Only Simulated Live Accounts Get A New Risk-Reduction Rule
Starting August 9, 2024 only simulated live accounts will implement a new risk-reduction tool – a 2.75% risk rule for opened positions. This rule provides traders with a 24-hour period to reorganize their trading strategy after experiencing a loss, preventing account closures and minimizing the impact of trading activities.
The balanced risk rule monitors the risk on opened positions relative to the most recent account balance. If this risk level is reached, trading positions will be closed automatically for 24 hours. The 2.75% risk level will then be recalculated based on the updated balance.
This rule is only applicable to simulated live accounts. Other existing risk rules, such as daily and total drawdown, remain in effect. The new rule is currently in the testing phase with the aim of eventually replacing the daily drawdown rule.
Here are two examples to illustrate how this rule works.
Example 1.
The trader has an account of €10,000. All opened positions (including commissions) have reached a risk of 2.75% (10,000 x 2.75% = 275). If open positions reach a €275 loss, the account will be frozen for 24 hours and all transactions will be closed. Trading access will resume after 24 hours.
Example 2.
The trader has an account of €10,000. In open transactions, there is a 2.5% loss. They are close to reaching 2.75%.The trader decides to close half of the transactions. How is 2.75% calculated now? It is calculated based on the information above, i.e., from the last recalculated balance (after trades are closed). Therefore, by closing a 1.25% loss (half of 2.5%), the trader closed a €125 loss. The balance is recalculated to 9,875 (10,000 - 125). From this balance, i.e., 9,875, the new 2.75% is calculated. Therefore, the trader can now have an open loss of -271.62.
IMPORTANT: after each closed transaction, 2.75% is calculated from the new balance.
For more details and to address any additional questions, please visit our Q&A section (Funded Accounts / Payouts) on the website.
The implementation of the risk-reduction rule is conditioned due to the fact that our traders often succumb to various emotions, leading them to continue a series of losses and bad investment decisions. Now we provide them a rule which limits the potential of overtrading while not closing their accounts due to excessive losses.
Can I incur a daily loss under the 2.75% rule?
Yes, as shown in Example 2. By closing transactions (and recalculating the 2.75% risk level), a trader can incur a daily loss that could lead to account closure. Attention: this rule applies only to simulated live accounts.
Does the 2.75% balanced risk rule apply to challenge accounts?
No.
Will the daily drawdown be removed for simulated live accounts?
We are currently testing the balanced risk rule, and if everything goes smoothly, the daily drawdown will be removed for simulated live accounts.
What happens if I leave losing positions open in the simulated live account?
The balanced risk rule is designed to protect traders from excessive losses when they do not set a stop loss. If open transactions exceed 2.75% of the balance, they will be closed automatically, and trading will be frozen for 24 hours.
When will the simulated live account be unfrozen?
24 hours from the time the losing transactions are closed.
Do commissions also count towards the 2.75% level?
Yes, commissions are transaction costs that the trader covers. They are an integral part of trading and are therefore included in the 2.75% risk. Attention: this rule applies only to simulated live accounts.