Analysis of the consistency rules of prop firms

[Findtrader]

In the world of proprietary trading firms, consistency assessment is a core tool for measuring a trader's stability and risk management capabilities. Different prop firms employ their own consistency rules, aiming to identify traders who consistently generate stable returns, rather than relying on a few large profit days. This article will delve into the consistency rules of major prop firms such as FTMO, The5ers, and Alpha, and introduce the innovative 2% maximum daily effective profit rule employed by Findtrader.

What is trading consistency?
Trading consistency refers to a trader's ability to maintain consistent profits over time, rather than relying on a few exceptionally profitable days. Traders with high consistency typically exhibit:
Low drawdown and volatility
Evenly distributed profits, avoiding gambling-style trading
Strict risk management, such as limiting daily exposure.
Prop firms use consistency rules to filter out high-risk traders, ensuring that funds are allocated to those who can generate consistent, long-term profits.

Analysis of Mainstream Prop Firm Consistency Rules
1. FTMO: Volatility-Based Consistency Formula
FTMO uses the following formula to calculate consistency:
(1 - (Highest Winning or Loss Day / Sum of Absolute Values ​​of All Trading Days)) x 100%
Explanation: If a particular day's gain or loss is excessively large, the consistency score will be lowered.

Advantages: Simple and easy to calculate, directly reflects account volatility.

Disadvantages:
The "sum of absolute values ​​of all trading days" in the formula may be distorted by high volatility days, resulting in a distorted score.
Inability to distinguish between winning and losing days—Large losing days can also reduce consistency, but this may not be the focus of risk management (profit consistency is the key).
Impact: Traders are incentivized to reduce their daily exposure, but may "dilute" volatility by increasing trading frequency.

2. The5ers: Lot Size Consistency Rule
The5ers uses lot size consistency:
Rule: If the lot size of a winning trade is greater than 2.5 times the average lot size, the trade is not counted towards the performance factor. Explanation: This is intended to prevent traders from "gambling" on profits by suddenly increasing their lot sizes, ensuring consistent trade sizes.

Advantages: Directly targets trading behavior and prevents lot size manipulation.

Disadvantages:
Applies only to profitable trades, ignoring lot size inconsistencies in losing trades.
The average lot size calculation may be affected by earlier trades, resulting in an unfair rule.
In the crypto market, due to high volatility, traders may need to adjust lot sizes to adapt to market conditions, making this rule overly rigid.

Impact: Traders will maintain a stable lot size, but may miss out on reasonable adjustments based on volatility.

3. Alpha: Daily Profit Contribution Ratio
Alpha uses:
Best day's net profit / Total net profit
Explanation: This ratio measures the contribution of the best profitable day to total profit. A lower ratio indicates more diversified profit sources and higher consistency.

Advantages: Intuitively reflects profit concentration and is easy to understand.

Disadvantages:
Focuses only on profitable days, ignoring the impact of losing days.
If total net profit is low, the ratio may be exaggerated, leading to misjudgment. There's no way to prevent traders from "accumulating" profits through multiple small wins before suddenly experiencing a single large win.
Impact: Traders will avoid large single-day gains, but may be able to reduce this rate by extending their trading cycles.

4.Findtrader: Maximum Effective Daily Profit of 2%
Rules and Regulations
We use a maximum effective daily profit of 2% as the core of our consistency assessment:
Based on the initial capital, a single day's profit contribution to the challenge's cumulative progress is limited to 2%.
If the actual daily profit is ≤ 2%, the actual value is counted towards the consistency score.
If the actual daily profit is > 2%, only 2% is counted; the excess does not contribute to the profit score (but the capital profit is retained).
Example: Assuming an initial capital of $10,000:
Day 1 profit of 1% ($100) is counted.
Day 2 profit of 3% ($300) is counted. Only 2% ($200) is counted; the additional $100 does not contribute to the consistency score, but increases the account balance.
Cumulative progress increases by a maximum of 2% per day.

Compared to other rules:
vs FTMO: Avoids the complexity of volatility calculations and directly controls daily contributions.
vs The5ers: Does not overly constrain trading lot sizes, allowing for flexible execution, but manages risk through profit caps.
vs Alpha: Not only focuses on profit concentration, but also actively smooths the profit curve through daily caps.

The Impact of Consistency Rules on Trading Behavior
All consistency rules are designed to shape trader behavior:
FTMO: Traders will minimize daily profit and loss margins, potentially increasing the number of trades.
The5ers: Traders will maintain a stable lot size and avoid sudden increases in position size.
Alpha: Traders will spread profitable days out, avoiding going all-in on a single day.
Findtrader: Traders will set daily profit targets (e.g., 1-2%) and strictly enforce take-profits to cultivate discipline.