Consistency rule
Also known as: prop firm consistency rule
Consistency rule: A consistency rule is a prop firm condition that limits how much of a trader's total profit may come from a single day or trade, so that results are not driven by one outsized gain.
How does a consistency rule work?
The firm compares the profit of the best day, or best trade, with the total profit over a period and sets a maximum share, for example 50%. If the best day is above that share, the trader usually has to keep trading until other profitable days bring it below the limit before passing a stage or receiving a payout. Firms differ on whether breaking it is a rule breach or only delays passing: prop firm challenge, prop firm consistency rule.
Worked example
Illustrative only, with a 50% best day limit: positive days total $16,000 and the best day made $10,000, which is 62.5% of the total. To bring the best day down to 50%, positive days need to total at least $20,000, so another $4,000 of profit on other days is needed.
Sources
- Trading Objectives, FTMO
Learn more
- Prop Firm Challenge Explained: One-Step, Two-Step and Instant Funding
How a prop firm challenge works: one-step vs two-step evaluations, instant funding, profit targets, drawdown limits, trading days, fees and refunds.
- What Is a Prop Firm? How Prop Trading Firms Work
What a prop firm is and how prop trading firms work: challenge fees, prop firm evaluations, funded and simulated accounts, profit splits, rules and risks.
Related terms
- Profit target
A profit target is the gain, usually a percentage of the initial account size, that a trader must reach to pass a stage of a prop firm challenge.
- Daily drawdown
Daily drawdown, also called the daily loss limit, is the most an account may lose within one trading day under a prop firm's rules; the limit is recalculated at a reset time set by the firm.
- Profit split
A profit split is the percentage of eligible profits on a funded prop firm account that the firm pays to the trader; the firm keeps the rest.