You’ve made the choice to take on the challenge in the trading of S&P 500 futures on a prop environment. This is a risky move, and, if you’re aware of what you’re doing, it’s a prudent one. They are highly regarded by both pros and traders due to their liquidity and swift movements. The biggest issue of this is the fact that trading S&P futures through a prop firm is not identical to depositing money into your own brokerage account.
There are rules. They can force you out before you’ve had the pleasure of financing if it fails.
Let’s talk about the essential laws, rules, regulations, and standards that prop companies often have to impose on S&P Futures Trading.
Daily Drawdown: The Silent Account Killer
Most prop companies have strict daily drawdown limits. This means you can only lose a set amount in one day. Depending on the assessment you make the amount could be as high as up to $1,000 or 5percent from your balance.
The tough aspect? Certain companies calculate the amount you draw down not only from the beginning of your balance, but as well from the day’s highest point. It’s known as a reversal of intraday decrease. Imagine losing $1200 in a single transaction, only to be up by $600 the previous morning. Even if the loss you have incurred is $600, the prop business will still deny you the loan for losing $1,200 from the top.
The most important thing to do is handle your daily losses as if your entire trading career depended on it. Because in the prop business it does.
Max Position Size – No, You Can’t YOLO 20 Contracts
The size of the position is important in trading something as volatile and potentially risky as the S&P 500 futures, regardless of whether you’re trading either the MSC (Micro) and the E-mini (E-mini).
The amount of contracts that you can trade will be restricted to prop firms. It could be 10, MES as well as two contracts with ES. The company’s risk tolerance as well as how big your accounts are going to affect the amount of risk.
This isn’t a deal that can be reached. Your account may be discovered or even rejected if you try to negotiate a huge deal in secret. Deals that do not comply with the maximum size limit are rescinded immediately through specific exchanges for futures.
Pro tip: Incorporate it into your brain to be aware of your limit. Better yet, set up your platform for trading to deny orders that are over your limit.
Hold Time Restrictions – No Swinging for the Fences
The overnight holding of S&P futures is banned by various prop firms. Because the market for futures closes at 4:00 pm ET, they would like you to be flat by the time they close.
Why? exposure to risk. If the market opens at 6 pm or during a sporadic Fed address in the Asia hours, your business will not want their transaction to go under.
You can find guidelines like:
- You must have your flat fixed by 3:55 pm ET or risk disqualification.
- The positions are not saved following the session of daily.
- Only intraday trading No swings.
What steps should I take? Review your company’s rules regarding trading during the night or even during lunchtime. The best trading plan is useless if it’s against the regulations.
News Trading – Tread Carefully Around the Wild Cards
The majority of new traders ignore this crucial issue. Most prop companies will restrict trading around important news events, specifically ones that could have the potential to change in the S&P the futures (think FOMC comments, NFP, CPI data, etc. ).
The regulations can include:
- A few minutes prior to or after the scheduled announcement there aren’t any fresh trades.
- In the event of important announcements, it is imperative to be able to remain in a straight line.
- Disqualification for violations, no questions asked
Why? because news volatility is able to increase the spreads of volatility, rip through stoppers and, in general, cause chaos. Additionally, the firm is not involved in betting with customers’ or clients’ money.
It’s good to keep a news calendar at your workstation. It’s even better to incorporate it in your notifications or trading software.
Trailing Drawdown (Not Just Daily)
In contrast to the daily version this rule applies to your account in general, and it is based on your earnings. The way it works is:
Let’s say you open with a $50k account with a trailing drawdown of $47,000 (a cushion of $3,000). If you increase your balance to $52,000, the new minimum equity amount increases to $49,000. When you get below that, you’re done.
This principle keeps you accountable. It is punishing big risks in the same way as it rewards consistent behavior.
The message is to avoid large drawdowns even if you’re on your account. Your cushion could be less than you imagine.
No Hedging, Martingale, or Grid Strategies
It’s not a casino and your prop company will not wish to treat it as one. The majority of them will ban trading strategies that are made to “game” the system.
This includes:
- Martingale (doubling down following losses)
- Grid trading (layering buys and selling in narrow limits)
- Hedging (opening both short and long positions with one tool)
Although they may be successful in the short-term, they’re not safe and could explode quickly. The prop companies won’t allow you to take the test even if you actually achieve profits.
The bottom line is to trade like a professional, and not an amateur roulette player.
Minimum Trading Days
A majority of companies require a minimum amount of active trading days — typically 5-10 to ensure that your winnings weren’t merely chance.
If you achieve your profit goal in two days but fail to meet the minimum requirement, you’ll need to continue trading (carefully!) to verify your results.
Do not try to cut corners on this. Distribute your trades even if they’re not huge and demonstrate consistency. Prop companies are actually looking for.
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Disclaimer: This article contains sponsored marketing content. It is intended for promotional purposes and should not be considered as an endorsement or recommendation by our website. Readers are encouraged to conduct their own research and exercise their own judgment before making any decisions based on the information provided in this article.
