Definition of Consistency Rule
What is a consistency rule?
A consistency rule is what funded trading programs put in place as a guideline for how traders are expected to perform. It should be noted that consistency rules are peculiar to each funded trading program. They allow the funded trading companies to measure the decisiveness and stability of the trading decisions made by the traders.
Despite the obvious potential profit that trading holds, there is also an equal level of risk which is why traders require a trading plan that encompasses excellent risk and money management strategy as this will be reflected in the way they trade.
In other words, a consistency rule clearly outlines what a particular funded trading program allows and rejects. This way, traders can identify their targets and limits while also avoiding flouting any rule.
Why funded trading programs require consistency rules?
The reason funded trading programs institute consistency rules is quite simple and it will be explained with an illustration. Whenever a bank wants to lend people money, one major thing that will be asked for is collateral so that the bank can have some sort of assurance that the loan will be paid back or at the very least, have something similar to the value of the money borrowed in case the individual fails to pay back.
It is also like that with consistency rules as it allows the company in charge of the program to detect early on which traders will be careless and wasteful with funds, especially as a result of employing an illogical approach to trading and depending on luck.
Considering that these companies provide the funds and bear a major part of the risks while traders are also entitled to a larger share of the profits made, then consistency rules are necessary. This enables traders to take the evaluation processes seriously because they know that if they keep flouting and disregarding the consistency rules, they are likely to forfeit their chances of getting funded.
So, the consistency rules protect the companies providing the funds for the trading programs, while at the same time stimulating traders to be intentional, determined, strategic, and focused in their approach to trading. This way, both parties get what they want: the companies get to help serious traders that need funding, and such traders get the required funds to build a trading career.
Consistency rule for Topstep
What is The Consistency rule At Topstep?
The consistency rule for Topstep is referred to as the Consistency Target which evaluates the ability of a trader to make profits steadily while also managing risks. It especially comes into play in Step 2 or Pro Account of the evaluation process as traders need to have their best day at less than 40% of the total profits made.
If the best day (highest day of profit) of the trader is equal to or exceeds 40% of the total profits made for a specific trading period, the trader will have to continue trading until that figure is below 40% of the total profits.
What is the Purpose of the Consistency Target?
For traders to grow their accounts sustainably, consistency is a crucial factor and the Consistency Target evaluates long-term, consistent profitability. For traders to achieve consistent profitability, they need to produce steady trading performances.
The Topstep consistency rule tries to verify that the trader didn’t make his profits by chance.
The major purpose of the Consistency Target is to determine the ability of a trader to strike a balance between making steady profits and managing risks as this will allow the trader to turn their passion into a profession, grow the account consistently, and begin to earn significant profits.
How we Calculate the Consistency Target at Topstep?
It is done in relation to the trader’s profit for the best day as well as the overall profit for the account. As long as the trader’s best day is maintained below 40% of the overall profit, then the trader is meeting the target requirement. The trader can monitor this through their dashboard where it is displayed as “Best Day % of Total Profit”. The method for calculating the Consistency Target is shown below:
- Calculation: Best Day Profit ÷ Overall Profit = Best Day % of Total Profit
Example for 50K Size Account:
- $1100 Best Day ÷ $3,200 Overall = 34%
In this example the trader is good, the Best Day % of Total Profit is below 40%.
- $1400 Best Day ÷ $3,200 Overall = 46%
In this example, the trader didn’t meet the consistency rule, the Best Day % of Total Profit is above 40%, so he needs to keep trading until this value is below 40%.
This is also an indication that there is a potential to reach the Consistency Target with just three winning days as long as each winning day is kept below 40% of the overall profit and the profit target is met.
Tips to adjust Best Day
Since the trader’s Best Day is expected to be less than 40% of the overall profit, traders are therefore advised to designate their daily profit target to be less than that amount in their trading plan. This way, the trader can lock in profits for each day, display consistency, and also avoid overtrading.
Traders will do well to remember that if their Best Day should be equal to 40% or higher than the profit target, then they will need to make extra profits to bring the profit percentage to below 40%. The table below shows the recommended Best day relative to the different account sizes.
|Best Day Recommendation
|Less than $1,200
|Less than $2,400
|Less than $3,600
|Less than $2,000
When is the Consistency Target needed At Topstep?
The Consistency Target is part of Step 2 of the Trading Combine and the Pro Account where traders can display their risk management ability and a consistent level of success. But the Consistency Target is not present in the Funded Account or Premium Funded Account.
However, since traders already have the mindset needed for success from the evaluation process along with a reliable trading plan, these should serve them well when they begin to manage live or funded accounts such that they can achieve sustainable success. It is believed that the consistency shown by the trader in the evaluation process should prepare them for success as they trade with the funded accounts in the live markets.
Consistency rule for Earn2Trade
What is The Consistency rule At Earn2Trade?
At Earn2Trade, the consistency rule is referred to as the “Maintain Consistency Rule”.
It is almost similar with the Topstep consistency rule, but instead of 40%, Earn2Trade requires a harder target, which is 30%.
The consistency rule at Earn2Trade states that during the evaluation process, traders should not have a single trading day accounting for 30% or more of the total Profit and Loss (PnL).
