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Which Trading Methods Aren't Allowed?
Which Trading Methods Aren't Allowed?
Branden Abushanab avatar
Written by Branden Abushanab
Updated this week

We allow traders to take advantage of a wide array of trading strategies, including trading assistant tools and EAs. Prohibited options include Martingale, Reverse Trading, High Frequency Trading, Grid Trading, Latency Arbitrage, General Exploitation of a Demo Environment, and Account Sharing. These trading styles pose significant risks and are not accepted or encouraged by any prop trading firms that prioritize prudent risk management and sustainable trading practices as prioritized on the Smart Prop Trader platform. Therefore, utilization of these prohibited options will result in your Smart Prop Trader account being shut down and you will no longer be able to utilize the Smart Prop Trader platform and services. Additionally, it's crucial to emphasize that engaging in cheating, fraud, failure to demonstrate sound risk management due to the volume and/or sparsity of transactions, or exploiting the simulated trading environment is strictly prohibited and goes against our Terms & Conditions.

Detailed Overview of Prohibited Trading Strategies:

Martingale Trading

  • In Martingale trading, you increase your investment after each loss. You hope that a successful trade will make up for the losses and give you a profit. This strategy is considered a form of gambling and is very risky. It can lead to large losses and even the complete loss of all invested money if there are many consecutive losses.

  • This trading strategy only works if you have unlimited simulated money (which you don't when trading with a firm). Trading firms set a maximum limit for how much money you can lose, and traders have to adjust their strategy to match this limit of risk.

Reverse Trading

  • Reverse trading is typically executed between two or more different firms. Please note that Smart Prop Trader communicates with other firms. Therefore, if reverse trading from the same trader is detected across 2 or more different firms, Smart Prop Trader reserves the right to shut down the trader's account and ban the trader from future use of Smart Prop Trader's services.

High Frequency Trading

  • High-Frequency Trading (HFT) involves employing sophisticated computer algorithms and high-speed telecommunication networks to execute a multitude of trades within mere fractions of a second.

  • The prohibition of High-Frequency Trading (HFT) is in place due to its potential for market manipulation, unfair advantages, and the ability to induce market instability.

Grid Trading

  • Grid Trading is a trading approach where opposing buy and sell orders for the same instrument are strategically placed to achieve equivalent or similar risk. This strategy carries the risks of market manipulation, excessive leveraging, market instability, and the potential for a risk-free simulated profit.

Latency Arbitrage Trading

  • Latency Arbitrage Trading involves employing a data stream intentionally designed to have a delay or lag in providing market data, such as stock prices or trading volumes. This grants an unjust advantage to the trader compared to others who must rely on real-time market data.

  • Employing Latency Arbitrage is deemed unethical and runs contrary to the ways in which legitimate financial markets function.

General Exploitation of a Demo Environment

  • While Latency Arbitrage Trading is one of the most frequented methodologies utilized to exploit demo environments, it's not the only way traders can exploit a demo environment in order to make unethical gains that wouldn't otherwise be possible within legitimate financial markets. That is, traders can also take advantage of glitches that arise within a demo environment rather than reporting the glitch taking place.

  • For example, if the demo feed suddenly stops at 2:00 price while at the same time allowing a trader to place trades locked in at the 2:00 price and consistently clicks back to where the feed should be 5 min later, if the trader looks at the other charts that don't contain a bug and places a trade on that exact 5 min window to exploit the glitch (as opposed to reporting the bug), this type of behavior would also be deemed a general exploitation of a demo environment.

  • Moreover, general exploitation of a demo environment violates our Terms & Conditions and will result in a trader's account being canceled as well as banning that trader from future use of Smart Prop Trader's services.

Account Sharing

  • Traders are prohibited from sharing accounts or transferring Simulated Funded Accounts from one owner to another for any purpose.

  • Engaging in account sharing and selling accounts is strictly forbidden and will promptly lead to a violation of your account(s), resulting in a ban from our services.

Please note that during any time trading with Smart Prop Trader, our admin team has the right to vet any trader's trading behaviors to determine whether or not a prohibited trading style was utilized that fails to follow sustainability and prudent risk management. If a prohibited trading style is discovered to be utilized on any specific trader's associated accounts, Smart Prop Trader reserves the right to inform the trader that prohibited trading style was utilized and ban the trader from partnering with Smart Prop Trader on future trade endeavors.

On the occasions where prohibited trading styles are discovered during our internal review process, Smart Prop Trader also reserves the right to not reveal the specific behaviors discovered during our vetting process as this could indirectly lead to promoting development of workarounds to exploit our firm's policies and restrictions that ensure traders are engaged in disciplined and sustainable risk management. Furthermore, traders engaged in prohibited trading styles will be subjected to our no refund policy. You can read more about our no refund policy within this article.

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