Applies to: Futures
Short answer
Plan every trade with a defined risk. Keep your risk-to-reward at 5:1 or better, don't use the trailing drawdown as your stop loss, keep your position sizes consistent, and don't trade within 2% of a CME price limit.
Stop losses
A stop loss isn't mandatory, but every trade needs a clearly defined risk. You can't trade without stops and rely on your account's trailing threshold to close a losing trade. That's gambling, not a strategy, and it will disqualify you from moving to a Live Account.
This applies to scalping too. For example, a scalper aiming for 10 ticks of profit might set a 30-tick initial stop. On longer-term trades, an initial stop defines the risk you accept, and trailing stops help you lock in gains when the market moves your way.
Maximum risk-to-reward: 5:1
Your stop loss can be at most 5 times your profit target.
Profit target of 10 ticks: stop loss no more than 50 ticks
Profit target of $100: stop loss no more than $500
Mental stops are allowed, but the 5:1 limit still applies. Don't move a stop to increase your risk. Only move stops forward to trail and protect profit. Breaking this rule can lead to a warning or disqualification from payouts.
Consistent position sizing
Keep your contract size consistent. Increasing your size to win back losses (martingale) isn't allowed, and inconsistent sizing or "all-in" trading may lead to an account review.
The 2% price limit rule
You can't trade within 2% of a CME price limit. A price limit is the maximum a futures contract can move in one session. When it's reached, the market may pause, stay at the limit or halt for the day.
Limits are set from the previous day's settlement price and differ by product, contract month and session (overnight vs regular hours).
They update daily at 5:05 PM EST. You can find them on the CME Group price limits page.
For equity products (ES, MES, NQ, MNQ, RTY, M2K, YM, MYM), overnight limits are 7%.
How to stay clear: watch the % Net Change for your contract on your platform's quote board, and stop trading before it gets within 2% of the limit.
Good habits
Know your exit for both profit and loss before you enter.
Use a tested system with a defined risk-to-reward.
Set targets and stops that match your strategy and current conditions.
Always honour your stops.