Why does C2 use a different margin requirement for stocks priced less than $5/share? This rule unfairly penalizes systems that trade cheap stocks, and it is not representative of a real world trading scenario.
I have never heard of a broker that has different margin requirements for stocks below $5/share. Some brokers (such as Interactive Brokers) have different margin requirements for stocks with market cap less than 250 million. However, it is not the norm. Most brokers use the same margin requirements for all stocks.
Ameritrade, for example, uses different margin requirements for different priced stocks.
C2 generally tries to treat margin as conservatively as possible, since we work with many brokers, and since we more or less need to work with the least common denominator. (In this case, “least common denominator” means “most conservative.”)
Ultimately, it doesn’t matter too much. Remember that your subscribers can lever up your system if they want to take the risk of doing so. In other words, if they want to trade more on a smaller capital base, they can. (Assuming their broker has less stringent margin requirements than C2’s Model Account margining system.)
