-loss orders in overseas forex trading? A detailed explanation of terminology and calculation methods

Now, let's get straight to explaining the mechanism and meaning of stop-loss orders in overseas forex trading, in a way that even beginners can understand

A stop-loss order is a mechanism that automatically closes a position

A stop-loss order closes the position to prevent the investor from incurring losses exceeding the funds (margin) they have deposited

"Wouldn't I suffer a huge loss if my account was suddenly and forcibly closed?"

Some people may be worried about this, but the FX company will issue a margin call before a stop-loss is triggered

Regarding margin calls before stop-loss orders are cut A margin call is a warning that alerts you to a potential stop-loss order when your margin maintenance ratio is falling. Some FX companies call this an "alarm" or "alert," and it's a warning that will notify you in advance of a stop-loss order being cut A stop-loss order forces the closing of all positions, while a margin call refers to prior notification While it varies by FX company, many companies seem to issue a margin call when the margin maintenance ratio falls to 50-70% Think of a margin call as a yellow card in soccer, and a stop-loss as a red card

What is a stop-loss level?

The stop-loss level is the threshold at which a stop-loss order is executed in FX trading .

A stop-loss order is triggered when the margin maintenance ratio falls below a certain level, resulting in the forced liquidation of the position

This margin maintenance ratio will be the level at which a stop-loss order is triggered

Stop-loss levels vary depending on the FX broker, so be sure to check them in advance

When will the stop-loss order be executed?

The timing of when a stop-loss order is executed depends on the stop-loss level set by the FX company

If your margin decreases and the funds remaining in your account fall to a predetermined margin maintenance ratio, a stop-loss order will be executed

If you're just starting out with FX, it's a good idea to deposit a sufficient amount of money in advance to avoid being stopped out

Additionally, we recommend trading with a low leverage setting.

Those who engage in high-leverage trading should also check out recommended trading methods and tips for high-leverage trading

How to calculate the margin maintenance ratio

The margin maintenance ratio is the ratio of net assets to the margin required to hold a position in FX trading .

The margin maintenance ratio is calculated using the formula: Net Assets ÷ Required Margin × 100

An example calculation is shown below

Calculation until stop-loss execution

Here, we calculate how long you can hold a position before a stop-loss order is triggered if you incur losses in FX trading

The advantage of a stop-loss order is to prevent losses from escalating

The biggest advantage of stop-loss orders is that they protect investors .

Without a stop-loss order, there is a risk of losing all of your deposited margin (synonymous with collateral) or having to pay additional funds

However, losses may exceed the deposited margin In the event of extremely rapid market fluctuations, such as a sharp drop or surge, stop-loss orders may not be executed in time. In such cases, losses may exceed the deposited margin To reiterate, a stop-loss order does not guarantee execution at a price that would bring the margin maintenance ratio to 100%, nor does it guarantee the amount of loss. It is important to be aware that losses can sometimes exceed the margin deposited by investors

So, how can we avoid being stopped out?

To avoid a margin call, "add more margin."

To avoid a margin call, you need to manage your positions with sufficient margin. To do this, you should add more margin

By adding more margin, your effective margin increases, which helps you avoid a margin call

However, caution is advised when adding "margin."

This is because if a trend (a phenomenon where the market moves in one direction) occurs, making additional margin deposits will increase the risk of a stop-loss order being triggered again.

If a stop-loss order is executed, you risk losing even the additional margin you've deposited. In that case, you could incur even greater losses

Alternatively, you could close a portion of your position

Another way to avoid a stop-loss is to close a portion of your position

Closing some positions increases your effective margin, which helps avoid the risk of a margin call

However, just like with adding margin, you should do so while keeping an eye on market conditions

This is only a temporary avoidance measure; if a trend develops in the market, the risk of a stop-loss will continue

Furthermore, continuing to hold positions with unrealized losses carries more than just the risk of being stopped out

Because your funds are tied up, there's a possibility that you might run out of funds when a trading opportunity arises, preventing you from making new trades

In other words, it can lead to the risk of missed opportunities

Therefore, position management that prevents stop-loss orders from being triggered is crucial

First and foremost, it's crucial to manage your positions in a way that prevents stop-loss orders from being triggered Adding margin or closing a portion of your position are only temporary workarounds Therefore, rather than adding more funds to hold on, it's important to manage your position from the start to avoid easily falling into a stop-loss situation Avoid trading with a position that uses up the maximum amount of funds in your account You must avoid the risk of a margin call by using moderate amounts of capital to lower effective leverage, or by implementing stop-loss orders, using methods that are not temporary Incidentally, the criteria for stop-loss orders vary depending on the broker. Next, let's look at a comparison of the lists for each broker

 What are the stop-loss levels for each overseas forex broker? Comparing stop-loss levels of overseas and domestic forex brokers

The stop-loss level varies depending on the FX broker

This section will explain the differences between overseas and domestic forex brokers, and compare the stop-loss levels of overseas and domestic forex brokers

1.  What are the differences between overseas and domestic forex trading?
2.  Comparison of stop-loss levels of overseas forex brokers
3.  Comparison of stop-loss levels at domestic FX brokers

What are the differences in stop-loss levels between overseas and domestic forex trading?

