In our Terms and Conditions, it is stated that all transactions made within simulated trading accounts of a prop firm must adhere to the functioning of the real market. Individual transactions and/or entire accounts could be annulled if this is not the case. As for The Funded Trader Program accounts, these positions would not be subject to a virtual profit split and the Customer Agreement is at risk of being terminated (note: A profit split means you are paid based on data which is measured by simulated profit).
But what does a contradiction with the functioning of the real market mean?
We aim to protect the company against practices that can achieve a risk-free virtual profit on regular demo accounts. As we all know, in the real market, risk-free virtual profits cannot be achieved and maintained on a consistent basis if they strategy used to achieve those profits is not one that can be replicated in the real market.
If any of The Funded Trader evaluations are completed in a way contradictory to the functioning of the real market, it does not reveal anything about the trader’s strategy being applicable in the real market.
NOTE: All Phase 1 & 2, as well as simulated Funded Accounts, are routed through a simulated feed, therefore simulating real market conditions.
In this article, we will discuss practices that do not comply with the functioning of the real market.
1. The use of platform or data freezing
What Are The Effects Of Data Feed Freezing?
It is not uncommon for trading platforms to experience data feed freezing. This often occurs when an influx of data overwhelms its system. As a result of data being frozen, your trades may not be immediately updated on the platform. It is as though the platform stops reporting the latest price movements for a short period of time.
What Causes Data Feed To Freeze?
Data feed freezing can be caused by a number of factors, including a peak in market activity, a technical glitch, or a trading platform-specific issue. On occasion, trading platforms may also freeze data intentionally as part of risk management strategies.
How Can Data Feed Freezing Be Taken Advantage Of?
There are some trading platforms who often freeze the data feed. This may happen for only a few seconds, which is more than enough time to look at the data of another trading platform who is not freezing their data and tell you where the price is going. There are also trading platforms who freeze data on a more regular and systematic basis. It sounds good to be able to predict the movement of price, but this does not work on live accounts.
2. The use of delayed data feed
This is very similar to the practice above, but a bit more complex. Each trading platform has a different data feed quality. Some are a few seconds slower than others. There are programs that are able to detect this delay and use this to take advantage of the market. Trading platforms are well aware of this practice and are doing everything they can to avoid this from happening.
You may find this in their T&Cs. In order to simplify things, there are programs that will disguise this form of arbitrage, making it harder for the trading platforms to find out.
3. Trading on delayed charts
Some trading platforms have delayed charts for their demo accounts. This is popular with stocks or rarely traded instruments. Simply by looking at another trading platform, the trader can know where the price will go 15 minutes before it happens, thus allowing them to pass the challenge. This is not possible to practice on a live account, so this practice does not comply with the functioning of the real market.
4. Trading at a time of significant macroeconomic reports
This practice does not contradict real trading, but demo accounts can achieve better quotations and slippages compared to real live accounts. Due to this reason, this technique is forbidden on The Funded Trader Challenge demo accounts.
If you are a news trader, please note that our company will not tolerate any abuse of stop orders to enter or exit trade. When scalping news releases with a straddling method, slippage, latency, and liquidity issues occur.
5. Use of the guarantee of compliance with limit orders (including Take Profit and Stop Loss)
Many trading platforms praise offering their clients the guarantee of filling all pending orders at a fixed price. Keep in mind that pending orders are Take Profit and Stop Loss as well. This is only possible on demo accounts. Here is an example:
On most trading platforms, the DAX is not traded overnight, between 10pm and 8am CET. During that time, the price will change in the market, creating a Night Gap. Let’s say that a trader opens both long and short positions at 21:58, and places a stop loss of 10 points and a take virtual profit of 50 points. The gap appears in the morning and is 80 points. Because the trading platform guarantees limit orders, one position has closed after -10 points and the other for +50 points, resulting in a virtual profit of 40 points. Since the DAX gaps like this daily, we can benefit from this forever.
Please note that these are only some of the scenarios that we have come across that contradict the functioning of the real market. Traders will always attempt to come up with new ways to bypass the real market data. It is always in the trader’s best interest to avoid such practices to ensure the longevity of an account and for adequate risk management purposes.