forex-scalping.com

Prop firm rules were not written with scalpers in mind

Funded account programs advertise big capital and profit splits. The rule sheet tells a different story for anyone who trades in seconds and minutes.

Common restrictions include a minimum holding time, a ban on trading around major news, limits on how much profit can come from a single trade, a maximum number of orders per day, and prohibitions on certain tactics that the firm labels abusive.

Some of these are reasonable risk controls. Others quietly remove the conditions a scalper depends on. A two minute news blackout around every tier one release cuts the busiest, most profitable moments out of the day. A minimum hold of 60 seconds eliminates entire strategies.

Another catch: execution on a simulated or semi-simulated account may differ from live conditions, so a strategy that passes the evaluation can behave differently on the funded stage.

Reading the rules line by line, then testing the strategy against each of them on a demo, saves a fee and a lot of frustration. The question to answer before paying is whether the approach still has an edge once every restriction is applied.

One more point worth checking is the drawdown rule. Daily and total loss limits are common, and a strategy with large intraday swings can breach a daily limit through floating losses even if it closes the day in profit. Knowing whether the limit counts floating equity or only closed trades changes the sizing completely.

Which prop firm rule turned out to be the real obstacle for a scalping approach?

The common ones that hit scalpers: minimum trade duration, bans on trading around news, limits on the number of trades, and consistency rules about daily profits. I looked at one firm where trades closed within a short time were not counted toward profit targets, which basically disqualifies a scalping style. Another firm banned trading two minutes before and after high impact news. If your strategy trades a lot around data, those rules remove a big part of your edge. So it's worth reading the full rule list before buying a challenge, not just the headline numbers.

The rule that caught me was the minimum holding time. I bought an evaluation at a firm that said trades under two minutes would not count towards the profit target, and my main setup closes in about 90 seconds on average. I only saw this on day four when I checked why my profit counter was barely moving even though my balance was up around 3 percent.

I then went through the rule sheet line by line and wrote down each restriction in a table with the percentage of my normal trades it would affect. The news blackout of two minutes touched about 12 percent of my entries, the hold time touched more than half, and the daily trade cap was not an issue at all. Seeing it like that made the decision easy, and I did not buy another one with that firm.

Before paying for anything now I run my last month of trades through the rules in a spreadsheet. If more than a fifth of my trades would break a rule, I skip the program.