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
Read and understand the Limits and you will never need to reset your account!
Trading Rules
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.
Rule:
All trades must have a Valid Stop Loss attached to every trade at entry into the market.
All professional traders attach a Stop Loss to all their trades. Without a Stop Loss your whole trading account balance is at risk. It makes no sense trading without a Stop Loss and without one the trading account has a very limited life.
Explainer
Current market conditions are littered with 'risk events' Geopolitical, Major Economic Events, and Central Bank News. These risk events can turn the market against you in a second. The Stop Loss protects your previous profits, without one your whole account balance can be wiped out in a few seconds.
A Valid Stop Loss means your Stop Loss must be within your 'Risk Available' that can be found on your Trader Dashboard. In short if your Stop Loss is triggered it must not come below the Maximum Trailing Drawdown Limit Level. This is calculated for you at all times on the Trader Dashboard.
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:
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.
Rule:
Maximum Open Risk on 1 Trade must not exceed 2% of your account balance & Total Open Risk at any one time must not exceed 3%
Before a trader opens any position, they will have 3% of risk available. If the Maximum Loss Limit is within 3% then they will only have that smaller limit available.
Explainer
The trader opens a position, and the system goes through a checklist process automatically:
Check ‘trade size risk’ = Lot size x pip value of instrument (pip value of position) + size of their stop loss.
Question: Is the risk of the new open position above 2.0%?
If not, then the position is left open, and the ‘Available risk’ reduced to 1.0% (cash equivalent)
If yes, the position is closed immediately, and the trader is notified of the soft breach. They can continue to trade.
Check Available Risk – say the trader already has open positions – if the total open risk including this trade is above 3% it closes out the most recent position opened immediately, and the trader is notified of the soft breach. They can continue to trade.
If the risk available when they opened this position was less than 1.0% then both positions would stay open, and the ‘Available Risk’ reduced to whatever the balance is left over.
Check Maximum Loss Limit – If the account balance is within 3% of the Maximum Loss Limit, the Available Risk will be worked off the Maximum Loss Limit. If the ‘open risk’ of the new position exceeds the ‘Available Limits’, then the position will be closed out and the trader notified of the soft breach.
Updating Available Open Risk – if a trader has 2 trades open with risk totally 3% and the positions are in profit, if they raise their stop loss orders to breakeven on both trades then they get 3% of additional ‘Available Risk’ to trade with.
Explainer
We don't want traders putting all their eggs in the one basket and loading up with huge risk on just one trade. To be a successful & consistent trader you should not have to risk more than 2% on any one trade. It will lead to more consistent capital growth and reduce big drawdowns.
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!
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%.
Account Limits
The account limits ensure that both your profits and our capital is protected. Breach this simple limit and your account is closed. If it happens during the Practical Assessment then you will need to reset the account, if it is in the live account account you will need to retake the Practical Assessment.
Limit:
Your Equity or Account Balance must not drop below The Maximum Trailing Drawdown Limit Level 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.
Limit:
There is no time limit to passing BUT at the 6 month mark if you haven’t passed the assessment yet it will cost a $100 to extend the assessment by an extra 6 months.
Why?
The brokers charge us additional monthly fees per account. These fees are being passed on. So, there is no time limit to passing but if it takes longer than 6 months it will cost $100 to extend the life of the account by an extra 6 months. Don’t worry, your account balance is carried over so any profits stay in the account.
6 Month Extension Option
If your account is in profit, but you’re not quite there yet then you will have the option to ‘extend’ the time limit by another 6 months by paying the ‘extension fee’ ($100). Your current ‘account balance’ will remain in the account to give you the best opportunity to pass the Assessment.
If You're Account is in Drawdown
If your account is in drawdown and you do not want to extend the time limit, then you can simply let the time limit expire and your account will be disabled. If you want to try again you can by resetting your recent disabled account by paying the ‘reset fee’. You will be issued a new account with a fresh 6-month time limit.
Breach
If you haven't hit the profit target within 6 months it will be considered a Breach and your account will be disabled.
Tip
If you want to extend the time limit on your account simply contact our team and they will arrange the extension once you've paid the 'extension fee' of $100.