Rules & Guidelines
Can you hold trades overnight? Some strategies require it. Others avoid it entirely. Knowing what is allowed before you enter a trade is not optional.
Overnight trading is one of the most polarizing topics in funded trading. Prop firms have different policies, and the rules can vary even between account types at the same firm. Knowing the rules before you hold overnight is the difference between a valid strategy and an instant account violation.
Futures markets trade nearly 24 hours, but liquidity drops significantly outside regular US session hours. When you hold through the close, you are exposed to thin order books, wider spreads, and global events that move price while you sleep.
Overnight risk is not theoretical. It happens regularly around earnings, geopolitical events, and after-hours economic data releases. Size for the worst-case gap, not the expected one.
All positions must be flat before session close. Simplest and safest for the firm.
Allowed on specific account types but with reduced contracts or tighter margin.
No additional restrictions beyond normal drawdown rules. Full responsibility on the trader.
The restriction makes sense from the firm's perspective. A position within all limits at the close can violate the drawdown on the next session's open if the gap is large enough.
EOD drawdown evaluated at session close, not intraday. An overnight gap that recovers by the next close does not trigger a violation. No daily loss limit on 25K tier.
End-of-day trailing drawdown with daily loss limits. Same contract sizes as Trailing. Drawdown only updates after the close, so overnight equity dips that recover do not raise the floor.
Fixed drawdown floor. A gap that pulls equity down temporarily does not raise any floor. As long as balance stays above the static floor, you are safe.
If your equity peaked during the session and you hold a position that gaps against you, the trailing floor may already be close to your current balance. Check the floor before deciding to hold.
During the day, you manage trades actively and can exit on a stop. Overnight, you have zero control until you return to the screen.
Size overnight positions at 25% to 50% of your intraday size. Trade 4 ES during the day? Hold 1 or 2 overnight. Trade 20 micros? Hold 5 to 10.
Assume worst-case gap of 2x to 3x ATR. On ES with 40-point ATR, plan for 80 to 120 point gap. If the resulting loss breaches your drawdown floor or daily loss limit, reduce size or go flat.
Holding 5 MES overnight = same directional bet as 0.5 ES contracts. The gap risk is 10x smaller than a full-size contract. Maintain exposure, manage risk.
Strategies target moves over days or weeks. Forcing them to flatten at the close kills the strategy entirely.
Hold when a strong trend is in play and continuation is expected. Works when thesis is sound and sizing accounts for gap risk.
Designed around intraday moves. Closing before session end eliminates unnecessary risk.
If you are unsure whether you need overnight exposure, start by trading intraday only. Add overnight holds once you understand how gaps affect your specific markets.
