Challenge Rules

Toxic trading refers to risky, impulsive trading behaviors that can endanger not only individual trader accounts but also the overall stability of proprietary trading firms. Understanding and avoiding toxic trading is crucial for your success as a trader.

Toxic Trading Flow

Toxic trading covers a variety of behaviors and practices, including but not limited to:

• Excessive Risk-Taking (Over-Leveraging)
  Participating in trades with disproportionately high levels of risk in relation to the trader's capital or risk tolerance. This often involves utilizing excessive leverage causing overexposure or full margin, which can magnify both gains and losses.
• Gambling Behavior
  Trading is driven by emotions rather than rational analysis, similar to gambling. Traders may pursue losses, make impulsive trades, or addictive tendencies, leading to negative trading outcomes. Splitting up a trade into multiple positions will be counted as one single trade on any of our accounts.
• Overtrading
  Continuously entering and exiting trades without a clear strategy or rationale, resulting in diminished profitability and emotional exhaustion.
• High-Frequency Trading (HFT) & Tick Scalping
  Engaging in excessive and rapid trading activities indicative of higher volatility, which may result in significant losses.
• Arbitrage
  All forms of arbitrage are considered toxic due to the lack of a clear underlying idea, strategy, or rationale.
  • Hedge Arbitrage
    Simultaneously entering opposing positions with different firms.
  • Latency Arbitrage
    Exploiting disparities in trade execution times across various trading platforms or venues to profit from minor price differences caused by delays in order processing or data feeds.
• Poor Money Management
  Traders who frequently encounter margin calls due to inadequate funds or risky positions may indicate a lack of risk management, posing a threat to their accounts and potentially the firm's stability.
• Behavioral Patterns
  Inconsistent behaviors such as trading during non-liquid market hours to exploit liquidity shortages, consistently disregarding risk management principles, or making emotional decisions.
• Reverse Trading
  Signs and behavior which include risking the full daily loss on one trade, often indicating reverse trading between different firms.
• Martingale
  A high-risk trading method where traders keep adding positions in drawdown, hoping to recover losses when the market eventually reverses.
  
  Example:
  Suppose your first trade goes into loss. Instead of closing it, you open another larger position in the same direction. As the loss deepens, you continue adding trades, expecting a reversal to recover all losses at once.
• Averaging
  Averaging is the practice of opening a new position on the same instrument in an attempt to reduce the average entry price of a losing trade. This behavior is considered toxic regardless of intent and is strictly prohibited.
  
  The following actions are classified as averaging:
  • Opening a new position on the same instrument while an existing trade is in a running (unrealised) loss.
  • Opening a new position on the same instrument within 5 minutes of closing a trade at a loss, measured from the exact timestamp of the closing fill.
  
  Additional Clarifications:
  • The restriction applies to both long and short directions equally.
  • Partial closes that leave the position in a net unrealised loss are treated as an active losing trade for the purpose of this rule.
  • The 5-minute cooldown is per instrument. Entering a different instrument within the same window is permitted.
  
  Example:
  You open a Buy trade on XAUUSD. The trade moves against you and is in a running loss. Opening another Buy or Sell position on XAUUSD at this point — or within 5 minutes of closing the losing trade — will be flagged as averaging and result in an immediate account breach.

Consequences of Toxic Trading

If toxic trading is detected, your account will be breached and a termination email will be sent to you.

Once an account is breached due to Toxic Trading Flow, it cannot be recovered under any circumstances.

PropScholar enforces a strict, fully objective Martingale and Averaging policy. All enforcement is based exclusively on measurable trading data and predefined numerical thresholds. No subjective or discretionary interpretation is used at any stage.

1. Definitions

Combined Net Position

The total unrealized profit or loss of all open positions on the same instrument in the same direction.

Example: Buy 1.00 lot EURUSD + Buy 0.50 lot EURUSD = one combined net position of 1.50 lots.

Averaging

Opening an additional position on the same instrument in the same direction while:

• the combined net position is in floating drawdown, or
• within 5 minutes after a realized loss on the same instrument.

This applies regardless of whether the new lot size is smaller, equal, or larger than the previous position. Adding to positions already in combined net profit is considered scaling or pyramiding and is not classified as averaging.

