Prop firms commonly restrict three trading practices: hedging positions across multiple accounts, copy trading, and trading around major news events. Each one breaks the same assumption, that the account is trading independently within its own risk limits.
Specifics vary by firm. Some ban a practice outright, some allow it with conditions, and some don't restrict it at all. Breaking a restriction that does apply typically voids the evaluation or funded account, regardless of whether the trades were profitable. The firms named below, including xato, show how differently these policies are written, so it's worth going straight into the specifics rather than staying abstract.
In short:
- Hedging positions across multiple accounts to guarantee an outcome is restricted by nearly every major firm.
- Copy trading policy ranges from an outright ban to allowed-with-conditions, depending on the firm and the signal source.
- Rules on trading during major news events range from a full position-size restriction to no restriction at all.
- Same-account hedging and cross-account hedging are treated as different things, not the same rule applied twice.
- Breaking a restriction usually voids the account, independent of profit or loss.
Why do prop firms restrict certain trading practices?
A prop firm's risk model assumes each account trades independently, on its own judgment, within its own risk limits. Hedging across accounts and copy trading both break that assumption in the same way, by making the outcome depend on something other than one trader's own decisions. Restricting them isn't about controlling how you trade in general; it's about making sure the specific thing being evaluated, independent trading skill within defined risk limits, is what's actually happening.
How hedging, copy trading and news rules compare across firms
Treating "prohibited trading practices" as one uniform rule undersells how much firms actually differ. Topstep (futures), Breakout (crypto), FTMO (forex and CFDs), and xato each publish their own position on the same three practices. Policies like these change without much notice, so the table is a snapshot rather than a permanent reference.
| Firm | Cross-account hedging | Copy trading | News-event trading |
|---|---|---|---|
| Topstep | Listed as a prohibited strategy | Allowed only between a trader's own linked accounts, via TopstepX or its API | Permitted; trading maximum position size directly into a scheduled major release is a listed violation |
| Breakout | Prohibited across accounts or traders, even under different names | Prohibited when it involves a third party's signals or strategy; trading your own accounts is unaffected | Fully permitted, no blackout window or position-size limit around releases |
| FTMO | Prohibited, described as group hedging across multiple accounts | Prohibited between different traders' accounts; copying your own accounts is generally permitted | Restricted on Standard accounts around high-impact releases; the Swing account type removes the restriction |
| xato | Prohibited, whether between two xato accounts or an xato account and a position held elsewhere | Prohibited, including copying signals, research calls, or coordinated entries from inside or outside xato | Fully permitted, no blackout window or position-size limit beyond xato's normal risk limits |
Prop firms commonly restrict three trading practices: hedging positions across multiple accounts, copy trading, and trading around major news events. Each one breaks the same assumption, that the account is trading independently within its own risk limits.
Specifics vary by firm. Some ban a practice outright, some allow it with conditions, and some don't restrict it at all. Breaking a restriction that does apply typically voids the evaluation or funded account, regardless of whether the trades were profitable. The firms named below, including xato, show how differently these policies are written, so it's worth going straight into the specifics rather than staying abstract.
In short:
- Hedging positions across multiple accounts to guarantee an outcome is restricted by nearly every major firm.
- Copy trading policy ranges from an outright ban to allowed-with-conditions, depending on the firm and the signal source.
- Rules on trading during major news events range from a full position-size restriction to no restriction at all.
- Same-account hedging and cross-account hedging are treated as different things, not the same rule applied twice.
- Breaking a restriction usually voids the account, independent of profit or loss.
Why do prop firms restrict certain trading practices?
A prop firm's risk model assumes each account trades independently, on its own judgment, within its own risk limits. Hedging across accounts and copy trading both break that assumption in the same way, by making the outcome depend on something other than one trader's own decisions. Restricting them isn't about controlling how you trade in general; it's about making sure the specific thing being evaluated, independent trading skill within defined risk limits, is what's actually happening.
How hedging, copy trading and news rules compare across firms
Treating "prohibited trading practices" as one uniform rule undersells how much firms actually differ. Topstep (futures), Breakout (crypto), FTMO (forex and CFDs), and xato each publish their own position on the same three practices. Policies like these change without much notice, so the table is a snapshot rather than a permanent reference.
Hedging across accounts
Hedging, in this context, means opening offsetting positions across two or more accounts so that one is guaranteed to profit regardless of what the market does. If you're long on one account and short the same instrument on another, the risk the evaluation is supposed to measure has been removed. Ordinary hedging as a risk management technique on one account, buying a protective option against a stock position, for example, isn't what any of these restrictions target; it's coordination across accounts that triggers the rule, not hedging itself.
The table above shows how each firm treats it, but two details are worth pulling out on their own. Breakout is explicit that hedging inside a single account is a different matter and isn't restricted at all. xato's version of that same-account question doesn't really arise in the first place: xato nets long and short fills on the same instrument within one account automatically, so there's no opposing-position state to hold.
