Risk Management – An Overview
The objective of the T4T Practical Assessment is to assess if you are able to adhere to our rules for trading our live accounts. The rules are simple and the limits are in place to not only protect our capital but also to protect your profits.
Please do not request exclusion from any of these rules. They are there for both our benefit.
Risk Management Limits
|Assessment Account Size
|Maximum Drawdown Limit
The limit is in place to protect our capital. These are hard account/equity balance levels that cannot be broken. They remain static for the duration of the Assessment phase.
If you Breach the Limit your account will require a reset to continue with the opportunity to become a funded trader with T4TCapital.
The Maximum Drawdown Level
The is the safety net for our Capital. It is calculated by taking 5% of the starting account size, in this case $100,000 and subtracting the 5% or $5,000 to obtain a Maximum Drawdown Level of $95,000.
Should you make a profit during the first week the $5,000 trails (your highest account balance) just like a trailing stop on a trade until the level hits the account start balance, where it then remains static at that level for the life of the account.
For example, if you reach an account balance of $105,000 the Max Drawdown becomes $100,000 at this point it never moves. If you then increased your account balance to $106,000 the Max Drawdown remains static at $100,000.
The rules cover all account sizes and are industry standard rules. When we mean industry standard we mean professional trading rules employed by the financial institutions such as the banks, hedge funds and mutual funds. These trading rules are managed by our trading server at T4TCapital.
If you breach one of these trading rules, your account will not require a reset, instead the trade that you placed that breaches a rule will be automatically closed at market. You will more than likely incur a small loss due to transaction fees. Think of it as a penalty for breaking the rules!
Rule 1 – All trades must have a Valid Stop Loss attached to every trade at entry into the market.
- You should not open a position and then add a stop loss afterwards. The stop loss should be a pending order attached the entry position.
- To be VALID your Stop Loss must be within your available limit.
You can use any trading methodology you wish and you can even use robots or EA’s however you are responsible for ensuring they have a Valid Stop Loss attached when the position is opened.
Rule 2 – All Trades Will be Closed Automatically by T4TCapital on Friday @7PM GMT.
This is a very basic rule. All trades either open or pending will be closed automatically by T4TCapital on Friday at 7PM GMT.
Over the last few years with the numerous geopolitical issues, gapping on the Monday open has been commonplace. It is an unnecessary risk to have trades open over the weekend when the market is closed.
If you want a long term trade then simply exit the trade on Friday and enter back into the trade on Monday at the same (or close ) to the same price.
Open positions over the weekend when the market is closed is huge and unacceptable risk for T4TCapital.
Rule 3 – Maximum Position Risk
Maximum Position Risk on any one trade must not exceed 2% of your account balance & Total Open Risk at any one time must not exceed 3%.
Before a trader opens any position, they will have 3% of risk available. If the Maximum Loss Limit is within 3% then they will only have that smaller limit available.
Single Position Risk – If a trader opens a position that exceeds 2% risk of the account balance then the trade will be closed out immediately, and the trader is notified of the soft breach. They can continue to trade.
Total Open Risk – If the total open risk is above 3% it closes out the most recent position opened immediately, and the trader is notified of the soft breach. They can continue to trade.
Updating Available Risk – If a trader has 2 trades open with risk totally 3% and the positions are in profit, if they raise their stop loss orders to breakeven on both trades then they get 3% of additional ‘Available Risk’ to trade with.
Rule 4 – No Outlier Profit Days
Your largest profit day must be below 40% of your total profits made.
We want profitable traders with consistent risk management, not one hit wonders that make a lot of money on one day and lose every other day. If there’s no plan going up then there’s definitely no plan going down!
Rule 5 – Unlimited Time Limit (extend every 6 Months)
At the end of 6 months, if you have not hit the profit target your account will be disabled or you can choose to extend the time limit by an additional 6 months by paying the ‘extension fee’.
Extension Fee Option
If your account is in profit, but you’re not quite there yet then you will have the option to ‘extend’ the time limit by another 6 months by paying the ‘extension fee’ ($100). Your current ‘account balance’ will remain in the account to give you the best opportunity to pass the Assessment.
If You’re Account is in Drawdown
If your account is in drawdown and you do not want to extend the time limit, then you can simply let the time limit expire and your account will be disabled. If you want to try again you can by resetting your recent disabled account by paying the ‘reset fee’. You will be issued a new account with a fresh 6 month time limit.
If you want to extend the time limit on your account simply contact our team and they will arrange the extension once you’ve paid the ‘extension fee’ of $100.