Evaluation rules decoded: profit targets, daily loss limits, consistency rules, minimum days and news restrictions

What you will learn

• The five rule families found in almost every evaluation and the exact questions to ask about each.
• Why "daily loss" has at least three different definitions and how to find the one that applies.
• How a consistency rule can block a payout even when you hit the target.
• How to write a one-page rule sheet with euro or dollar numbers before the first trade.

Explanation

Evaluation rules look simple on a sales page; the detail lives in the terms and the FAQ. Always convert rules into numbers for your account size and write them down.

1. Profit target

A two-phase evaluation typically asks for a higher target in phase 1 and a lower one in phase 2; one-phase and "instant funding" products exist with different fees. Check whether the target is measured on closed balance or on equity.

2. Daily loss limit

The definitions differ:

• Balance-based: loss of the day is measured from the closed balance at the start of the trading day. Floating losses count only when closed.
• Equity-based: measured from the equity (balance plus open profit or loss) at the day start; an open loss during the day can trigger a breach.
• Fixed or percentage of initial balance: 5 percent of €100,000 is always €5,000, even if the account has grown.
• Day boundary: a reset at midnight server time or at a specific exchange close. If you hold overnight, the gap belongs to the next day's calculation.

3. Maximum (overall) loss

Static or trailing; lesson 3 treats this in depth because it changes your risk per trade more than any other rule.

4. Consistency and activity rules

• Consistency rule: no single trading day may represent more than a given share (often 30 to 50 percent) of total profit, or no single trade may exceed a share of profit. The aim is to exclude passes by one lucky oversized trade.
• Minimum trading days: a day counts only if at least one trade is opened or closed; some firms require a minimum profit per counted day.

5. News and time restrictions

Many firms prohibit opening or closing positions within a window around high-impact scheduled releases, commonly a few minutes before and after, in funded accounts; others allow it in the evaluation but not after funding. Weekend holding, overnight holding and trading during low-liquidity hours may be restricted. Inactivity (for example 30 days without a trade) can still close an account.

Rule interactions

Rules combine in unfriendly ways. A trader at the target on day 3 with a 4-day minimum must trade a fourth day and may lose the target again. A consistency rule forces a trader above the target to keep trading. Equity-based daily loss plus overnight positions means a weekend gap can breach the rule before you can act.

Worked example

Hypothetical example: €100,000 evaluation account, phase 1 target 8 percent (€8,000), daily loss limit 5 percent of the initial balance (€5,000) measured on equity from the start-of-day balance, maximum loss 10 percent (€10,000) static, consistency rule: best day at most 40 percent of total profit, minimum 4 trading days. Fees, spreads and swaps are ignored.

Step 1, the consistency check. After 6 trading days the trader has €8,000 total profit, of which €4,500 came on one strong day. Share of best day = €4,500 / €8,000 = 56.25 percent, above 40 percent. To pass, total profit must be at least €4,500 / 0.40 = €11,250, so the trader needs another €3,250 of profit, and no new day may exceed 40 percent of the new total either.

Step 2, the daily loss floor. The next day starts with a balance of €101,200 (the account is above start but below target). Daily floor = €101,200 − €5,000 = €96,200. During the day the trader closes losses of €3,900 and holds an open position showing −€800. Equity = €101,200 − €3,900 − €800 = €96,500. Remaining room: €96,500 − €96,200 = €300. One more small adverse move breaches the account although the closed loss is "only" 3.9 percent; on a balance-based definition the room would be €1,100.

Step 3, the rule sheet. The trader writes: "Daily floor today: €96,200 (equity). Overall floor: €90,000. Target: €11,250 under the consistency rule. Max risk per trade: €800." Writing the floor as an equity number removes mental arithmetic in the moment that matters.

Common mistake

Practice activity

Take a hypothetical $50,000 account: target 10 percent, daily loss 4 percent of the initial balance on an equity basis, consistency rule 30 percent per day, minimum 5 trading days. After 4 days the trader has $5,000 profit with a best day of $2,100, and today's start-of-day balance is $55,000. Calculate (a) whether the consistency rule is met, (b) the total profit needed if it is not, (c) today's equity floor and (d) the maximum number of $400 losses that fit under today's floor.

Key takeaways

• Convert every rule into an absolute euro or dollar number for your account and keep it in front of you.
• The daily loss definition (balance, equity, day boundary) decides how much real room you have.
• Consistency and minimum-day rules can force extra trading after the target is reached.
• Rule interactions, not single rules, cause most unexpected failures.

Next step

Next, we put numbers on the three drawdown types and see how a trailing drawdown quietly shrinks your risk budget per trade.