The stop-loss levels differ between overseas and domestic forex brokers

Overseas forex brokers tend to set lower stop-loss levels

If the stop-loss level is set low, it is less likely to be stopped out even if there are unexpected price movements

Therefore, it is possible to aim for profits while holding a position up to the stop-loss line you have set yourself

Traders who have a solid investment plan will likely find it easier to trade with lower stop-loss levels because it offers greater investment flexibility

Comparison of stop-loss levels of overseas forex brokers

The stop-loss levels for each overseas forex broker are as follows:

<Overseas Forex Broker Stop-Loss Levels>

Overseas Forex Brokers	Stop-loss level
Tradeview	100%
MiltonMarkets	50%
TradersTrust	50%
LAND-FX	30%
GEMFOREX	20%
XM	20%
AXIORY	20%
HotForex	20%
FBS	20%
IS6FX	20%
TitanFX	20%
FXGT	20%
Bigboss	20%
FxPro	20%
Exdefine	0%
iFOREX	0%

Overseas forex brokers have a wide range of stop-loss levels, from 0% to 100%

On the other hand, some of you may be wondering, "What are the stop-loss criteria for domestic FX brokers?" or "What are the differences between domestic and foreign FX brokers?"

Therefore, let's also check the stop-loss criteria of domestic FX brokers

In conclusion, domestic FX brokers tend to set their rates higher

Comparison of stop-loss levels at domestic FX brokers

The following are the stop-loss levels for domestic FX brokers

<Domestic FX broker stop-loss levels>

Domestic FX brokers	Stop-loss level
Foreign Exchange Online	100%
Invast Securities	100%
Gaitame.com	100%
Traders Securities	100%
Kabu.com Securities	100%
Kanetsu FX Securities	75%
DMM FX	50%
SBI FX Trade	50%
GMO Click Securities	50%
Rakuten Securities	20%

As you can see from the various stop-loss levels, domestic FX brokers tend to set them slightly higher.

In overseas forex trading, if the margin level falls below a predetermined stop-loss level, positions with the largest losses are closed first, and the margin maintenance ratio is closed until it recovers

In domestic FX trading, stop-loss orders are not simply based on the margin maintenance ratio; each broker also has its own unique rules and services

Therefore, the situation is a bit more complicated compared to overseas forex trading.

What are the differences between overseas and domestic forex trading? We'll explain who each is suitable for, as well as tax implications and profit/loss offsetting

Three ways to avoid forced liquidation in overseas forex trading

Here are three ways to avoid a forced stop-loss in overseas forex trading:

1. Don't use excessive leverage
2. Scalping trade
3. Create a stop-loss rule as your own decision-making criterion

We will explain each item in detail

① Do not use excessive leverage

The main appeal of FX trading is undoubtedly leverage

Leverage means "the power of a lever." It's not possible to get a large return with a small initial investment through foreign currency deposits

own funds	Leverage	Transaction amount
100,000 yen	1x	100,000 yen
100,000 yen	25 times	2.5 million yen
Over 40,000,000 yen	45％	4,796,000 yen

For example, if you have 100,000 yen in your own capital and leverage is 100 times, you can trade up to 10 million yen worth of currency

The higher the leverage, the lower the margin maintenance ratio becomes

In that case, the risk of a stop-loss order being triggered also increases, so it is important not to use excessively high leverage

Especially for beginners, I recommend starting with low leverage

Beginners, in particular, should start with low leverage For beginners, starting with a leverage of around 3x is generally recommended to minimize the risk of running out of margin If you aim for low risk and high returns and apply 25x leverage from the start, you may suffer unexpected losses The leverage offered by domestic FX brokers is limited to a maximum of 25 times by the Japanese Financial Services Agency On the other hand, as shown below, overseas forex brokers allow leverage from 400 times to unlimited

<Examples of maximum leverage offered by overseas forex brokers >

Overseas Forex Brokers	Maximum leverage
GEMFOREX	5,000 times
IS6FX	1,000 times
TitanFX	500 times
FXGT	1,000 times
Bigboss	1,111 times
XMTrading	1,000 times
Exdefine	Unlimited
FocusMartkets	1,000 times

Even with overseas forex brokers, it's a good idea to start with leverage of around 3x, gradually get used to trading, and then increase the leverage

We introduce brokers with high maximum leverage and good trading environments in the article below

Overseas Forex Leverage Comparison! Recommended Brokers with Leverages from 1000x to Unlimited, and a Summary of Regulatory Rules Including Calculations and Limitations!

② Scalping trades

Scalping trading can help you avoid stop-loss orders

making trades within a short period of time (just a few seconds to a few minutes) and repeating this process to generate profit .