Copy trading
Copy trading means mirroring another trader's positions, manually or through automated tools, rather than trading on independent judgment. The line most firms draw is the same one: copying your own accounts is fine, copying someone else's account or a third-party signal service generally isn't.
Topstep is the exception worth noting, it's the most permissive of the four, allowing a trade copier across a trader's own linked accounts through its own platform or API, though not on every account type. The others frame the restriction around the source of the signal rather than the tool used to act on it: mirroring a Telegram channel, a research report, or another trader's account counts as copy trading whether or not automation is involved.
Policies like these are also among the least consistently enforced, particularly where the copying is manual and harder to detect than account-to-account hedging. Worth confirming directly with any firm you're evaluating with if this is part of how you trade.
News-event trading
Some firms restrict trading around major scheduled releases, when volatility spikes and spreads can widen sharply; others don't restrict it at all and treat a release like any other moment in the market. The table above shows the split: Breakout and xato sit at the fully-permitted end, FTMO is the most restrictive on its Standard account type, and Topstep permits it generally but singles out one specific behavior, trading a full maximum position size directly into a release, as a listed violation.
Where firms do restrict it, the concern is usually that a single volatility-driven move doesn't represent the kind of trading the evaluation is meant to measure, and that execution risk during a fast move concentrates in a narrow window.
What happens if you break these rules?
Typically, the evaluation or funded account is voided, independent of whether the trades in question were profitable. A firm generally isn't evaluating whether you can make money once; it's evaluating whether you can trade independently within the rules you agreed to, and a violation undermines that regardless of the outcome.
Firms increasingly detect coordinated patterns, matched timing, device data, or account behavior across accounts, algorithmically rather than relying on traders to self-report.
How xato does this
Pulled together: xato prohibits cross-account hedging and copy trading on the same terms described above, and permits news-event trading without a blackout window, closer to Breakout's model than to Topstep's or FTMO's Standard-account restrictions. The one xato-specific mechanic worth flagging on its own is the same-account hedging question: it doesn't really arise, because xato nets long and short fills on the same instrument within one account automatically, so there's no opposing position to hold in the first place.
Hedging across accounts
Hedging, in this context, means opening offsetting positions across two or more accounts so that one is guaranteed to profit regardless of what the market does. If you're long on one account and short the same instrument on another, the risk the evaluation is supposed to measure has been removed. Ordinary hedging as a risk management technique on one account, buying a protective option against a stock position, for example, isn't what any of these restrictions target; it's coordination across accounts that triggers the rule, not hedging itself.
The table above shows how each firm treats it, but two details are worth pulling out on their own. Breakout is explicit that hedging inside a single account is a different matter and isn't restricted at all. xato's version of that same-account question doesn't really arise in the first place: xato nets long and short fills on the same instrument within one account automatically, so there's no opposing-position state to hold.
Copy trading
Copy trading means mirroring another trader's positions, manually or through automated tools, rather than trading on independent judgment. The line most firms draw is the same one: copying your own accounts is fine, copying someone else's account or a third-party signal service generally isn't.
Topstep is the exception worth noting, it's the most permissive of the four, allowing a trade copier across a trader's own linked accounts through its own platform or API, though not on every account type. The others frame the restriction around the source of the signal rather than the tool used to act on it: mirroring a Telegram channel, a research report, or another trader's account counts as copy trading whether or not automation is involved.
Policies like these are also among the least consistently enforced, particularly where the copying is manual and harder to detect than account-to-account hedging. Worth confirming directly with any firm you're evaluating with if this is part of how you trade.
News-event trading
Some firms restrict trading around major scheduled releases, when volatility spikes and spreads can widen sharply; others don't restrict it at all and treat a release like any other moment in the market. The table above shows the split: Breakout and xato sit at the fully-permitted end, FTMO is the most restrictive on its Standard account type, and Topstep permits it generally but singles out one specific behavior, trading a full maximum position size directly into a release, as a listed violation.
Where firms do restrict it, the concern is usually that a single volatility-driven move doesn't represent the kind of trading the evaluation is meant to measure, and that execution risk during a fast move concentrates in a narrow window.
What happens if you break these rules?
Typically, the evaluation or funded account is voided, independent of whether the trades in question were profitable. A firm generally isn't evaluating whether you can make money once; it's evaluating whether you can trade independently within the rules you agreed to, and a violation undermines that regardless of the outcome.
Firms increasingly detect coordinated patterns, matched timing, device data, or account behavior across accounts, algorithmically rather than relying on traders to self-report.
How xato does this
Pulled together: xato prohibits cross-account hedging and copy trading on the same terms described above, and permits news-event trading without a blackout window, closer to Breakout's model than to Topstep's or FTMO's Standard-account restrictions. The one xato-specific mechanic worth flagging on its own is the same-account hedging question: it doesn't really arise, because xato nets long and short fills on the same instrument within one account automatically, so there's no opposing position to hold in the first place.
Frequently asked questions
Ordinary risk management on a single account generally is. Using multiple accounts to guarantee an outcome regardless of market direction is restricted by nearly every major firm.