Are Overnight Trades Allowed in Prop Accounts?
When trading with a funded account, one of the first rules to clarify is whether prop firm overnight positions are permitted. These rules can greatly affect your trading strategy, especially if you trade swing setups or hold trades for more than a few hours. In this guide, we’ll explore the logic behind overnight trading restrictions, the types of traders affected, and how to plan your trading while staying compliant with prop firm guidelines.
Understanding Overnight Position Rules in Prop Trading
Most prop firms establish strict rules around holding trades overnight. The term “overnight” typically refers to holding open positions beyond the end of the trading day—often around 5:00 PM EST for forex or futures, and the end of the session for equities.
The primary reason behind these restrictions is risk control. Overnight markets often experience low liquidity, wide spreads, or unexpected news events that can trigger significant volatility. Since the prop firm provides capital, they want to minimize the risk of sudden losses outside regular trading hours.
Why Do Prop Firms Limit Overnight Holding?
Before committing to any trading plan, you need to understand the “why” behind the restriction. Here are a few key reasons:
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Market Gaps: News events that occur when markets are closed can create large gaps at the next open. These price jumps can bypass stop-loss levels, exposing the account to more risk than intended.
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Spread Widening: During after-hours trading, spreads often widen due to limited liquidity. This can trigger margin calls or unexpected losses.
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Operational Risks: Prop firms need time to manage their own liquidity, accounting, and platform maintenance. Restricting overnight exposure helps maintain orderly operations.
Because of these factors, many firms either prohibit or tightly control overnight trading in the evaluation phase—and sometimes even after funding.
Exceptions to Overnight Trade Bans
Though most firms impose restrictions, some allow overnight trades under certain conditions:
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With Prior Approval: Some firms may permit overnight trades on specific assets or under managed risk terms.
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During Live Accounts Only: While evaluations may prohibit it, funded traders in live stages might be given more flexibility.
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On Specific Assets: Instruments like forex might be allowed overnight if volatility is expected to remain low.
It’s crucial to read and understand the trading rules provided by your firm. Violating overnight position rules can lead to instant failure of your challenge or the loss of a funded account.
Who Is Most Affected by These Rules?
Swing traders and position traders are most impacted by prop firm overnight position rules. These traders often hold trades for multiple days or even weeks. If overnight trades are disallowed, they may need to adjust their strategy or avoid prop accounts altogether.
On the other hand, day traders—especially those using scalping or intraday breakout strategies—can operate comfortably within these constraints. They close all positions before the trading day ends and are less affected by such rules.
Managing Risk Without Overnight Positions
If you’re not allowed to hold trades overnight, you can still manage risk effectively and adapt your trading approach. Here are some strategies:
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Use Tight Risk Controls: Focus on shorter timeframes with strict risk-to-reward setups. This allows you to complete trades within the day while still aiming for good profits.
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Pre-Session Planning: Analyze overnight news and global market sentiment before the session starts to anticipate strong moves and structure your entries accordingly.
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End-of-Day Closure Discipline: Set reminders or trading system rules that force position closure before the cutoff. Avoid last-minute decisions that can lead to mistakes.
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Use Breakout and Reversal Strategies: These are suited to high-volatility periods like market open or news releases—times when you don’t need to stay in trades overnight.
By shifting your focus, you can still trade effectively and within the guidelines.
Best Practices for Navigating Prop Firm Overnight Positions
Prop firm overnight positions—or the lack thereof—shouldn’t limit your trading success if you follow best practices. These include:
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Read the Rulebook Thoroughly: Every firm has slightly different rules. Confirm whether overnight trades are allowed during challenges, verification stages, or after funding.
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Set Exit Timers: Use automated alerts or even expert advisors to ensure trades close before the deadline.
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Choose the Right Strategy: Opt for strategies that match the time constraints. Scalping, news trading (if permitted), and intraday trend-following are strong options.
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Track Your Results: Monitor the performance of your adapted strategies in a trading journal. This helps you stay disciplined and evolve over time.
A Closer Look at Larsa Capital’s Overnight Trade Policy
Larsa Capital is known for offering clear trading conditions with a strong focus on capital protection and account stability. According to its trading guidelines, there may be certain restrictions or specific requirements regarding overnight positions—especially during the evaluation phase or after funding.
These policies are designed to minimize the risks associated with after-hours market behavior, such as price gaps or low liquidity periods.
Therefore, traders working with Larsa Capital are encouraged to carefully review the trading rules for each phase and ensure their strategy aligns with the firm’s expectations, particularly when it comes to managing trades at the end of the trading day.
Final Thoughts
Overnight trading restrictions are a standard risk management practice in the proprietary trading world. While these limitations may feel restrictive, they are actually an opportunity for traders to sharpen their discipline, improve timing, and build strategies that work within clearly defined boundaries.
Traders who understand and respect these limits are more likely to succeed in passing evaluations and managing funded accounts. Whether you’re a scalper, a momentum trader, or an intraday breakout specialist, you can thrive—even without holding positions overnight.
If you’re aiming to work with a firm like Larsa Capital, remember: compliance with the rules is not just about avoiding penalties—it’s a sign of professionalism and readiness for the prop trading world.
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