This rule is for traders to produce consistent results instead of having a few massive winning trades. This way, the element of luck is minimized and the trading strategy of the trader is reflected.
How the “Maintain Consistency Rule” works?
The rule is based on the daily calculation of a trader’s PnL (Profit and Losses) and the overall profit from his or her Gauntlet Mini account which is the account used during evaluation. Since the rule already dictates that the PnL for one day should not exceed 30% of the overall profit, if it should happen, the trader will not be allowed to pass the evaluation.
The most important factor considered under this rule is the daily PnL irrespective of whether the current account balance at a particular point in time exceeds or falls below the starting balance.
Example of how the rule works
If a trader chooses the Gauntlet Mini account of $100,000 and the overall profit for a certain period is $10,000 but then $3,500 of that profit was made on a single trading day. That figure already represents 35% of the overall profit which is more than the acceptable limit of 30%.
If such happens, it does not mean the trader has failed the evaluation process but rather, it is an indication that the trader will have to keep trading to increase the overall profit until the biggest profit for a single trading day is equal to or less than 30%. In this case, increasing the overall profit to about $12,000 will bring the figure down to about 29% of the total profit which is acceptable.
What is The Importance of the Consistency rule?
The main importance of the consistency rule in Earn2Trade is to help improve the trader and make him or her better such that the trader can navigate the market in a more controlled and strategic manner.
Traders need to understand that even though movement in the financial markets is in cycles, the cycles are usually different. Therefore, market dynamics are constantly changing and trade setups are unique which makes replication difficult. This is why traders need a solid and dependable strategy to succeed.
The “Maintain Consistency Rule” is more interested in the trader’s level of willingness and discipline to adhere to their pre-defined trading plan and remain focused on delivering consistent performances rather than one-off profits.
Does this rule come into play once the trader is funded?
No, the trader is not expected to follow the rule once funding is approved, but since the trader is already familiar with the importance of the rule and consistency in trading, then it is advisable for the trader to adopt it as a cornerstone of their overall trading strategy so that they will continue to improve and enjoy steady success.
Consistency rule for Leeloo trading
What is The Consistency rule At Leeloo Trading?
When it comes to Leeloo trading, there is no rigid set of rules like other funded programs but the company would like to see traders adhere to a specific trading strategy and stay away from over-leveraging. The major rule that might cause a trader’s account to be invalidated is reaching the trailing max drawdown limit.
Like other funded programs, the company believes that sticking to a systematic trading plan will ensure long-term success, and traders are expected to submit this trading plan via the Trader Questionnaire provided by the company once they complete the Evaluation phase.
How to trade consistently?
- If traders are using an intentional trade plan, then the number of contracts that will be used for each of the trades should be identical.
- If the trader employs scalping technique and uses 3 contracts per trade, then the company expects the trader to execute trades within a range of 2-5 contracts.
- If the trader employs dollar average into their trades, the company wants to see a strategic approach to how the traders ‘add in.’
For instance, the company does not want a situation in which a trader executes trades for 10 contracts, then changes to 1 contract, and then 7 contracts in a random manner. Also, having a day where the trader goes ‘all in’ with near max contracts and then ‘skimp by’ on other trading days is not recommended or acceptable.
A random or haphazard approach is unacceptable and illogical because the Evaluation phase has been shortened so that traders can finish in quick time and get funded. The Evaluation phase only has one step and it is just for 10 days. This is why traders are expected to display an intentional approach to trading throughout the whole duration of Evaluation.
Consistency Rule for Apex
What is The Consistency rule At Apex?
Just like Leeloo Trading, there are no consistency rules, as Apex Trader Funding is trying to give traders as much leeway as possible so that they have sufficient wiggle room to adapt, adjust and trade consistently. However, there are two major ways by which traders can fail the evaluation account they are managing which are:
- Hitting their trailing max drawdown threshold
- Maintaining a position or an open pending order beyond 4:59 PM ET.
Importance of the consistency rule
At a glance, it is clear that the company’s consistency guidelines are quite lenient when it comes to the evaluation process but the company prefers that traders have a solid trading plan. This is because the lack of a trading plan will make it difficult to navigate the market which is bound to negatively affect the trader’s ability to abide by the rules and meet the profit target.
With a solid trading plan, traders can design a template that will enable them to manage their expectations, cope adequately with the emotions produced as a result of profits and losses, and strategically navigate the dynamics of the market in a consistent manner. A discernible level of consistency is what Apex funded program is looking for in traders.
Consistency is the key to be funded
Many funded trading programs actually use more rules to verify the consistency of a trader, including the Trailing Drawdown, the Scaling plan, daily loss limit and weekly loss limit. Because consistency is what funded trading programs really want from traders.
Building up consistency in trading is critical to the long-term success of a trader because changing position sizes randomly while trying to get lucky or utilizing erratic approaches to trading does not exemplify a trader who is serious and committed to trading. Such traders are likely to fail the evaluation process and miss out on getting funded.
This is why funded trading companies are only looking to provide funding to traders that are dedicated and committed, who have a clear trading plan that will enable them to achieve success by delivering consistent results as they trade.