I’m just looking at the IG platform and and for the smallest lot size of £0.25 per pip, with just £2.50 equity out of £500 at risk (0.5%), I’m using a margin of £130.42 (26%). I don’t get it?
That means with an account balance of £500 I can’t even open up 5 trades at once as I’ll be out of margin…
Here’s a screenshot in case you’re confused https://i.gyazo.com/4f382c9d46d56b703d73444d4e5cb3bc.png
It is to stop over trading and protect the retail trader
But shouldn’t the margin requirement be based on your stop loss? If my stop loss is just -£2.50 from a £500 balance there’s literally no chance of me getting a margin call, even with 20 trades of that size.
It is more related to the leverage, which appears to be around 1:20 to 1:30 in the UK. The SL can be modified, so can’t be the base for Margin.
Based mainly on position size rather than stop loss
Its annoying but they say it will protect the new and inexperienced trader. Which I think is the majority.
Some firms offer smaller minimum sizes than IG - LCG offer £0.10 per pip on major forex. Not a perfect solution but it might help.
You can also open a MT4 account with IG which offer a minimum of £0.10p per pip, though there is a smaller sample of markets to trade.
I’m still wrapping my head around this concept myself but I did see babypips esson on this topic:
You should check with your Broker, some of them may apply increased margin requirements for some pairs.
