Drawdown Violation Detection and Reconciliation Process
At The Funded Trader, maintaining fairness through our rules and drawdown limits is essential to sustaining a balanced trading ecosystem. Sometimes, our live systems may not immediately detect drawdown violations, which may allow traders to continue trading temporarily. However, we perform a comprehensive daily reconciliation to ensure that violations are caught and addressed retroactively.
What Happens if a Violation Occurs?
If our system detects a violation of the daily drawdown or maximum drawdown limits, you will receive a notification via email. This email will contain a link to the Breach Details Dashboard, where you can review exactly when and how the breach occurred.
The Breach Details Dashboard
When a breach is detected, the Open Breach Details email will guide you to a dashboard that offers full transparency:
• Replay of Breach: Review the exact time, down to the millisecond, that the breach occurred.
• Equity and Balance Tracking: Visualize your account’s equity and balance movements, showing how close you were to breaching.
• Daily Drawdown Calculations: Detailed calculations showing your daily drawdown limits and where the violation occurred.
• Detailed Trade Breakdown: See every trade and how it contributed to your overall performance, including the exact moment a trade pushed your account into breach.
• Tick-by-Tick Replay: Visualize market conditions at the time of the violation to help you understand the context of the breach.
Prohibited Trading Strategies
Summary of Violation Warning System at TFT
Violation Warning Structure:
First & Second Warning: Issued for initial violations; net profits from violating trades are deducted.
Third Warning: Results in account breach; warnings carry over across phases, not resetting after a phase.
News Trading Violations:
Definition: Trading during significant economic or political events, leading to extreme market volatility.
Restrictions: Certain accounts have limitations during high-impact news events to ensure realistic market conditions.
Disciplinary Actions:
1st & 2nd Violations: Warnings and profit deductions.
3rd Violation: Account breach and possible suspension.
Order Layering Violations:
Definition: Splitting large positions into smaller trades to reduce slippage.
Disciplinary Actions:
1st & 2nd Warnings: Issued and profits may be deducted.
3rd Warning: Account breach and rollback to previous challenge phase.
Rapid Fire Trading Violations:
Definition: Rapid Fire Trading involves using strategies or algorithms to execute trades at high speeds, potentially exploiting data delays or system inefficiencies.
Disciplinary Actions: Violations follow a progressive discipline process. Traders receive warnings for initial violations, with profits from the flagged trades deducted. After the third violation within a phase, the account will breach, potentially leading to suspension or termination. This process ensures consistency and fairness while maintaining platform integrity.
Streak Risk Escalation Violations:
Definition: Increasing trade size after losses, risking significant drawdowns.
Disciplinary Actions: Warnings followed by account breach on third violation, with profits deducted.
Grid Trading Violations:
Definition: Placing buy and sell orders at similar levels, risking market manipulation.
Disciplinary Actions: Same process as other violations, aiming to prevent over-leveraging and maintain market integrity.
Copy Trading Violations:
Definition: Replicating trades from another account, undermining independent analysis.
Disciplinary Actions: Progressive warnings and profit deductions, with account breach on the third violation.
Latency Arbitrage Violations:
Definition: Exploiting delays between market data updates and trade execution.
Disciplinary Actions: Similar warning and deduction structure, ensuring fairness and market integrity.
Future Automation: Some viiolations are currently handled manually, but TFT is moving toward automated daily checks for consistent enforcement.
You can review this article for more details: Prohibited trading strategies that violate the TFT rules and Terms of Use
System Integrity and Rule Enforcement
We strive to ensure the integrity of the platform for all users, and enforcing these rules is part of that mission. Traders violating drawdown limits or engaging in prohibited strategies risk having their accounts breached and payouts forfeited. Our comprehensive detection systems aim to provide transparency, ensuring that traders fully understand the nature of their breach.
Why Do We Have This System?
This reconciliation and monitoring process is designed to ensure fairness and transparency while promoting sustainability on our platform. Enforcing drawdown limits and prohibiting certain trading strategies creates an environment where everyone follows the same rules, providing a balanced opportunity for all traders to succeed. Our goal is to ensure that traders who abide by the rules have a clear path toward payouts and long-term success.