Consistency Rule
The Consistency Rule ensures that your trading strategy is balanced and not dependent on high-risk or one-off trades.
What It Means:
No single trade can account for more than 30% of your total profits during the evaluation.
This encourages disciplined trading, demonstrating your ability to maintain consistency over time.
Example:
Suppose you’ve made $10,000 in total profits during your evaluation. No single trade should contribute more than $3,000 (30%) to that total.
If a trade exceeds 30% of your profits, it may result in failing the evaluation—even if you meet other requirements.
Drawdown Limits
Managing drawdown effectively is critical to passing the evaluation. The system uses two types of drawdown to assess your risk management:
Max Drawdown:
The maximum amount you can lose relative to your starting balance.
Example: For a $50,000 Options Account, the max drawdown is $2,500 (5%).
Trailing Drawdown:
A dynamic drawdown limit that adjusts upward as your equity increases.
It is calculated based on your equity peak and ensures you maintain consistent performance as you grow your account.
Example:
A $50,000 Stocks Account starts with a $48,500 trailing drawdown ($50,000 - $1,500).
If your equity peak rises to $55,000, the trailing drawdown adjusts to $53,500 ($55,000 - $1,500).
Why It Matters:
These limits are in place to encourage careful risk management and prevent excessive losses.
Other Requirements
While profit and drawdown limits are critical, there are additional rules to follow to ensure you meet all evaluation criteria:
Minimum Number of Trades:
You must execute at least 10 trades during the evaluation. This ensures your performance isn’t based on too few trades and reflects consistent effort.
Post-Evaluation Rules:
Once you pass the evaluation, some rules, such as the profit target, no longer apply. However, the Consistency Rule and Drawdown Limits remain in effect.
Tip: Even after passing the evaluation, maintaining disciplined trading is essential to success in your Performance Account.