The Dolvero rules prohibit three specific categories of trading strategy: hedging, martingale position sizing, and latency arbitrage. This is not a list of vague prohibitions — each one has a precise definition, a clear rationale, and a specific detection methodology used in compliance review. If you are trading at Dolvero or considering it, understanding all three in depth is not optional.
Why Strategies Are Prohibited at All
Before examining each prohibited strategy, it is worth understanding the underlying principle. Prop firms fund traders for one purpose: to generate genuine trading profit on real markets, using the firm's capital, sharing the upside through a defined profit split.
A strategy that is prohibited is one that undermines this arrangement in a specific way — either by exploiting the evaluation structure rather than the market, by creating firm-side risk that the business model cannot sustain, or by generating evaluation-passing performance through mechanics that do not translate to funded account performance.
Prohibition is not about protecting the firm from losing money on funded accounts — that risk is inherent and accepted. It is about ensuring that the evaluation process measures what it is supposed to measure: whether a trader has genuine market edge.
1. Hedging
What it is
Hedging, in the context of prop firm rules, refers specifically to holding simultaneously open long and short positions on the same instrument — or on instruments that are designed to offset each other — within the same account, at the same firm.
Example: buying 1 lot of EUR/USD and simultaneously selling 1 lot of EUR/USD creates a net-zero exposure position. The two positions cancel each other. Neither makes nor loses money as price moves, ignoring spread.
Why it is prohibited
Hedging of this type does not generate real market exposure. A net-zero position does not participate in price discovery. When a trader holds offsetting positions across the full duration of a restricted period — such as news events — they are exploiting the ability to appear active without accepting the risk that the restriction is designed to manage.
More fundamentally: if a trader holds a matched long/short in EUR/USD across a weekend (where weekend holding is prohibited by default), the positions create the technical appearance of being "open" while generating no net exposure. This is evasion of the rule's intent, not compliance with its letter.
What is not hedging
Having open positions on correlated instruments is not hedging in the prohibited sense. Being long EUR/USD and long GBP/USD simultaneously is a correlated exposure, not an offset. Being long a currency pair and short a related pair as part of a deliberate multi-leg strategy is evaluated on its merits.
Legitimate risk reduction through position sizing, stop-losses, and thoughtful instrument selection is not hedging. The prohibition is specific to simultaneous long/short on the same or directly offsetting instruments designed to create net-zero exposure.
How compliance identifies it
Simultaneous offsetting positions are structurally visible in trading data. Compliance review examines position direction, instrument, size, and open duration. Positions that create net-zero or near-net-zero exposure on the same instrument for meaningful durations are flagged for review. Intent is relevant but secondary — the structural effect is what the rule addresses.
2. Martingale Position Sizing
What it is
Martingale is a position sizing approach in which the size of each new position is increased — typically doubled — following a loss, with the intent of recovering previous losses in a single subsequent winner. The classic sequence: bet $1, lose; bet $2, lose; bet $4, lose; bet $8, win. The $8 win recovers $1+$2+$4=$7 in losses plus generates $1 net profit.
In trading contexts, this manifests as: trade 0.5 lot, take a loss; trade 1.0 lot, take a loss; trade 2.0 lots. The position size escalates with the losing streak.
Why it is prohibited
Martingale does not generate market edge. It generates the statistical illusion of edge by compressing winning streaks and catastrophically amplifying losing streaks. The mathematics are unambiguous: in a market with zero or negative expected value per trade, martingale guarantees eventual ruin — it simply delays it while maximizing the destruction when ruin arrives.
For a funded account, the catastrophic loss event in a martingale sequence is not a trader's personal loss — it is a firm loss. A trader who runs a martingale sequence that generates several consecutive evaluation-passing months before the inevitable catastrophic drawdown has not demonstrated edge. They have demonstrated the temporary illusion of edge, paid for by the firm when the sequence fails.
