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Are there restrictions/prohibitions on trading strategies?

Restricted and prohibited trading strategies.

Shanice avatar
Written by Shanice
Updated over 10 months ago

All strategies are allowed if they comply with risk management rules. However, the following practices are prohibited:

Exploiting Errors or Latency in Pricing/Platform

  • Explanation: Taking advantage of delays or mistakes in the broker’s pricing or platform to make a profit.

  • Example: If a platform displays incorrect currency pair prices due to a glitch, exploiting these discrepancies for financial gain is prohibited.

Utilizing Non-Public and/or Insider Information

  • Explanation: Trading based on confidential information that is not available to the public.

  • Example: Using knowledge of an impending merger announcement obtained through private sources to profit in forex or stock markets.

Front-Running of Trades Placed Elsewhere

  • Explanation: Placing trades based on foreknowledge of large market-moving trades being placed by others.

  • Example: Knowing that a large institutional trade is about to occur and placing your own trade beforehand to capitalize on the resulting market movement.

Jeopardizing Broker Relationships or Trade Cancellation

  • Explanation: Engaging in activities that could damage the company's relationship with its brokers or lead to trades being voided.

  • Example: Using practices that trigger the broker's risk management alerts, such as consistently placing trades that exceed market norms.

Creating Regulatory Issues for the Broker

  • Explanation: Trading in ways that violate financial regulations, leading to issues for the broker.

  • Example: Trading in restricted markets or assets without the proper licenses or permissions.

Using Third-Party, Off-the-Shelf, or Marketed Strategies

  • Explanation: Employing pre-made or publicly marketed strategies, especially ones designed specifically to pass challenge accounts.

  • Example: Using a widely sold EA (Expert Advisor) that’s advertised as a “prop firm pass strategy.”

Changing Strategies After Account Funding

  • Explanation: Using one trading strategy to pass the evaluation phase and switching to a different one once funded.

  • Example: Using a low-risk strategy to meet evaluation requirements but then transitioning to high-risk scalping on a funded account.

Utilizing Martingale or Average-Down Strategies

  • Explanation: Doubling down or adding to losing trades, which is considered unsustainable in the long term.

  • Example: Placing increasingly larger trades after a loss to recover losses quickly (e.g., doubling trade size after each losing trade).

Arbitrage Between Accounts

  • Explanation: Exploiting price differences between two accounts, whether with the same company or different companies.

  • Example: Simultaneously buying an asset in one account and selling it in another to profit from slight price mismatches.

“All-Inning” or Excessive Risk-Taking

  • Explanation: Placing excessively high-risk trades repeatedly, often risking the entire account balance.

  • Example: Using all available margin to place a single trade, risking the entire account on one market movement.

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