Overview

NexGen does not permit Ultra-Short-Term Trading (USTT) in our funded trading plans. USTT is defined as a strategy that involves executing trades within seconds, aiming to capture minimal price movements. While this approach may seem appealing in simulated environments, it is not reflective of realistic market conditions and poses significant challenges in live trading. This document outlines the reasons for this policy and explains why it is crucial for maintaining a fair and reliable trading environment.

Key Characteristics of Ultra-Short-Term Trading

• Trade Duration: Positions are generally held for around but not 20 seconds.
• Profit Targets: Trades target small gains, typically less than 1 or 2 contract tick size.
• High Trade Frequency: Dozens of trades are executed within minutes.
• Tight Stop Losses: Stops are often placed within 1 tick of entry prices to minimize loss.
• Combination Factors: When some or all of the above characteristics are combined in various trades.

Why NexGen Does Not Allow Ultra-Short-Term Trading

1. Unrealistic Market Conditions: USTT relies heavily on perfect trade execution, with instant fills and no slippage. In live markets, such perfect conditions are rarely achievable, as market volatility and liquidity fluctuations often result in execution delays or missed trades.
2. Execution and Slippage Risks: Small profit targets in USTT do not account for real-world slippage and delayed fills. In live trading, even minimal slippage can turn a winning trade into a losing one, making the strategy unviable over time. USTT often exploits the lack of slippage in simulated environments, giving traders a false sense of success.
3. Order Queueing and Delays: In live markets, orders are filled based on a priority queue. USTT often involves executing trades at prices that may not be available due to liquidity issues or competition in the order book, resulting in missed opportunities that simulation environments do not account for.
4. Market Liquidity and Volatility: USTT is highly dependent on consistent market liquidity, but in live trading, liquidity fluctuates rapidly, especially during volatile periods. In illiquid markets, traders may not be able to exit their positions at the intended price, leading to larger-than-expected losses.
5. Unreliable Profitability: While USTT may appear profitable in the short term within simulations, the inability to consistently execute trades at ideal prices in live markets makes it unsustainable. Small margins leave no room for error, and even slight market changes can result in cumulative losses.
6. Exchange rules:  Exchange rules prohibit behavior described but not limited to above.

Examples of Prohibited Ultra-Short-Term Trading:

1. Minimal Profit Target:
   • Contract: S&P 500 E-mini (ES)
   • Buy at: 4378.75
   • Sell at: 4379.00
   • Duration: 9 seconds
   • Profit: $12.50 (0.25 point)
   • Why Not Allowed: Small profit targets like this rely on perfect market conditions, where liquidity and price movement align precisely. In reality, slippage or microsecond delayed execution would likely erase these gains.
2. Quick Scalping:
   • Contract: NASDAQ 100 E-mini (NQ)
   • Buy at: 15152.00
   • Sell at: 15152.75
   • Duration: 5 seconds
   • Profit: $20.00 (0.75 point)
   • Why Not Allowed: The 5-second trade window is unrealistic in a live market, where price volatility and queue position could cause execution delays, making this trade unachievable.
3. Tight Stops:
   • Contract: Dow Jones E-mini (YM)
   • Buy at: 34920.00
   • Sell at: 34921.00
   • Duration: 12 seconds
   • Profit: $10.00 (1 point)
   • Why Not Allowed: Tight stops are frequently stopped out due to slippage in live markets. Relying on tight stops in USTT leads to frequent losses and exposes the trader to unnecessary risk.
4. High Frequency Trade:
   • Contract: Crude Oil Futures (CL)
   • Buy at: 90.55
   • Sell at: 90.60
   • Duration: 7 seconds
   • Profit: $50.00 (0.05 point)
   • Why Not Allowed: Crude oil is a highly volatile contract, and small ticks are prone to significant slippage. Capturing a small profit with this frequency in a live environment would be extremely difficult and prone to losses due to volatility.
5. Short-Term Profit:
   • Contract: Gold Futures (GC)
   • Buy at: 1917.40
   • Sell at: 1917.60
   • Duration: 14 seconds
   • Profit: $20.00 (0.2 point)
   • Why Not Allowed: In live trading, volatility in the gold market can cause price movements to shift significantly, and trying to capture small profits without considering price fluctuations would likely result in the trade failing to meet expectations.

Consequences of USTT Violations

Any trader found engaging in USTT will be subject to disciplinary action, including but not limited to:

1. Warning: For first-time, minor violations, traders may at the discretion of the firm, be issued a formal warning and guidance on acceptable trading practices.
2. Account Suspension: Repeated or any severe violations will result in suspension of trading privileges.
3. Account Termination: At the sole discretion of the company this may lead to termination of the trading account.
4. Disqualification from Funded Programs: Traders found violating this policy may lose their eligibility for current and future funded trading.
5. Profit Forfeiture: Any profits generated through USTT strategies will be forfeited, as they do not reflect valid trading practices.
6. In no circumstances will the company refund fees paid if an account/trader is suspended, terminated or banned.

Detection Methods

NexGen may employ a combination of automated systems and manual reviews to detect USTT:
Including but not limited to:

1. Algorithmic Monitoring: Algorithms may be used to analyze trading patterns to identify characteristics of USTT.
2. Statistical Analysis: Regular statistical reviews of trade durations, frequencies, and profit targets are conducted.
3. Manual Oversight: Our experienced compliance team reviews flagged trades and trading patterns.

While we do not disclose the specific parameters of our detection methods to maintain their integrity, traders should be aware that all trading activity is subject to thorough scrutiny.

Appeal Process

Traders who believe they have been incorrectly identified as engaging in USTT may appeal the decision:

1. Submit a written appeal to compliance@nexgenfuturestrader.com within 5 business days of notification.
2. Include account details, trade information, and a detailed explanation of why the trades in question do not constitute USTT.
3. Provide evidence to support their claim.
4. Appeals will be reviewed by a committee within 10 business days.
5. The decision of the appeal committee is final.

During the appeal process, any account restrictions will remain in place.

Regular Policy Review

This policy is subject to regular review and may be updated as market conditions, technology, or regulations evolve. Traders will be notified of any significant changes to this policy. It is the responsibility of each trader to stay informed about the current version of this policy.

Alignment with Regulatory Bodies

NexGen’s USTT policy is intended to align with guidelines and regulations set forth by relevant regulatory bodies, including but not limited to the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA). Our policy may be adjusted to remain compliant with any changes in regulatory requirements. We will ensure that every effort is made to remain compliant.

Exceptions

As a rule, there are no exceptions to the USTT policy. However, in rare and extraordinary market conditions, NexGen management may temporarily adjust trading parameters, entirely at its discretion. Any such adjustments will be clearly communicated to all traders in advance and will apply universally.

Contact Information

For any questions or clarifications regarding this policy, please contact our Compliance Department:

• Email: compliance@nexgenfuturestrader.com
• Hours: Monday to Friday, 9:00 AM to 5:00 PM EST