Prohibited strategies at prop firms
Martingale, grid trading, arbitrage and gambling-style overleveraging are banned at many firms. The wording differs, and a pass or a payout can be voided after the fact if the firm decides your trading fits it. Every rule below is quoted from the firm’s own pages, with a link to where we read it.
What can this rule do to you?
Kind of rule
Prohibited strategies
Martingale, grid, overleveraging and the practices that void a pass however you got there.
The banned strategies close the account permanently
High-frequency trading, latency arbitrage, hedging across accounts, martingale position sizing and dollar-cost averaging into a loser are all listed as prohibited, along with exploiting a platform or data-feed flaw. The consequence is stated without qualification: on abuse "through the use of arbitrage, HFT, DCA, or other prohibited strategies, we will immediately and permanently deactivate the account."
Hedging between your own funded accounts ends access
Taking opposite positions across your LiveSim or Live accounts is strictly forbidden. Earn2Trade says account access will be terminated.
Opposite positions across accounts reset balances and then breach
A long on one account and a short on another in the same or a correlated product, such as ES against NQ, is hedging. A first flag resets the accounts to the prior day balance and repeat offences breach them.
Trades shorter than 10 seconds are banned
Any funded trade lasting under 10 seconds is prohibited by the funding partners, as is trading data errors. Breaking the funded trader rules puts the account at risk of termination.
Trades closed within 60 seconds count as HFT
Any trade opened and closed in under a minute is treated as high frequency trading. A first offence cuts the payout and closes the account after payment while a third means payout denial and permanent closure.
Long on one account and short on another gets both liquidated
Opposite positions across any accounts you control are banned, including related pairs like ES and MES. Both accounts are liquidated and the profit is forfeited.
Copying trades across different account types or sizes closes accounts
Copying or manually mirroring trades between accounts of a different programme or size counts as prohibited copy trading, even with correlated products such as ES and NQ. It can close every associated account.
Opposite positions across your accounts or related products count as hedging
A long on one account and a short on another in the same product group, such as ES against NQ, is a hedge. Every involved account can be set to violation and the profits from that period forfeited.
Futures: no new trades within 2% of a CME price limit
You may not open positions once price is within 2% of the CME daily price limit for that contract. You have to track CME's limits yourself, and FTMO may terminate the account for a violation.
Average trade must last over 2 minutes
Average trade duration must exceed 2 minutes and at least half of profits must come from trades longer than 2 minutes. Breach it in evaluation and you restart from Phase 1 and breach it when qualified and all profit is removed.
Trades under 2 minutes can have profit removed
Trades held for less than 2 minutes may be classed as tick scalping. On funded accounts the profit from them can be removed.
Trades closed in under a minute cost most of the payout
Every trade must stay open at least one minute (two minutes on Villain accounts). One to four violations cost 75% of the payout split and five or more mean no payout and an account reset.
Five reverse trades reset the account and void the payout
Five or more reverse trades on one account reset it to the starting balance and cancel that period's payout. A second occurrence gets you permanently banned.
Profits from trades held 5 seconds or less can be forfeited
Accounts are flagged when over half of profits come from trades held 5 seconds or less. After a written warning continued behaviour forfeits those profits and can bring a permanent ban.
Any hedge counts, including mini against micro
Holding buys and sells on the same underlying at once is banned, so long NQ with short MNQ is a violation. Profits from prohibited practices are confiscated.
Trades held under two minutes lose their profit
Any trade closed within two minutes counts as tick scalping. Its profit is deducted when you request a payout and it counts toward the soft breach limit.
Trades closed within 10 seconds can cost the profits
Every trade, including any partial close, must stay open longer than 10 seconds. If close to half of your trades or profits break this rule the profits from those trades are removed.
Futures: trading the funded account differently from the evaluation is forbidden
FTMO can act if you trade a funded futures account materially differently from how you passed the evaluation, cluster trades around news or size positions far outside your usual pattern. Consequences range from removed trades to termination.
Banned strategies carry penalties the firm decides
Hedging within or across accounts, martingale, grid trading, HFT, tick scalping, arbitrage, latency trading, one-sided betting and server-error exploits are banned. Penalties run from a warning to profit removal, a denied payout or a permanent ban.
Funded payouts need most trades held over 10 seconds
On funded accounts over half of your trades and over half of your profit must come from trades held longer than 10 seconds. If not you cannot request a payout, though the account is not failed.
Sudden jump in lot size can be treated as gambling
A big change in lot size against your account average or trades opened just around the news window can be judged all or nothing trading. Alpha decides case by case and can remove profits and close the Qualified account.
One-sided betting can be treated as gambling
Repeatedly trading only in one direction or piling exposure onto a single instrument can be classed as gambling. Pipstone decides this at its discretion and can cut or deny payouts or close the account.
Big size only at the open or news can end funding
Mostly trading large size at predictable moments like the open or key releases is treated as a simulation-only strategy. TPT says it may part ways without prior notice.
Opposite positions across your own accounts are banned
Being long in one account and short in another at the same time counts as cross-account hedging. It is prohibited conduct even when all the accounts are yours.
This list is only as complete as our reading. 33 of the 83 firms we track have been through a rulebook pass; the rest are still to do, and a firm missing from here has not been cleared. It has not been checked. See which firms are next.