Why it matters
Closeouts occur at the worst possible times: spread widening, poor liquidity, and maximum stress.
Decision use: treat this term as a risk input. If you can’t observe it, you can’t size for it.
Common trap
Sizing as if you control the exit. Under margin stress, the broker controls it.
Example
A gap moves against your leveraged position. Equity drops below maintenance margin and the broker liquidates into the spike.
Operational cue: if you can’t point to it on the chart, in the DOM, or in your broker logs, treat it as a story and trade smaller.
Notes
Quick rule
- If you see this repeatedly, you are in a different regime than your model assumes.
- Regime change usually means position size change.
- When in doubt: trade smaller, or don’t trade.