Common Violations
Real violation scenarios that cause traders to fail their challenge phase. Learn what not to do and how to avoid these costly mistakes.
Overview
Violations are actions that break the trading rules during your challenge. Some violations are obvious, but others can catch even experienced traders off guard. These real-world examples show the most common violations and explain exactly why they are against the rules.
Breaching the 3% daily drawdown limit
You start the day with a $50,000 account. You take a trade that moves against you, and your account equity drops to $48,400 — a loss of $1,600 or 3.2%. Even if the trade eventually recovers, this is an instant violation. The rule is strict: your equity cannot fall below 97% of your starting balance at any point during the trading day.
Breaching the 7% static drawdown limit
Your starting balance is $50,000. Over several days of trading, your account equity drops to $46,200 — a total loss of $3,800 or 7.6%. This exceeds the maximum 7% static drawdown allowed from your starting balance. The challenge is over regardless of whether you recover the losses later.
Not trading the minimum 4 days
You pass Phase 1 by hitting the 8% profit target in just 2 days of trading. However, the rules require a minimum of 4 trading days in each phase. Since you only traded 2 days, you have not met this requirement and cannot proceed to Phase 2. You would need to continue trading (without exceeding drawdown limits) until you have at least 4 trading days.
Trading on news within the restricted window on a funded account
You have a funded account. A major Federal Reserve interest rate announcement is scheduled for 2:00 PM. You open a trade at 1:58 PM — just 2 minutes before the news. Even if the trade is profitable, this is a violation. Funded accounts prohibit trading within 5 minutes before or after major news announcements.
Holding a position over the weekend during the challenge
It is Friday afternoon and you are holding a profitable long position on EUR/USD. Instead of closing it before the market close, you decide to hold it over the weekend, expecting a gap up on Sunday. This is a violation. During the challenge phase, all positions must be closed before the weekend. Weekend holding is only permitted on funded accounts.
Exceeding maximum lot size on a single trade
On a $100,000 account, you open a trade with 10 standard lots. Even though your stop loss is tight, the position size is excessively large relative to your account. This violates the maximum lot size restrictions and could be flagged as reckless trading behavior.
Trading on a account that has already breached drawdown
Your account equity drops to $46,400 — just under the 7% drawdown limit. You know you are close, but you take another trade hoping to recover. The trade moves against you and your equity drops further, breaching the 7% limit. The violation was triggered not just by the final trade, but by continuing to trade after being in a dangerous position.
Using inconsistent position sizing
One day you trade 0.1 lots, the next day you trade 2.0 lots. Your position sizing varies wildly from trade to trade with no clear risk management plan. This inconsistent behavior is flagged as a violation of the risk management guidelines, even if you stay within drawdown limits.
Opening trades that exceed 50% of accounts simultaneously
You open three different trades simultaneously on EUR/USD, GBP/USD, and USD/JPY. The combined margin of all three positions exceeds 50% of your account equity. This is a violation — you cannot have open positions whose total margin exceeds half your account balance at any time.
Most Violations Are Preventable
The vast majority of violations happen because traders either do not understand the rules or let emotions override their plan. Reading these examples and internalizing the rules before you start trading will save you from costly mistakes.
What These Violations Teach Us
Every violation comes down to one of three things: not knowing the rules, ignoring the rules, or letting emotions take over. The drawdown limits, minimum trading days, and position size restrictions are designed to protect both you and the firm. When you violate them, you are not just breaking a rule — you are demonstrating that you are not ready for a funded account.