Martingale

A form of averaging where the new position size exceeds the immediately previous position size during floating drawdown or within the 5-minute recovery window.

2. Allowed Trading Behavior

• Re-entering after a stop loss once the 5-minute recovery window has expired
• Multiple entries on the same instrument while the combined net position remains in floating profit
• Scaling into profitable positions (pyramiding)
• Structured entries with predefined stop losses
• Independent new trades opened after the 5-minute recovery window

3. Prohibited Trading Behavior

• Averaging into floating drawdown conditions
• Averaging within 5 minutes after a realized loss on the same instrument
• Martingale behavior as defined above
• Progressive exposure escalation during drawdown
• Recovery-based lot size increases
• Exponential or aggressive lot progression
• Excessive concentration on a single instrument
• Uncontrolled basket or grid exposure
• Attempting to recover prior losses through increased exposure

4. Objective Detection Rules

A Martingale violation is triggered if ANY of the following conditions are met:

Rule A — Increased Lot Size During Recovery Window

Any new position that exceeds the immediately previous position size while the combined net position is in floating drawdown, or within 5 minutes after a realized loss on the same instrument.

Rule B — Consecutive Exposure Escalation

If position sizes increase consecutively across 3 or more entries on the same instrument during floating drawdown or within 5 minutes of a realized loss, the activity is automatically classified as Martingale.

Example: 1.00 → 1.20 → 1.50 → 2.00 = Violation.

Rule C — Excessive Exposure Concentration

If cumulative open exposure on a single instrument exceeds 5× the trader's initial entry size while the combined net position remains in floating drawdown, it is classified as prohibited Martingale activity.

Example: Initial entry = 1.00 lot. Total open exposure exceeds 5.00 lots during floating loss = Violation.

5. Clarification Examples

6. Enforcement

All evaluations are performed exclusively using:

• Lot progression
• Cumulative exposure
• Floating drawdown behavior
• Realized loss behavior
• Exposure concentration
• Predefined numerical thresholds

PropScholar does not use subjective interpretation, discretionary judgment, or manual opinion when enforcing Martingale and Averaging policies. All violations are determined by data alone.

Forbidden Strategies

At PropScholar, we give you the freedom to trade the way you want, whether you are a scalper, intraday trader, or swing trader, as long as you stay within the rules. You have full control over your approach, strategy, and risk style, with no restrictions on lot size or timing. This freedom comes with clear boundaries.

We do not allow the use of any unfair, manipulative, or exploitative trading strategies. The following practices are strictly prohibited:

• Gap trading
• High-frequency trading (HFT)
• Averaging positions
• Server spamming
• Martingale
• Latency arbitrage
• Toxic trading flow
• Hedging across accounts
• Long-short arbitrage
• Reverse arbitrage
• Tick scalping
• Server execution abuse
• Opposite account trading
• Copy trading between PropScholar accounts
• Third-party account management

Engaging in any of the above will lead to immediate termination of your evaluation and disqualification from the PropScholar program.

Expert Advisors (EAs)

You may use a third-party Expert Advisor (EA) only if it functions as a trade manager or risk manager. Any other type of EA, including signal-following bots, scalpers, or execution manipulators, is not allowed.

Use of such tools will result in denial of your evaluation or reward and closure of your account.

Remember:

PropScholar makes trading skill-based. You do not pay for the full challenge, but that does not mean unfair methods are allowed.

Once the evaluation program is purchased, the trader will receive the account login credentials immediately, typically within 120 milliseconds.

Changing, modifying, or attempting to reset the account credentials is strictly prohibited under all circumstances.

If a trader changes the account credentials, the account will be suspended.

After passing the evaluation, a trader can directly request their scholarship payout. There is no intermediate or additional process.

Payout requests are submitted directly from the dashboard.

Payouts are processed within 4 hours at PropScholar.

Giveaway and free accounts. If your account was received free of charge — through a giveaway, contest, community event, promotion, or as a gift — your scholarship payout is issued as PropScholar Wallet credit instead of a cash payout. Wallet credit can be spent on any challenge at checkout. It is not redeemable for cash and cannot be transferred or withdrawn. Accounts you paid for are not affected — those payouts are made normally.

PropScholar does not enforce any IP address restrictions on trader accounts.

Traders may access and trade on their accounts from any location or IP address without limitation.