Noxious Trading is defined as reckless risk-taking, impulsive behavior, and a disregard for fundamental principles. The threat of toxic trading jeopardizes not only individual trader accounts but also the stability of proprietary trading firms. We will shed light on toxic trading, defining its various manifestations and underscoring the imperative for vigilance and responsibility in the pursuit of profitable trading strategies.

Trading is driven by emotions rather than rational analysis, similar to gambling. Traders may pursue losses, make impulsive trades, or display addictive tendencies, leading to negative trading outcomes. Your biggest loss should not exceed 3% of the account size on the Master accounts only. Splitting up a trade into multiple positions will be counted as one single trade.

Continuously entering and exiting trades without a clear strategy or rationale, resulting in diminished profitability and emotional exhaustion.

All forms of arbitrage are considered toxic due to the lack of a clear underlying idea, strategy, or rationale. Below are two common arbitrage strategies:

Hedge Arbitrage: Simultaneously entering opposing positions with different firms.

Latency Arbitrage: Exploiting disparities in trade execution times across various trading platforms or venues. Traders using this strategy seek to profit from minor price differences resulting from delays in order processing or data feed.

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.

Inconsistent behaviors, such as trading during non-liquid market hours to exploit liquidity shortages, consistently disregarding risk management principles, or making emotional decisions.

Signs and behavior, which includes risking the full daily loss on one trade, which often indicates reverse trading between different firms.