The Consistency Rule ensures that traders maintain a balanced approach to trading while discouraging reliance on a few “Home Run” high-profit days. Here’s a detailed explanation of the 40% Consistency Rule and how it works. The 40% consistency rule is required to be met on both your challenge and funded stage.
What is the 40% Consistency Rule?
The 40% Consistency Rule states that no single trading day’s profit can exceed 40% of your total profits accumulated over your trading period. This encourages traders to adopt steady and consistent trading strategies, avoiding spikes caused by high-risk trades.
Why is the Consistency Rule Important?
The Consistency Rule is vital for maintaining:
Risk Management: Prevents traders from depending on high-risk trades to achieve profitability.
Performance Stability: Encourages steady, balanced trading practices, reducing erratic profit spikes.
Discipline: Promotes controlled and consistent growth over time.
How Does the Consistency Rule Work?
At the end of your trading period, we calculate the highest profit made in a single day and compare it to your total profits. If any single day’s profit exceeds 40% of the total, you’ll need to continue trading to lower the percentage.
Example of the 40% Consistency Rule in Action
Imagine you have made $2,000 in total profits over a 5-day trading period:
Day 1: $800
Day 2: $400
Day 3: $400
Day 4: $200
Day 5: $200
The highest profitable day is $800. To calculate the consistency percentage, divide your highest profitable day by your total profits:
$800 ÷ $2,000 = 40%
In this case, your highest profitable day is exactly 40% of your total profits, so you meet the consistency requirement.
Extended Example:
If your highest profitable day was $1,000:
$1,000 ÷ $2,000 = 50%
Since 50% exceeds the 40% limit, you would need to continue trading to increase your total profits. For instance, if you trade for two more days and earn $500 each day, your total profits increase to $3,000, while your highest profitable day remains $1,000:
$1,000 ÷ $3,000 = 33.3%
Now, you meet the consistency requirement and qualify for a payout.
What Happens After a Payout?
Once you request and receive a payout:
The highest profitable day resets.
The Consistency % calculation begins anew for your next trading cycle.
You must maintain consistency again to qualify for future payouts.
Key Takeaways
Rule Limit: No single trading day’s profit can exceed 40% of total profits.
Eligibility: If your highest profitable day exceeds 40%, continue trading to bring your percentage within the limit.
After Payout: The rule resets, applying to your next trading period.
Pro Tip: Have a daily profit target and when you hit said target stop trading for the day.
Building Disciplined Trading Habits
The 40% Consistency Rule is more than just a guideline it’s a tool to help traders cultivate steady and disciplined trading habits. By adhering to this rule, you not only secure eligibility for payouts but also set yourself on the path to long-term success as a consistent and profitable trader .