As a funded prop firm trader with over six years of trading experience, I’ve come across just about every rule prop firms have. One of the most important and sometimes frustrating rules is the prop firm consistency rule. This rule is designed to make sure that you maintain steady profits rather than relying on a few big wins in lots of small losses. It sounds simple, but it can actually impact how you trade every day.
In this article, I’ll break down what the consistency rule is, why it matters, and how it affects your trading strategy. I’ll also cover the differences between firms that use this rule and those that don’t. Bear with me, as understanding this rule can be a game-changer.
Key Takeaways
- The consistency rule is designed to promote steady, reliable profits, ensuring traders avoid relying on just a few big wins.
- By limiting high-risk trades, it encourages disciplined trading habits and better risk management, which are crucial for long-term success.
- Each prop firm has its own consistency requirements and thresholds, so understanding these rules before starting can save you from failed evaluations.
- Tools like consistency rule calculators can help you monitor profit distribution and trade sizes to minimize the risk of violating prop firm consistency rules.
What Is Consistency Rule in Prop Firms?
The prop firm consistency rule is one of the fundamental rules you’ll find in most prop firms. They claim it to be there to keep you steady and disciplined. The rule limits the amount of profit you can make in a single day. This means you can’t rely on one or two big trades to hit your target. Instead, you need to show consistent results over time.
For example, imagine that a firm has a 30% consistency rule. So, no more than 30% of your total profits can come from a single day. Let’s say your profit target is $10,000. Under the consistency rule, the most you could earn from any one day’s trading is $3,000. If you go over that, you might not pass the firm’s evaluation. This is even if you hit the profit target and don’t break any other rule.
The prop firm consistency rule might sound strict. But, it also has some benefits for us traders. The most valuable benefit that has helped me personally is stopping you from blowing your challenges and funded accounts by over-leveraging or overtrading. Either way, you should spread your profits, or you’ll not pass prop firm challenges that have this rule.
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Purpose of the Consistency Rule
The consistency rule prop firms enforce isn’t just a formality. It’s actually there for both good and bad reasons. Prop firms themselves claim that this rule can encourage you and me to manage our risk carefully. Well, it’s not wrong. At least, it has helped me become more consistent and a better risk manager.
Yet, that’s not the full story. You might already know that the sole revenue source for most prop firms is the challenge fee, especially the failed challenge fees, as there are no refunds or payouts from them in the future. This means net profit.
So, each time a trader has to buy a new challenge due to failing the consistency rule, it adds to the firm’s profits. I know this seems frustrating and even evil, but remember that prop firms are businesses. They should make money to keep operating and can’t do so with your simulated trades.
How the Prop Firm Consistency Rule Affects You
The prop firm consistency rule has a big impact on how you can approach trading. With this rule in place, you’re pushed to focus on strategies that provide steady, reliable gains. You can’t just go for big or bet on the NFP and hope for the best. You need to think in terms of long-term growth and showcase consistent results.
This rule means that you’re likely using smaller, calculated trades instead of high-risk setups. It’s all about building a track record that reflects control, not luck.
Moreover, a lot of firms also have something called a lot size consistency rule. This is a way to keep trade sizes consistent. In practice, it means that you can’t suddenly jump into large positions after several small ones. The prop firm wants to see that your trade sizes are predictable.
I guess this explanation is already clear enough and should help you figure out which kinds of strategies you can use and which you can’t, as they might break the prop firm consistency rule. Nevertheless, if you really are a consistently profitable trader, you have nothing to worry about.
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The Benefits and Drawbacks of the Consistency Rule
Interestingly, the prop firm consistency rule has its share of both pros and cons. Let’s start with the benefits it can bring to your trading:
- Encourages Consistency: The prop firm consistency rule Forces you to focus on reliable, consistent gains instead of big, risky trades. This goes a long way in helping you build the mindset of a consistently profitable trader.
- Improves Risk Management: I’ve said it before, and I will again. Profitable traders are expert risk managers. The consistency rule prop firms impose can improve your risk management skills significantly.
