Risk Review Policy

1. Introduction

1.1 Background  

1.1.1

Ultimately, as a firm, we want to be transparent with our rules and policies. We do not want to implement consistency rules, and we do not want to ban news trading. This has been the case since we first launched in 2021, and something we want to preserve as much as possible.

1.1.2

Our overarching goal is to proactively prevent issues occurring, rather than reacting to issues as they occur. This Risk Review Policy document forms part of trying to achieve that goal. 

1.1.3

For clarity, at specific milestones during an account’s lifecycle we operate a risk review. This is not a new process, it is something we have always conducted.  

The milestones for review are listed below: 

1. Evaluation passes 

2. Scaling requests

3. Withdrawal requests from simulated-live accounts

Accounts outside the above listed milestones do not trigger a risk review, for example, an account that has had a hard rule breach.

1.1.4 

It is important to note that the Risk Team, Operations Department or Live Chat will not perform individual risk checks on trades or accounts by request. 

Operations, on occasion, can give an opinion based on this guidance document, but ultimately the Risk Team sits independently. We have internally recommended that all customer facing departments refer clients to this document as the central guidelines.

1.1.5

Section 2, below, details how these reviews are triggered, and what occurs during a review.

2. Policy

2.1 Margin Utilisation

Funded Trading Plus has automated triggers that review the margin utilisation of accounts at the milestones listed in 1.1.3.  This is the total Margin Utilisation on an account (across all trades at any one time).

2.1.1 

Importantly, this is a trigger for a manual human review, which is then independently completed by the risk team. 

High margin utilisation is not necessarily an issue, and it is not the only factor the risk team considers. However, in order to avoid a full account review, Funded Trading Plus recommends staying within the below parameters: 

Table 1. 

2.1.2 

In order to determine margin manually, please use the below calculation.

Price of market * Total Amount of Contracts * (Leverage) = Margin used

Price of market = the BUY/SELL price of the market that is going to be opened.

Total Amount of Contacts = How many contacts you have bought, for example 1 lot on a FX pair = 100,000 contracts. You can find out how many contracts per lot by going into the specification of that market.

Leverage = Forex pairs/commodities are 1:30, indices are 1:20 (1:10 for cTrader), and cryptocurrency is 1:2.

Example:

10 lots on a BUY EURUSD at 1.05493

10 lots x 100,000 contracts = 1,000,000 contacts

1.05493 * 1000000 * (1/30) = $35,164.33

Note: If an account had a $30,000 balance, it would not be possible to open 10 lots on EURUSD at this price. The account would need at least $35,164.33 of available margin to open this trade.

2.2.3

If you are using DXtrade it is possible to see the Margin Utilisation impact of a trade before you place the trade.

For Match-Trader if you select a new order you can view the Margin Utilisation impact of a trade before you place the trade.

For cTrader simply open the new order screen to see the Margin Utilisation impact of a trade before you place the trade.

 2.1.4

Funded Trading Plus acknowledges that appropriate trading behaviour can still occur whilst exceeding the parameters published in Table 1. e.g. utilising margin across a diverse set of simulated instruments. Where this is the case, it is highly likely that the manual review will be quickly dismissed.

2.2 The Review Process 

Funded Trading Plus cannot easily dictate the exact numbers that it uses in each factor, as risk assessment is a holistic process. There are circumstances where an individual variable in isolation may be acceptable, but when viewed in combination with another high-risk variable would increase the risk significantly to an unacceptable level. 

2.2.1 

Funded Trading Plus will always endeavour to provide appropriate guidance when asked.  Please use the information in this document to determine how best to apply this information to your simulated-trading. 

2.2.2

If your account is subject to manual review on a withdrawal, you will always receive an in depth explanation as to the Risk Team’s assessment.  Further sections provide scenarios of how the risk assessment methodology is applied in practice.

2.2.3

Factors considered during manual review (Red Flags)

• Account Size

• % Margin utilised (on the same markets at the same time)

• Duration of the trade

• Which market/s were traded

• The volatility of the market at that time

• The number of similar trades taken on the same market open at the same time

• If a client has previously been given a warning for risk management
  

2.2.4

Factors excluded during manual review 

• The amount of profit or loss made on a trade

• If the market trended in a particular direction

• Exact lot size restrictions (what matters is margin utilisation for the trade/s)

• Exact measurements in each individual component of section 2.2.3 (Factors considered during manual review)

One or more Red Flag factors combined do not automatically fail the risk review. 

3. Scenarios 

3.1 Common account scenarios encountered during review: 

3.1.1

Scenario 1: One trade is opened on a highly volatile market during high impact news, such as the Non-Farm Payrolls (NFP). Margin utilisation is on the lower end of the trigger point for the account size, and the trade is open for around 30 minutes. This would more than likely be acceptable. 

Rationale: We allow news trading, and appropriate management of risk by utilising modest margin, over an appropriate time-frame for the volatility of the market. 

3.1.2

Scenario 2: One trade is opened on a highly volatile market during high impact news such as the Non-Farm Payrolls. 90% of available margin is utilised, and the trade is open for around 10 seconds.  This would more than likely be an unacceptable ‘coin-flip’ as defined in our Terms & Conditions. 

Rationale: We allow news trading, we allow large lot sizing, we allow scalping, however  when all Red Flag factors are combined, it is clearly an unrealistic approach to risk.

3.1.3 

Scenario 3: Two or more trades are opened simultaneously on different markets that do not trend together.  One is of short-duration (scalping) and others are of longer duration. A high impact news event occurs during this setup, however all simulated-trades are using modest margin utilisation near to the trigger point, with no further Red Flags.  This would more than likely be acceptable, due to the spread of risk across multiple simulated-trades and markets. 

Rationale: We welcome sensible scalping, and the spreading risk across multiple markets. The presence of a news event, combined with short time-frame trading, is not negatively impacting the risk assessment due to the appropriate spread of risk.