Funded With PerpsStart with the rules, not the setup
A challenge can end for reasons that have nothing to do with whether your strategy has an edge. A rule ends the account before the edge has time to show. So this guide is about rules: what each one does, how it ends accounts, and what to do about it.
We use our own challenge as the example, because those are the numbers we can quote exactly: a 10% target, a 3% daily loss limit, a 6% static max loss, no time limit and no minimum days. The worked numbers use a $50,000 account. Every rule scales with size, so the percentages are what matter.
1. The daily loss limit counts open trades
On a $50,000 account the daily loss limit starts at $1,500: 3% of your equity when the trading day begins, at midnight New York time.
The part that catches people: it is measured on equity, in real time, open positions included. A trade that is down $1,500 and still open has breached the limit, even if you were sure it would come back. You do not get to wait for the close and see.
What to do:
- Set a personal stop well inside the limit. If you stop for the day at half the limit, $750, one bad trade cannot end the account.
- Size every trade from the stop, not the target. Decide where you are wrong, then size so that being wrong costs a fixed slice of the daily limit.
- Know the reset time. The day rolls at midnight New York time. Two losses either side of midnight count against different days; two losses at 11:50 pm count against the same one.
2. Leverage turns small moves into big losses
Leverage is capped per market: 10x on BTC and ETH and 5x on other crypto, with caps for stocks, metals, energy and indices on the rules page. A cap is a ceiling, not a target.
At 10x, your position is 10 times your balance. A 0.3% move against a full size position costs 3% of the account: the whole daily limit. Bitcoin can move that far in minutes. On an alt perp at 5x, the same happens on a 0.6% move.
What to do: pick your stop first, then use only as much leverage as that stop allows. Full leverage with a wide stop is how a single trade ends a challenge.
3. Fees are charged on notional
Commission is 0.03% per fill, on the position's notional value, not your margin. At 10x, opening and closing a full size position costs 0.6% of your account. Do that 5 times in a day and you have spent as much as the entire daily limit on commission, before a single trade loses. Fees come out of your balance, so they count like losses.
Swap adds 0.03% of notional per day while a position is open, charged hourly. It is small on a scalp and real on a leveraged swing. The full math is in