In our General terms and Conditions even in the contract for the traders, it is written that the transactions made within all types of trading accounts of our project must not interfere with the functioning of the real market. If they were, individual transactions or even entire accounts could be annulled and in the case of a funded account, such positions would not be subject to a profit claim, and even the contract may be terminated by our company. But what does the contradiction with the real market functioning mean?
In fact, we protect the company against practices that can achieve a risk-free regular profit on demo accounts. We all know that risk-free profit cannot be achieved on a regular basis in the real market. The Challenge accomplished in such a way logically does not reveal anything about the trader's trading capabilities, and above all, the Funded account would prove that it would be impossible to make real money for both the trader and our company.
In this article, we approach precisely those practices that do not comply with the functioning of the real market, so it can be done on demo accounts, but not on real accounts. Thus, at least the ones we have met in the past practice, inventive traders will surely come up with new ones.
- Use of the guarantee of compliance with limit orders (including Takeprofit and Stoploss)
Some brokers for some reason boast of offering their clients the guarantee of filling their pending orders at a fixed price. Remember that pending orders are Takeprofit and Stoploss as well. This is, of course, possible only on a demo account, imagine the following situations:
The DAX index is not traded overnight with most brokers, specifically between 10 pm and 8 am CET. In that time, the price will often change in the market, thus creating the so-called Night gap. Suppose the trader at 21:58 opens both long and short positions at the same time and places a stop losses of 10 points and a take profit of 50 points. The gap will appear in the morning market of the size let’s say 80 points. With the guarantee of the limit orders, one position has closed after-10 points (do not consider the spread) and the second for + 50, so I have a profit of 40 points. Since the DAX gaps come on the daily basis, we can be profiting like this endlessly.
Or a similar scenario: at 21:59, we place a stop order to buy 10 points above the current price and another stop order to sell 10 points below it. Stop losses will again be 10 points for each position. If the morning opens with a gap of 40 points, one position will be approximately 30 points in plus and the second will be closed after-10. Again, I have a risk-free profit that I can create almost every day.
- Use of platform or data freezing
There are brokers which occasionally freeze the data feed. Sometimes only for ten seconds. But that's enough to look at the data of another broker who has nothing to freeze, and I know a few seconds in advance where the price will go. There are even brokers that happen to conduct this unfair practice regularly and systematically. It would surely be wonderful to be able to predict the market movements with certainty, but unfortunately, it does not work in a live account.
- Use of delayed data feed
It is a very similar practice, like the previous one, but slightly more sophisticated. The point is that each broker has a different data feed quality. One can have a bit slower than the other, perhaps even a few milliseconds. However, there are programs that can detect this delay and use it as an advantage. Brokers already know these practices and are strictly defending themselves against this, for example in their T&Cs. But to keep it simple, there have been programs that try to disguise this form of arbitrage, and then it takes a little longer for the broker to find out. As well as us. However, when this happens, and it always happens, it is too late, and the trader will lose his gold mine.
- Trading on delayed charts
Some brokers have delayed charts on demo accounts, such as stocks or generally rarely traded instruments. For example, at Admiral Markets, the delay in CFD shares is 15 minutes from the live stock exchange feed. By looking at another broker, I even know about 15 minutes ahead of what happens in the market and I very simply meet the rules of the Challenge. Of course, this would not be possible to practice on the live funded account, so this style also does not comply with the functioning of the real market.
- Trading at a time of significant macroeconomic reports
This point does not seem to contradict real trading, but unfortunately, demo accounts can often or always achieve much better quotations and smaller or no slippages compared to real live accounts. Therefore, this technique is disabled on the FTMO funded account and also it is not permitted in the Challenge and in the Verification phase. If you are a news trader and trade conservatively, there is no problem at all. However, scalping the news releases by a straddling method incurs slippages, latency and liquidity issues. We wouldn't be able to pay you profits if we can't generate them by legitimate means.
For now, these all are the techniques that we have encountered so far that contradict the functioning of the real market. However, it is not impossible that some innovative traders will come up with another bypass, unfair technique or a fishy practice in the trading style. In any case, it is in the interest of the trader to trade as if his account was a live account and thus avoid the inconveniences for both sides.