What is the Highest Profit Day Rule?
The Highest Profit Day Rule is a crucial aspect of Clarity Traders Funded Account Challenge, designed to assess your capacity to generate consistent profits and manage risk efficiently. It aims to ensure stable profitability during Phase 2 (Verification) of the challenge. The highest profit day can also be referred to as the “Consistency Rule” as it stipulates that traders need to maintain consistency with their daily profits rather than have just a few successful trades.
According to the rule, the profits from your best trading day (most profitable day) should not exceed 30% of your total profits during Phase 2. This requirement encourages traders to avoid relying heavily on a single exceptionally profitable day and instead focus on maintaining steady performance over time.
Why is it Important for Traders to Follow the Consistency Rule?
By requiring traders to keep their most profitable day below a certain percentage of their overall profits, the Consistency Rule helps manage risk effectively. This prevents traders from relying too heavily on a few extremely profitable trades, which could expose them to significant losses if those trades do not repeat consistently.
Following this rule also helps traders to maintain a more balanced risk-reward ratio and prevent excessive risk-taking. It encourages traders to follow a disciplined and systematic approach, reducing the likelihood of making emotionally driven trades that could jeopardize their overall performance.
How is the Consistency Rule calculated and when is it applied?
The Consistency Rule is applicable to both our 2-Phase and Single-Phase Challenges. Here is an example of how to determine the amount of profit you are allowed to make in a day to pass the challenge:
If the total profit is $2,000 (100%), the maximum profit that could be made in a single day cannot be more than $600 (30%). If you reach the profit target of $2000 and make $800 of it in one day, the consistency rule is violated ($800 of $2000 is 40%).
You must continue trading until that day accounts for less than 30% of the total profit made. In this scenario, you must keep trading until their overall profit reaches $2,667, at which point the $800 earned in one day will account for 30% of the total profits.
How Does the Highest Profit Day Rule Work?
The Highest Profit Day Rule comes into action during the Evaluation Stage and Verification Stage of our Funded Account Challenge. This rule serves as a benchmark and opportunity for our traders.
The Highest Profit Day Rule can be best explained, through the example below:
Hypothetically, imagine you purchased a Challenge Account with an Initial Balance of $100,000. In phase 1 the Profit Target is $8,000 (8% of $100,000). We have set our Highest Profit Day Rule at 30%, thus, you cannot earn a daily profit that exceeds $2,400 (30% of $8,000).
Now, consider this scenario:
- You reached the Profit Target of $8,000 (8% of $100,000).
- You earned a Profit of $3,200 in a single Trading Day.
Outcome: In this case, $3,200 is 40% of the Profit Target ($8,000) and therefore, you did not pass the Funded Account Challenge, due to a violation of the Highest Profit Day Rule.
To successfully pass this phase of the Funded Account Challenge, in this scenario, as a trader you would need to devise a trading approach that reaches the Profit Target of $8,000 (8% of $100,000) but does not rely on large High-Risk Trades, therefore never having a Trading Day which exceeds $2,400 (30% of $8,000). One strategy to achieve this would be to place a consistent amount of lower risk trades to spread out your daily profits.
How Do I Calculate the Highest Profit Day Rule?
The Highest Profit Day Rule can be calculated as follows:
Account Balance x 0.08 (Profit Target 8%) = Profit Target (Amount)
Profit Target x 0.3 (Highest Profit Day Rule 30%) = Max Daily Profit
Ex. $50,000 (Account Balance) x 0.8 (Profit Target 8%) = $4,000 (Profit Target)
$4,000 (Profit Target) x 0.3 (Highest Profit Day Rule 30%) = $1,200 (Max Daily Profit)
What is the Recommended Best Day?
To abide by Clarity Traders’ Highest Profit Day Rule your best Trading Day must remain below 30% of your Total Profit Target. We recommend that you set a Daily Profit Target that is below this maximum threshold. This will help you maintain an approach that builds consistent daily profits which abide by the Highest Profit Day Rule.
You can follow these examples of the Recommended Best Day based on Account Size:
[Phase 1 Parameters: Profit Target = 8% + Highest Profit Day Rule = 30%]
| Account Size | Profit Target (8%) | Recommended Best Day |
|---|---|---|
| $10k Account | $800 | Less than $240 |
| $25k Account | $2,000 | Less than $600 |
| $50k Account | $4,000 | Less than $1200 |
| $100k Account | $8,000 | Less than $2400 |
[Phase 2 Parameters: Profit Target = 5%+ Highest Profit Day Rule = 30%]
| Account Size | Profit Target (8%) | Recommended Best Day |
|---|---|---|
| $10k Account | $500 | Less than $150 |
| $25k Account | $1,250 | Less than $375 |
| $50k Account | $2,500 | Less than $750 |
| $100k Account | $5,000 | Less than $1,500 |
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