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Liquid Trader: Defining The Consistency Rule

What is the Consistency Rule?

The Consistency Rule in The Liquid Trader is designed to ensure you achieve steady and sustainable profits while effectively managing risk. The rule states that the earnings of your best trading day should not exceed 30% of your total profits.

Why is the Consistency Rule Important?

The Liquid Trader’s Consistency Rule aids in the cultivation of consistent profits and the avoidance of emotion-driven trading. By ensuring your most profitable day falls below 30% of your overall profits, you can better manage your risk-reward ratio (RRR) and develop a more sustainable trading approach. This rule assists The Liquid Trader in identifying the top professional traders to fund.

It is important to note that in the case of your profit/loss being in the negative, the consistency rule will not apply.

When is the Consistency Rule required and how is it calculated?

Here, you have the chance to demonstrate your ability to manage risk effectively and build consistent success.

The calculation is as follows: Best Day Profit ÷ Overall Profit = Best Day % of Total Profit

Let’s illustrate this with a new example:

Imagine a $50,000 account with a profit target of $2,500 (5%). The daily profit should never exceed $750, which is 30% of total profits. Consider this scenario:

  • You reach your target and make a total profit of $2500
  • You earn a $1600 profit in a single day.

Result: You do not pass the Challenge.

To succeed, you should devise a strategy that prevents you from exceeding a $1600 in daily profit. Once you reach a total profit of $2500, you will pass the Challenge as you have demonstrated that you can profit consistently without relying on risky large trades.

Here is another example taking into consideration multiple trading days in the challenge:

5 trading days with the following results, day-by-day:

  • +$1,000
  • -$500
  • +$2,000
  • +$750
  • -$250

This results in a total P/L of $3,000. The highest profit day was the day of +$2,000, so we arrive at the following calculation and value:
$2,000 / $3,000 * 100 = ~0.667 * 100 = ~66.67% Highest Profit Day

What is meant by the Recommended Best Day?

Given that your best trading day should remain below 30% of your total profit, we recommend that you set a daily profit target below this threshold. This strategy will help you maintain consistency and lock in daily profits.