Yes, but this is different from lot size restrictions (which we don't have)
This only applies to the consistency of risk applied per trade expression, also known as position sizing. This means that your risk per trade must remain consistent. The main reason for this rule is to prevent traders from significantly causing wide swings to the funded accounts.
It has been a common practice in the prop firm space to increase risk when they are either on a winning or losing streak. We have had many traders going "all-in" by risking more than 2% on one trade idea. This practice is risky and can be considered gambling. Applying consistent position sizing enforces sustainable and disciplined execution principles to our traders - which is what we need.
As a prop firm, we want our equity curve to be as smooth as possible. Having large swings just because of one trade idea going wrong is an unnecessary risk that could be avoided. As much as going "all in" on a trade can go well, it also has the chance of going very wrong.
In short, we don't allow sudden increases in position sizing to avoid:
Large swings in the equity curve
Higher risk of ruin when affected by news events/black swan events
Gambling characteristics
To place a hard and clear line for traders to follow, here are the guidelines:
Max. risk/loss (including floating loss) per trade idea is 2% of the initial account balance
This includes split positions:
A trade idea is categorized as one if:
It was floating/open at the same time at one point on the same symbol and direction or;
The trades are closed and opened within 2 minutes of each other on the same symbol and direction
Note: You can still utilize up to 4/5% daily drawdown, just not on one trade idea.
Trade Idea Example
Single Trade Idea:
Open GOLD BUY > Open GOLD BUY > Open GOLD BUY
It is considered as single trade idea because the trades are on the same asset, direction and are all floating at the same time.
Multiple Trade Ideas:
Open GOLD BUY > Open GBPJPY SELL > Open AUDUSD SELL
It is considered as multiple trade ideas because the trades are on different assets and direction.
Consistency Rule Representation:
Allowed:
Open GOLD BUY (2% risk/loss) > Close trade > Open GOLD BUY (2% risk/loss) > Close trade
2% risk/loss on single trade idea.
Open GOLD BUY (2% risk/loss) > Open AUDUSD BUY (2% risk/loss) > Open GBPJPY SELL (2% risk/loss) > Close trade
2% risk/loss(each) on multiple trade ideas.
Open GOLD BUY (1% risk/loss) > Open GOLD BUY (1% risk/loss) > Close trade
2% risk/loss on single trade idea.
Not allowed:
Open GOLD BUY (2% risk/loss) > Open GOLD BUY (2% risk/loss) > Close trade
4% risk/loss on single trade idea.
Principles:
Protect the company's funds from excessive swings in the equity curve
Instill discipline and consistency in the trader's execution
Allow traders' edge to play out longer by reducing the risk of ruin
FundingTraders is on the hunt for traders that we can have a long-term win-win relationship with. We are not looking to fund just anyone. We're only backing traders that pass the evaluations and showcase a great understanding of risk management and trade executions.