Restricted strategy lists at prop firms: what they mean in practice

[Fairman]

Restricted strategy lists at prop firms: what they mean in practice

Most prop firms have a list of strategies or behaviours they don't allow. Common ones: high frequency trading, tick scalping, latency arbitrage, hedging across accounts, news straddles, and copy trading from other people. The wording is often vague, which leaves traders unsure whether their style is allowed.

Tick scalping usually means very short holding times, seconds rather than minutes, often trying to exploit tiny price differences. Some firms set a minimum hold time, like a minute or two. If you scalp M1 with trades lasting a few minutes, you're probably fine, but check whether there's an explicit minimum.

Latency arbitrage means exploiting delays between price feeds. Most retail traders aren't doing this, but some EAs sold online are, sometimes without saying so.

News straddles mean placing buy and sell stops either side of a release. Many firms ban this even if they allow trading news otherwise.

The vague ones are things like 'gambling behaviour' or 'trading that doesn't reflect real market conditions'. These give the firm discretion.

If you're unsure, ask support with a specific description of your strategy and keep their written answer. It's much better to know before passing than to have a payout denied afterwards.

[Fairman]

Bought EAs are where people get caught most often. An EA might be marketed as a scalper, but under the hood it relies on fast execution against a slow feed, which is exactly what firms ban. If you use a commercial EA on a prop account, I'd ask the vendor directly how it makes its trades and check that against the firm's rules. If the vendor can't explain it clearly, I wouldn't risk an account on it. Vendors who are confident in their EA usually don't mind explaining roughly how it works.

[Fairman]

Look at holding times in your own history. Some firms flag accounts where a large share of trades last under a minute, even if each trade is legitimate. Exporting your history and checking the distribution of trade durations takes a few minutes. If a lot of your trades are very short, you'll know whether you're near a firm's threshold before it becomes an issue rather than after a payout request. Most platforms show duration in the history, and a quick sort in a spreadsheet gives you the picture in a few minutes.

[FXS Prop Desk]

"Tick scalping" can mean holding trades for seconds, or exploiting stale prices, and a normal M1 scalper may wonder whether their style is included.

Asking support in writing with a description of the strategy, including typical holding time and number of trades per day, is the safest approach. A clear written answer is worth keeping in case of questions at payout time.

[Fairman]

Grid and martingale style strategies are on most restricted lists, but the definitions vary. Some firms ban any strategy that adds to losing positions. Others only ban adding at fixed intervals without a stop. If you scale into trades or average down occasionally, check how the firm defines these, since a normal scaling approach might technically fall under a ban. Asking support with a concrete example of your method, in writing, gets a clearer answer than reading the general description on the website. Keep the reply, since support answers sometimes get forgotten later.

[Fairman]

Hedging across accounts is another one that catches people. Holding a long on one evaluation and a short on another, at the same or a different firm, is banned by most firms because it guarantees one account passes at the expense of the other. Even if it's not intentional, two strategies that sometimes take opposite positions on the same pair could look like this. If you run several accounts with different strategies, it helps to check that they don't regularly end up on opposite sides at the same time. A quick look through the trade history of both accounts for overlapping opposite positions is enough to check.