Opposite Direction Rule

Prevent hedging violations by automatically closing positions before reversing direction.

Critical Rule: Most prop firms prohibit holding simultaneous long and short positions in the same instrument. Violating this rule can result in immediate account termination.

What Is the Opposite Direction Rule?

The opposite direction rule means you cannot be long and short the same instrument at the same time. This is also called "hedging" or "netting." For example, you cannot hold 2 long ES contracts while also holding 1 short ES contract.

Prop firms prohibit this because:

It locks in losses without actually exiting the trade
It can be used to manipulate drawdown calculations
It indicates undisciplined trading behavior

How TradingPlace Handles This

When you place an order in the opposite direction of your current position, TradingPlace automatically:

Detects you have an existing position
Closes the existing position first
Opens the new position in the opposite direction

Example Scenario

You are long 2 MES contracts at 5000. The market reverses and you want to go short.

Without TradingPlace: If you accidentally click "Sell 2" instead of "Close Position" then "Sell 2", you might end up with a hedged position (long 2 + short 2 = violation).

With TradingPlace: When you click "Sell 2", the system first closes your 2 long contracts, then opens 2 short contracts. No hedging occurs.

Why Manual Execution Fails

Traders accidentally hedge positions because:

Fast markets - In volatile conditions, you click quickly without checking existing positions
Multiple accounts - You lose track of which accounts have which positions
Order confusion - Mixing up "close" and "sell" when already long
Partial fills - A close order partially fills, then your reversal creates a hedge

Automatic protection: TradingPlace checks every order against existing positions before execution. You cannot accidentally create a hedged position.

Multi-Account Behavior

When trading multiple accounts, the opposite direction rule applies per-account:

Each account is checked individually
Account A being long doesn't affect Account B going short
Within each account, positions are always net (no hedging)

Edge Cases

Scaling In and Out

You can scale into positions without triggering opposite direction protection:

Long 1 contract, buy 1 more = Long 2 contracts (no issue)
Long 2 contracts, sell 1 = Long 1 contract (no issue)
Long 2 contracts, sell 3 = automatically closes long 2, opens short 1

Bracket Orders

Stop loss and take profit orders are not affected. These are exit orders that close your position, not opposite direction entries.

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