Every prop firm gives you rules. But the best risk managers go further — they build their own framework on top of the firm's minimum requirements. Here are the seven rules that consistently appear in the practice of funded traders who keep their accounts long-term.
Rule 1: Define Your Risk Per Trade Before the Session
Never decide how much to risk while you're watching a live chart. The act of watching price move creates emotional bias that inflates or deflates your perceived risk tolerance. Set your risk percentage (e.g. 0.75%) before the session and calculate position size before entering. Non-negotiable.
Use the Position Size Calculator to calculate the exact lot size for each planned setup before the market opens.
Rule 2: Set a Daily Stop Loss Below the Firm's Limit
Your firm's daily loss limit is a hard floor. Your personal daily stop should be 50–70% of that limit. If your firm allows a 5% daily loss, set your personal stop at 3%. This buffer exists because:
- Commissions and slippage can eat into your buffer
- Open positions can spike through the limit during fast markets
- Emotional state degrades after multiple losses — stopping early protects your decision-making
Rule 3: Never Add to a Losing Trade
"Averaging down" is one of the most seductive and destructive habits in trading. The logic feels sound: the trade is moving against me, so I'll add more at a better price and lower my average cost. But you're increasing your position size at the exact moment the market is telling you your thesis is wrong.
On a funded account, where drawdown limits are absolute, this can turn a manageable loss into an account-ending event.
Rule 4: Reduce Size After a Loss Streak
If you lose 3 trades in a row, cut your position size in half for the next session. This is not pessimism — it's science. Consecutive losses correlate with one of two things: a strategy that's out of sync with current market conditions, or a trader in a degraded psychological state. Either way, smaller size is the correct response.
Size Ladder
Rule 5: Respect the Correlation Between Positions
Running two long ES trades simultaneously isn't 1% risk + 1% risk — it's 2% risk on the same market direction. Similarly, a long ES and a long NQ are highly correlated. If you want to take multiple positions, they should be genuinely uncorrelated or offsetting.
Most funded traders are better served taking one quality trade at a time rather than managing multiple correlated positions.
Rule 6: Track Your Drawdown Floor Before Every Session
After a good day, your trailing drawdown floor has risen. After a bad day, your buffer has shrunk. The floor you had yesterday is not the floor you have today. Recalculate before every session.
Use the Drawdown Tracker to see your current floor and buffer in real time.
Rule 7: Run a Pre-Trade Check on Every Setup
Before entering any trade, run a 30-second mental (or actual) checklist:
- Is this setup in my playbook?
- Have I calculated my position size?
- Does this trade fit within today's daily loss limit?
- Is there a news event in the next 30 minutes?
- Am I trading because I see a valid setup — or because I want to trade?
The Rule Checker automates the compliance part of this checklist — enter your trade details and it confirms whether the trade fits within your drawdown buffer and daily loss limit.
The Core Principle
Risk management doesn't improve your win rate. It ensures that when your strategy works, you're still in the market to benefit from it — and that a bad run doesn't take you out of the game entirely. Every rule above is designed to keep you trading. That's the edge.