In our Terms and Conditions, it is stated that all transactions made within trading accounts of our proprietary firm must not interfere with the functioning of the real market. Individual transactions and/or entire accounts could be annulled if this were the case. As for The Funded Trader Program accounts, these positions would not be subject to a profit split and the contract is at risk of being terminated. But what does the contradiction with the real market functioning mean?
We aim to protect the company against practices that can achieve a risk free profit on regular demo accounts. As we all know, in the real market, risk free profits cannot be achieved and maintained on a consistent basis. If The Funded Trader Standard Challenge is completed this way it does not reveal anything about the trader’s capabilities. Ultimately, trading a The Funded Trader Account in this manner would prove that it is impossible to make real money for the trader and our company, because these practices do not work in the live market.
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
There are some brokers 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 broker who is not freezing their data, and tell you where the price is going. There are also brokers 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 broker 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. Brokers 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 broker to find out. Luckily, when the broker does find out, and they always do, the trader will be out of luck.
3. Trading on delayed charts
Some brokers have delayed charts for their demo accounts. This is popular with stocks or rarely traded instruments. With Admiral Markets, CFD shares are delayed up to 15 minutes from the live stock exchange feed. Simply by looking at another broker, I can know where the price will go 15 minutes before it happens, thus allowing me 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 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 brokers 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 brokers, 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 profit of 50 points. The gap appears in the morning and is 80 points. Because the broker guarantees limit orders, one position has closed after -10 points and the other for +50 points, resulting in a 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 and inconveniences.