Hedge trading is a practice in which a trader uses two different accounts to trade strategies that aim to offset or balance risk by partially or fully replicating trades from one account to the other.
The parameters of hedge trading:
Instrument: The trade must be for the same asset, even if the name includes different extensions (such as EURUSD and EURUSD.ecn).
Direction (Side): The choice between Buy or Sell must be opposite.
Opening and Closing Times: Very similar opening and closing times (including minutes and seconds).
Trading Accounts: They must be different.
These parameters ensure that trades are virtually opposite and made on two different trading accounts.
In this way, even those without much trading experience can benefit from risk-free strategies.
This practice is prohibited on Prop Number One, pay attention even a purchased BOT or Software, if set with opposite parameters will open opposite trades, violating our terms and conditions.
Although it can be employed to manage risk, on Prop Number One such behavior is strongly monitored and prohibited, as it can compromise the integrity of individual strategies and the transparency of internal processes.
The rules and applicable penalties based on the percentage of hedge trading between two different accounts are explained below.
What happens if I am flagged for hedge trading?
Unlike all the other Prop Firms out there that disable the account with no chance of recovery in Prop Number One, where transparency is one of the values, we have developed ranges based on the percentage of trades that are made in hedge trading.
We have prepared a series of warnings before taking very strict actions for this behavior, you will find them listed below.
Scenario 1: Transactions in Hedge Trading on two different accounts belonging to the same person
Controls are based on the percentage (x) of hedge trades detected, with two operational bands:
Band 1: 1% < x < 25%
Band 2: 25% < x < 100%
Percentage of hedge trading between 1% and 25%.
What happens with an initial warning
Step 1: The infraction is notified, the account is disabled, and a new account identical in Step 1 is assigned.
Phase 2: The infraction is notified, the account is disabled, and a new identical account is assigned in Phase 1.
Funded: The infraction is notified, the account is disabled, and a new identical account is assigned in Phase 2.
What happens with a second warning
Step 1: The account is permanently disabled and the challenge is considered lost.
Phase 2: The account is permanently disabled and the challenge is considered lost.
Funded: The account is permanently disabled and the challenge is considered lost.
Percentage of hedge trading between 25% and 100%.
What happens with an initial warning
Step 1: The account is permanently disabled and the challenge is considered lost.
Phase 2: The account is permanently disabled and the challenge is considered lost.
Funded: The account is permanently disabled and the challenge is considered lost.
Scenario 2: Transactions in Hedge Trading on two different accounts belonging to different people
Band 1: 1% < x < 25%
Band 2: 25% < x < 100%
Percentage of hedge trading between 1% and 25%.
What happens with an initial warning
Step 1: The infraction is notified, the account is disabled, and a new account identical in Step 1 is assigned.
Step 2: The infraction is notified, the account is disabled, and a new identical account is assigned in Phase 1.
Funded: The infraction is notified, the account is disabled, and a new identical account is assigned in Phase 2.
What happens with a second warning
Step 1: The account is permanently disabled and the challenge is considered lost.
Step 2: The account is permanently disabled and the challenge is considered lost.
Funded: The account is permanently disabled and the challenge is considered lost.
Percentage of hedge trading between 25% and 100%.
What happens with an initial warning
Step 1: The account is permanently disabled and the challenge is considered lost.
Step 2: The account is permanently disabled and the challenge is considered lost.
Funded: The account is permanently disabled and the challenge is considered lost.
N.B.
Of course we will provide all the necessary evidence of our systems for our users to verify as well.
Please note that it is the trader's responsibility to make sure that purchased software and BOTs do not operate in the opposite way, if Risk Management detects such operations it will apply the prescribed penalties in any case.