The 2% maximum risk per trade rule at Dolvero provides substantial protection against this by limiting the position size in any single trade. However, a trader who systematically increases position sizes following losses — even staying within the 2% limit per trade — is exhibiting martingale logic, and this behavior is prohibited regardless of whether each individual trade technically complies with the size limit.
What is not martingale
Increasing position size following a winning streak (pyramiding), or varying position size based on conviction and setup quality rather than outcome history, is not martingale. Strategic scaling into a position over multiple entries at different price levels is not martingale. The prohibition is specifically about size escalation as a function of loss recovery logic.
How compliance identifies it
Compliance review examines position size sequences over time. A pattern where position sizes consistently increase following losing trades — particularly where the size increase corresponds to multiples of the prior loss — is flagged for martingale review. The pattern is distinguishable from legitimate size variation by its correlation with prior trade outcomes rather than with setup-specific factors.
3. Latency Arbitrage
What it is
Latency arbitrage exploits the time delay between when price information is available at one data source and when that information is reflected in the quoted prices on the trading platform being used. A trader with access to faster price data can see where the market has moved before the broker's quote has updated, allowing them to enter trades with a known directional edge before the spread catches up.
In practice, this typically involves using a faster data feed — from a different broker, exchange, or data provider — to identify price movements, then executing trades on the slower platform before its quotes update. The trader is not predicting market direction; they are exploiting a pure information latency gap.
Why it is prohibited
Latency arbitrage does not generate trading profit from market insight or risk acceptance. It generates profit from a mechanical inefficiency in the trading infrastructure that the firm cannot sustainably offer. Every latency arbitrage win comes directly from the firm's own spread and position management, not from the market.
More precisely: latency arbitrage does not transfer value from other market participants — it transfers value from the broker/firm's own P&L through stale quote exploitation. When scaled, this becomes a direct liability for the firm rather than a participation in market price discovery.
A trader who passes an evaluation using latency arbitrage has not demonstrated that they can generate profit from markets. They have demonstrated that they can exploit a platform inefficiency. On a funded account with better infrastructure, the same approach generates zero edge because the latency gap closes. The evaluation-passing performance is completely non-transferable.
What is not latency arbitrage
Trading news releases based on fundamental analysis — even when executing quickly after an announcement — is not latency arbitrage. Using faster connections, co-location services, or optimized execution infrastructure to reduce your own execution latency is not latency arbitrage; it is legitimate execution optimization.
The distinction is directional: latency arbitrage exploits price information available from a faster source that is not yet reflected in the platform's quotes. Execution speed optimization is about how fast your own orders reach the market, not about exploiting a known future price move.
How compliance identifies it
Latency arbitrage exhibits characteristic signatures in trade data: very short holding periods (often seconds), consistent positive P&L on entry (meaning the trade is profitable from the first tick), and clustering of trades during periods of high market volatility when latency gaps are widest. These patterns, particularly in combination, are flagged for review.
Consequences of Prohibited Strategy Use
Use of any prohibited strategy results in evaluation disqualification. This means:
- The evaluation account is closed
- The evaluation fee is not refunded
- Any profits generated during the evaluation period are not paid out
- Future evaluation eligibility may be affected at Dolvero's discretion
Prohibited strategy detection can occur during an evaluation (resulting in immediate closure) or retrospectively during payout review (resulting in payout denial). We do not issue warnings before disqualification for prohibited strategy use — the prohibition is clear, and compliance review is thorough.
If You Are Uncertain About Your Strategy
If you have a trading approach that you are uncertain about — particularly involving multi-leg positions, position sizing rules that vary based on recent results, or any use of external data for execution timing — contact support before you begin trading, not after. A descriptive explanation of your intended approach can be reviewed by our compliance team, and you will receive a clear determination of whether the approach is permitted.
We do not penalize traders for asking compliance questions in advance. We do review all trades against the prohibited strategy criteria regardless of what traders have disclosed.
Full rules at /rules. Start an evaluation at app.dolvero.com/start.
