Slippage factor definition:
It is a factor which IG uses to calculate margin for positions with a non-guaranteed stop level.
Because a non-guaranteed stop is subject to slippage, the margin requirement is sometimes greater than for a position opened with a guaranteed stop. This depends on the relevant market and / or your stop distance.
The margin requirement for a position with a non-guaranteed stop comprises two parts:
- Risk margin: exposure per point movement x stop distance
- Slippage margin: slippage factor x normal initial margin
Therefore, the margin calculation would be as follows: (Number of contracts X amount per point X price X margin requirement X slippage factor) + ( Stop distance X number of contracts X amount per point)
The normal initial margin is the margin that would be required on the contract if no stop was placed at all. The slippage factor is a percentage that is applied individually to various markets and usually ranges from 30% to 50%.
Margin rates and slippage factors can vary, dependent on the regulatory rules governing the country in which your account is based. Please look in the “Get info” page from the platform understand the particular product you are trading for the slippage factor.
Please note that the slippage factor is not the a measure of the maximum loss which may be unlimited in the case of a non-guaranteed stop but in the case of a guaranteed stop, it is limited to the guaranteed stop level.