Minimum capital allocation vs Providers own funds
Minimum capital allocation vs Providers own funds
10 Nov 2022, 10:47
Hi fellow traders,
just a discussion and idea I'd like to start with our copy trading (copiers and providers) community.
I see provider strategies, and quit some of them, that use an account (own funds) of around 5K, whereas the minimum capital allocation to follow is put 100.
When that provider opens a position that uses let's say 50 usd margin, that a very small percentage on his account balance. However, when this position gets 1-to-1 copied (which happens, I did test it) to the followers account, it uses there a relatively huge amount of available margin and a smart stop-out (margin liquidation) might be close whenever the position goes - even slightly - against hem.
Probably not every provider is aware of this and one could say it's the responsibility of the copier to make sure he knows this. However, a lot of copiers might also not be aware of this.
Would it be a solution to enforce a minimum capital allocation as a percentage of the providers own funds, like at least 40% or so.
What are your thoughts on this ?