- Develops Good Habits: The consistency rule makes you more disciplined, which is a huge benefit in the long run. We all promise to become disciplined when we get funded. This rule helps you actually do so right away and build good habits.
There are also some drawbacks and challenges associated with the prop firm consistency rule. The most prominent ones include:
- Reduced Flexibility: It limits your ability to take advantage of high-risk, high-reward setups. This is especially damaging if your strategy relies on high risk-reward setups.
- Makes Everything Harder: You can’t rely on one or two big wins to pass a challenge or get a payout anymore. The consistency rule can even make your challenge phase take longer.
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How the Consistency Rule Varies Among Prop Firms
Prop firms have different approaches to the consistency rule. So, it’s important to know what you’re signing up for when choosing a firm. Some firms have strict consistency requirements, while others don’t have a consistency rule at all. The sweet spot is to find a firm with rules that fit your trading style.
Most top prop firms have strict consistency rules to keep traders consistent and make gamblers fail. This means they may set a specific threshold, like limiting the percentage of your profits that can come from any single day’s trading. Here are some of the best firms that enforce the consistency rule:
- FTMO: Utilizes a Consistency Score to assess traders’ performance stability.
- FundedNext: Requires consistency, particularly in their Express Consistency accounts.
- Funding Pips: Enforces consistency as a core requirement for its funded traders.
- The 5%ers: Implements a consistency rule to ensure traders maintain steady performance.
- Maven: Applies a consistency rule to promote disciplined trading habits.
- Alpha Capital Group: Implements a consistency rule to ensure traders maintain steady performance.
- My Funded FX: Enforces consistency to encourage stable trading practices.
- E8 Markets: Requires traders to adhere to a consistency rule to maintain funding.
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Tips for Adapting to the Consistency Rule
I’ve passed several challenges and also failed a lot more. So, let me give you some tips, based on my experience, to help you adapt to the prop firm consistency rule:
- Focus on Smaller, Balanced Trades: Go for steady gains rather than catching big swings with tight stop losses. Spread your profits across multiple trades with higher win rates.
- Have a Defined Strategy: Think about an ideal but sustainable profit distribution over time. Have a clear trading strategy, and make sure this strategy can help you achieve a similar distribution of profits.
- Use it to Build a Track Record: To become a professional trader working with private investors, you need a track record. Use this rule as an opportunity to learn how you can build one.
- Just Do it: Finally, for most of you, the best tip is to just do what you do best. If you have a proven profitable strategy, stick to it and don’t worry about the prop firm consistency rule. It’s actually a hurdle for gamblers, not real traders.
- Use a Prop Firm Consistency Rule Calculator: If you’re still worried and can’t shake the feeling of failing the challenge, use a consistency rule calculator. These tools will help you play by the rule and not stress it out.
Prop Firm Consistency Rule Calculators
A prop firm consistency rule calculator is a very useful tool for satisfying the consistency rule. These calculators help you stay within the firm’s requirements. They track things like profit distribution and trade sizes to help you remain consistent and not break any limits.
Here are some of the best consistency rule calculators:
- Makarios Consistency Rule Calculator
- Funded Wizard Consistency Calculator
- Fast Track Trading Consistency Calculator
- PropScholar Consistency Rule Check
Conclusion
The prop firm consistency rule might feel frustrating at first, especially if you’ve failed a challenge due to breaking it. But it can actually be valuable for serious traders. I mean, this rule can teach you discipline and encourage building good habits.
Yes, it’s challenging, especially if you’re used to going for high-risk trades. But remember, the consistency rule is an obstacle that separates gamblers from true traders. If you embrace the rule and adapt your strategy to align with it, you’re setting yourself up for long-term consistency and success.
Stay steady, stay disciplined, and keep focused on your goals. It might be tough, but playing by the prop firm consistency rule is one of the best ways to prove you’ve got what it takes to be a professional trader.
