Trading Restrictions

Are there restrictions on my trading style?

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Written by Leveled Up Society
Updated over a week ago

There are no limitations on your trading style or the specific trading strategy you opt for during the demo evaluation. The choice is entirely yours. However, please be aware that certain strategies are prohibited as they violate our terms of use policy, as they are considered "cheating". It is important to note that employing any strategy that exploits the demo environment will lead to the termination of your trader account, regardless of whether you are in the evaluation phase or already trading the Simulated Funded Account.

Below are some, not limited, examples of prohibited strategies:

  • Guaranteed limit orders

  • Trading on delayed charts

  • Grid Trading

  • Martingale

  • Macroeconomic trading.

  • Hedging between accounts

  • High-frequency trading

    • Tick scalping

  • Account management

    • Signal trading

  • Arbitrage Trading

    • Latency arbitrage

    • Reverse arbitrage

Definitions

Guaranteed limit orders

  • In the Real Market, there is no guarantee that your orders will be executed at the precise price you set, particularly in situations of low liquidity or high market volatility. This applies to Limit and Stop Orders, as well as Take Profits and Stop Losses.


    The reason behind this limitation stems from the nature of trading on a simulated platform. Traders may evade order fills that would have occurred in the actual financial market by relying on the assurance of order compliance. Consequently, such an approach is deemed non-compliant with the regulations of the real financial market.


    For instance, it is unrealistic to expect order fills at the exact prices specified for limit/stop orders during major macroeconomic announcements or when there is significant movement in a closed market (such as weekends or outside of regular trading hours).

Trading on delayed charts

  • Day traders have the potential to utilize a data feed that exhibits a delay or lag in delivering market data, including stock prices and trading volumes. This can grant them an unfair advantage over other traders who rely on real-time market data.


    Employing a delayed data feed is considered unethical and is in violation of financial market regulations. Consequently, such trading practices are prohibited under Our Terms of Use.

Grid Trading

  • Grid trading is when orders are placed above and below a set price, creating a grid of orders that increment or decrease along with the chart price. Having 2 trades open at a time is not considered as grid trading, however, once there are more than 2 positions in the trading session it falls more into grid trading.

    The process for identifying Grid Trading, most often than not follows, the below-stated points:

    • Determining the starting price for the grid.

    • Choosing an interval, such as 10 pips, 50 pips, or 100 pips.

    • Determining whether the grid will be with-the-trend or against the trend.

    For example, the below image shows a trader that had placed four separate trades on EURAUD.i all opened at different times, yet all closed at the same time. The initial trade was at a loss that got worse as the market progressed, but in an attempt to reduce the loss they had opened more positions not only at different pricing but with larger lot sizing than the initial trade.

    Note that the above example also leads to Martingale

Martingale

  • Martingale is a methodology to amplify the chance of recovering from a losing streak by constantly increasing the lot size of new trades in order to circumvent any loss taken.

    This strategy involves doubling up losing trades and reducing winning trades by roughly half. Opening subsequent trades on an asset with a difference in β‰ˆ50% of the prior trade would result in martingale.

    For example, the below image shows a trader that had placed five separate trades on NZDUSD.i all of which had incrementing lot sizes to the prior trade. This is a clear-cut example of the martingale strategy.

Macroeconomic trading

  • Traders may adopt news trading as a strategy to capitalize on the market's response to economic or political news and events, such as interest rate decisions, GDP reports, and political announcements. News trading can be a risky approach as market reactions to news events are typically unforeseeable and can result in considerable losses.

    Please see this article regarding Macroeconomic Trading Restrictions for more information.

Hedging between accounts

  • Hedging between accounts is a trading technique in which an individual or a group creates several accounts with a financial institution and executes trades on the same asset in opposing directions (i.e., buy/sell) across all accounts. This strategy aims to generate profits from the price fluctuations of an asset without incurring significant market risks.

    In the real financial market, implementing this technique would yield zero profits since you're hedged in both directions. Conversely, while trading with a Firm, one account would be incurring losses for the firm while the other would be generating profits, resulting in risk-free earnings.

High-Frequency Trading

  • High-Frequency Trading (HFT) involves utilizing sophisticated computer algorithms and high-speed telecommunications networks to conduct a considerable number of trades within a matter of seconds. It's prohibited due to the potential for market manipulation, unfair advantages, and instability.

    Any trader caught participating in HFT will violate our Terms of Use and consequently lose the ability to trade with us.

    • Tick Scalping. Is a trading strategy that involves making small profits from price movements in a very short amount of time.

      While trading with this strategy on a demo environment may seem profitable, it may not be the case when it comes to Real trading conditions. This is because demo trading doesn't simulate all the factors that can affect trading outcomes in a real market, such as slippage, execution delays, and liquidity shortages.

    Examples: Using algorithms such as Western Pips or DAAS to take advantage of price discrepancies.

Account management

  • The use of account management, 3rd party management, or pass-your-challenge services is prohibited because it goes against the principles of fair trading and can be considered cheating. These services allow traders to use other people's money, strategies, or accounts to make trades and profit from them. This practice doesn't demonstrate the trader's actual skills and abilities, and it can lead to inflated results that don't reflect their actual performance.

    • Signal Trading. Relying on signals from a third party does not demonstrate a trader's ability to make independent decisions and manage risks appropriately. It can also lead to an aggregate risk for the firm since traders may take on excessive risks to generate higher profits based on these signals, ultimately jeopardizing the integrity and stability of the trading platform.

Arbitrage Trading

  • Arbitrage trading is a strategy in which traders aim to profit from price discrepancies between two or more markets by buying and selling assets simultaneously. The trader takes advantage of the price difference between markets to generate profits with little to no market risk.

    • Latency arbitrage. Is a trading strategy that takes advantage of differences in the time it takes for information to travel between different exchanges or trading platforms. It involves using high-speed computer algorithms and sophisticated software to identify and exploit tiny delays in market data and trade execution times.

    • Reverse arbitrage. Also known as reverse carry arbitrage, is a trading strategy that seeks to exploit temporary price differences between two financial instruments that should be priced similarly due to a known relationship or arbitrage condition. Unlike traditional arbitrage, where the trader buys low on one market and sells high on another, reverse arbitrage involves short-selling the overpriced instrument and buying the underpriced one.

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