Trading Rules and Account Limits
If there was ever a ‘Holy Grail’ of trading it is Risk Management. To ensure all our traders are safe and to achieve a sustainable profitable trading life, we use industry standard trading rules and account limits.
Breach of ‘Trading Rules’ = Soft Breach = Trade Closed Continue Trading
Breach of ‘Account Limits’ = Hard Breach = Account Closed + Reset Required
Understand the T’s & C’s and Limits and you will never need to reset your account!
Trading Rules – Soft Breach
The trading rules ensure that each trade that you enter does not involve unacceptable risk. If you breach a Trading Rule then your trade will be closed straight away at the current market price. Your trading account will not be closed and you may continue to trade.
Maximum Position Risk of all open trades must not exceed 3.0% of your account equity.
Before a trader opens any position, they will have 3.0% of risk available. If the Maximum Loss Limit is within 3.0% then they will only have that smaller limit available.
Updating Available Risk - If a trader has 2 trades open with risk totally 3.0% and the positions are in profit, if they raise their stop loss orders to breakeven on both trades then they get 3.0% of additional ‘Available Risk’ to trade with.
Soft Breach
If you enter a trade that exceeds the maximum open position risk then our trading server will automatically close out the trade at the current price. This will most likely result in a small loss, and you will receive an email from our server notifying you of the fact. Your account will not be closed!
All trades must have a Valid Stop Loss attached to every trade at entry into the market.
When you open a position there are two variables that determine the amount of risk you have open. First, the lot size and second, the size of the stop loss (i.e., the distance from the open price to your stop out level.) You have 3% of Available (Maximum Open) Risk at any one time.
A valid stop loss means your stop loss must be within your ‘Available Risk’ Limits.
For example, if you’re trading a $100K account you can be long 10 lots EURUSD with a maximum stop loss of 30 pips. If you tried to apply a bigger stop loss the position will be closed out and immediately.
The 'Risk Available' can be found on your Trader Dashboard.
Soft Breach
If you enter a trade without a Stop Loss then our trading server will automatically close out the trade at the current price. This will most likely result in a small loss, and you will receive an email from our server notifying you of the fact. Your account will not be closed!
Tip
One of the most dangerous functions of MT4 is that of One Click Trading. This will not enter a Stop Loss or Take Profit which indicates you have no plan, this type of trading is 'casino trading'. If you do not have any Trade Execution Software, you should hide the above 'One Click Trading' and use the 'New Order' button.
Rule:
Your largest profit day must be below 40% of your total profits made.
We want profitable traders with consistent risk management, not one hit wonders that make a lot of money on one day and lose every other day. If there's no plan going up then there's definitely no plan going down!
Explainer
Huge outlier profit days generally occur when there is a mismanagement of risk. Having a consistent trade plan with consistent stop loss and take profit is essential to consistent returns. Only when a trader is in drawdown do they panic and go for the big winner. This is the exact behaviour we want to avoid.
What Happens if my largest profit day is Over 40%?
This is not a Breach. If your largest profit day is equal to or more than 40% of your total profits made, you’ll need to continue trading until your Best Performance Day % of Total Profit is below 40%.
Rule:
All trades must be closed before 1900GMT on Friday.
*Important Note: The trading server will be disabled for the weekend. You will not be able place trades over the weekend.
All open or pending trades will be closed automatically by our trading server at 1900 GMT on Friday as a back stop if a trader has forgotten to close their trades. This will be done at market price at the time.
Explainer
In recent years Geopolitical risk events over the weekend have caused big gaps over the weekend, during this time you have no control over your trade. In line with industry standards until this Geopolitical risk subsides this rule will remain in place. In the future we will notify trades if this rule has been lifted.
Breach
If you haven't already closed your trades prior to 1900 GMT on Friday the server will close your open and pending trades and notify you of the breach by email. You will be able to continue trading at the beginning of the next week.
Tip
If you are in a longer term trade then you simply close your trade and re-enter at the same price at the beginning of the next week. If the current price next week has been affected by a gap then you have the opportunity to choose a better entry level.
Account Drawdown Limits – Hard Breach
The account limits ensure that both your profits and our capital is protected. A breach of either of these Drawdown Limits will result in closing the trader’s account and a reset will be required to qualify for a funded account.
Maximum Loss Limit:
Your Equity or Account Balance must not drop below The Maximum Trailing Drawdown Limit at any time.
The is the safety net for our Capital. It is calculated by taking 5% of the starting account size, for example $100,000 and subtracting the 5% or $5,000 to obtain a Maximum Drawdown Level of $95,000.
Should you make a profit during the first week the $5,000 trails (your highest account balance/High Water Mark) just like a trailing stop on a trade until the level hits the account start balance, where it then remains static at that level for the life of the account.
For example, if you reach an account balance of $105,000 the Max Drawdown becomes $100,000 at this point it never moves. If you then increased your account balance to $106,000 the Max Drawdown remains static at $100,000.
Weekly Loss Limit - For Challenge Accounts
Incurred losses cannot exceed 2.5% of your account equity in a given trading week.
This rule protects you from yourself and keeps you in the game longer!
The Weekly Loss Limit is reset every week on the Monday open.
For example, a trader with a $100,000 funded account would have a $2,500 weekly loss limit. If the trader ran up a profit of $20,000 and their starting balance on the Monday open was $120,000 their new weekly loss limit would be $3,000 or 2.5% of their new balance of $120,000.
The Weekly Loss Limit will prevent a cataclysmic drawdown in your live account.
Weekly Loss Limit - For Live Funded Accounts
Incurred losses cannot exceed 2.5% of your account equity in a given trading week.
For Live Accounts there are two outcomes:
- If a trader hits the WLL and by doing so their account is in the RED (below the starting balance) the account is closed. (The reason for this is to deter traders from loading up as soon as they get their live account).
- If the traders account is in profit, the trader has 3 WLL strikes before their account is closed and any remaining profits will be split according to the profit share agreement. (This gives the trader ample time to correct their capital management).
Limit:
There is no time limit to passing the Funding Assessment, at the same time you can't just leave your trading account inactive.
Inactivity Rule:
If your account is inactive for 30 days it will be automatically suspended. That means you need to have either made a trade or placed an order in the market (it doesn't need to have been executed).
If you do not inform us within 10 days of the suspension the reason for the inactivity, the account will be permanently breached.
This rule is to prevent us having thousands of inactive abandoned accounts. If you are planning to be away for a prolonged period of time, please inform us and we will make sure your account continues.