The term "scalping" comes from the English word "scalp."

The term also means "to peel off the scalp," and like peeling off many thin layers of skin, it involves accumulating small profits obtained through small transactions that aim for tiny profit margins

Because it involves low risk and low return, it is an effective way to avoid stop-loss orders

Let's also check out some scalping tips and recommended accounts

③ Create a stop-loss rule as your own decision-making criterion

To avoid being stopped out, it's important to set your own stop-loss rules, such as "I will definitely close the position when it reaches this point."

Beginners, in particular, tend to start trading without setting stop-loss rules.

"If we wait a little longer, the market will reverse."

"Let's wait and see for a little while longer."

This can lead to a situation where you end up with a stop-loss order that results in significant losses

In FX trading, profit and loss are more important than the win rate

To put it in extreme terms, even if you win 99 times, one big loss can wipe out all your previous wins, or even result in an even greater loss.

A stop-loss order is a forced liquidation, while a stop-loss order is a liquidation made at your own discretion

By trading according to your own stop-loss rules, you can avoid forced liquidation and prevent large losses

Q&A regarding stop-loss orders in overseas forex trading

Here are four frequently asked questions about stop-loss orders in overseas forex trading

1. What is a zero-cut system?
2. What's the difference between a contract with and without margin calls?
3. Is it possible to incur debt through overseas forex trading?
4. What are some situations where a forced stop-loss order might not be executed in time?

Q. What is a zero-cut system?

A zero-cut system is a system that, in the unlikely event that your account balance goes negative due to reasons such as a stop-loss order not being executed in time, will reset that negative amount to zero.

With this zero-cut system, you will never incur losses exceeding your account balance

While this system is beneficial for investors, domestic FX brokers do not offer a zero-cut system.

Domestic FX brokers are protected by national laws, and in Japan, the Financial Instruments and Exchange Act prohibits compensation for losses

If there is a zero-cut system where the broker covers the trader's losses, the broker simply ends up losing money

The zero-cut system also carries the risk of the business going bankrupt

On the other hand, why do overseas forex brokers have a zero-cut system?

The reason is that even if it means taking on losses, I believe that stimulating trading will be more profitable overall .

However, be aware that trading based on the assumption of a zero-cut system may result in your account being frozen

Are there no margin calls in overseas forex trading? An explanation of the disadvantages and mechanisms of the zero-cut system

Q. What's the difference between a contract with and without margin calls?

A margin call is a type of collateral that you are required to deposit when losses exceed your account balance due to sudden currency fluctuations or other reasons that prevent stop-loss orders from being executed in time

The official name is "additional margin deposit," but it is commonly abbreviated as "margin call."

In other words, with a zero-cut system, the broker will cover the losses, so you don't need to make any additional margin calls.

In this case, you will not lose more money than the balance in your account

On the other hand, if there is no zero-cut system, a margin call will be required

If you receive a margin call, you will need to raise funds exceeding your account balance, and in some cases, this may mean taking out a loan

Q. Is it possible to incur debt through overseas forex trading?

There are four ways in which you could end up in debt through overseas forex trading

Start investing only with your own surplus funds

Even if you incur losses, do not consider borrowing from consumer finance companies or other sources to add margin and recover your losses

The causes of debt from FX trading and how to prevent it are explained in detail in the article below

What are the chances of incurring debt through overseas forex trading? This article explains the reasons for debt and how to avoid the risks

Q. What are some situations where a forced stop-loss order might not be executed in time?

No matter how careful you are, there are situations where a forced stop-loss order may not be executed in time

For example, consider the following case:

One thing to be careful of is the large exchange rate fluctuations that occur on weekends

Since FX companies are closed on weekends, there is a possibility that stop-loss orders may not be executed in time if there are large currency fluctuations over the weekend。

However, extremely rapid rate fluctuations that prevent stop-loss orders from being executed in time, even on weekends, are rare, so there's no need to worry excessively

summary

This page explains stop-loss orders in overseas forex trading

Finally, let's review the important points

1. A stop-loss order is a mechanism in FX trading where, if losses exceed a certain level, the FX company automatically closes the position to prevent the investor from incurring losses exceeding their deposited funds (margin)
2. Before a stop-loss order is triggered, there is a margin call that notifies you if your margin maintenance ratio is falling
3. Overseas forex brokers tend to set higher stop-loss levels than domestic forex brokers
4. There are three ways to avoid a stop-loss: " Don't use too much leverage," "Use scalping trading," and "Create your own stop-loss rules."

One of the characteristics of overseas forex trading is that the higher the leverage you use, the greater the potential return you can earn

On the other hand, there is also the risk of significant losses due to forced liquidation

Initially, it's important to trade using only your surplus funds

Also, to avoid being forced into a stop-loss, start with low leverage and take other measures to mitigate risk

Overseas Forex Account Opening Bonus & Deposit Bonus Comparison Ranking! [Latest January 2026] Broker List