← Back to Blog · 2026-10-18 · 7 min read · Challenge Guide

You’ve just opened a position on Shanghai Futures Exchange (SHFE) rebar. The market moves against you by five ticks. Your account balance dips. Then, you think, "It’s just a small drawdown. I’ll wait for the bounce." Ten minutes later, you’re staring at a red screen, your account is blown, and the evaluation platform has emailed you a failure notice. Sound familiar?

If you are attempting to pass a China futures evaluation, the 2% daily loss limit is not just a rule—it is the primary filter that separates disciplined traders from gamblers. In the Western prop firm world, this is standard. But in the Chinese commodity markets, where volatility can spike violently due to policy shifts, weather events, or supply chain disruptions, this constraint is unforgiving.

Most retail traders fail not because they can’t predict the market, but because they cannot manage the math of risk. This guide breaks down exactly how to structure your trades to survive the 2% cap while trading the most liquid contracts in China, from iron ore to crude oil.

Understanding the Math: What 2% Actually Means in CNY

Before you place a single order, you must translate percentages into yuan. Prop firms and evaluation platforms typically set the maximum daily loss at 2% of your starting balance. Let’s assume a standard evaluation account size of 100,000 CNY.

• Maximum Daily Loss: 2,000 CNY.
• Real-World Implication: If you lose 2,000 CNY in open positions or realized losses during a trading session, your account is breached. Period. There is no "waiting it out" until tomorrow.

Here is the critical trap: Most traders calculate risk based on their potential loss, not their hard cap. If you have 2,000 CNY to risk, you do not have 2,000 CNY to lose on a single trade. You need a buffer. Markets gap. Slippage happens. If you risk 1,900 CNY on one trade and the market gaps against you by another 200 CNY, you are out. A professional approach is to risk no more than 0.5% to 1% of the account per trade, leaving ample room for slippage and unexpected volatility.

Contract Specs: The Hidden Killer in Chinese Futures

You cannot manage risk if you do not know the tick value of the instrument you are trading. In Chinese futures, contract multipliers vary significantly across exchanges (SHFE, DCE, CZCE, INE). A "tick" is not always 1 yuan.

Example 1: Iron Ore (DCE)

Iron ore is one of the most volatile and popular contracts for traders looking to test their skills. Let’s look at the specs for a standard Iron Ore contract:

If you are trading one lot of Iron Ore, every 0.5-point move costs you 50 CNY. With a 2% daily loss limit on a 100,000 CNY account (2,000 CNY), you can only afford 40 ticks of movement against you before you hit your limit. If you place a stop loss 100 ticks away, you are risking 5,000 CNY. You have already failed the evaluation before the trade is even closed.

Example 2: Rebar (SHFE)

Rebar (steel reinforcement bar) is a staple for industrial traders.

Rebar is cheaper to trade per lot, but the moves can be fast. A 100-point move against you on one lot costs 1,000 CNY. On two lots, that’s 2,000 CNY—your entire daily allowance. This illustrates why sizing is not just about capital; it’s about respecting the volatility profile of the specific Chinese commodity you are trading.

Volatility Reality: Why "It Will Come Back" Is a Dangerous Lie

Chinese commodity markets are driven by unique factors: government policy announcements, inventory data releases, and global supply chain shocks. These events do not trickle in; they hit like a hammer.

Consider the thermal coal rally in late 2021. Prices surged dramatically as supply constraints met high demand. Traders shorting into strength without a hard stop were wiped out in hours. Similarly, the 2020 oil crash saw crude oil futures (traded on INE) gap down massively. If you were trading on margin with loose stops, your account equity went negative before you could even react.

When navigating the 2% limit, you must assume that gaps will happen. You cannot rely on mental stops. You must use hard, server-side stop-loss orders immediately upon entry. If you enter a trade on Crude Oil and the stop is 50 ticks away, you must accept that if the market gaps 60 ticks, you lose 60 ticks worth of value. Your position sizing must account for the worst-case gap, not the average daily range.

Strategic Position Sizing: The 0.5% Rule

To survive the evaluation, you need to invert your thinking. Do not ask, "How much can I make?" Ask, "How much can I lose and still trade tomorrow?"

A robust rule for Chinese commodity futures evaluations is the 0.5% Risk Rule. On a 100,000 CNY account, this means risking no more than 500 CNY per trade. This leaves 1,500 CNY of buffer against the 2,000 CNY daily limit.

How to Calculate Your Position Size

Let’s apply this to our Iron Ore example. If your technical analysis suggests a stop loss should be 20 ticks away:

1. Risk per Trade: 500 CNY (0.5% of 100k account).
2. Stop Distance: 20 ticks.
3. Tick Value: 50 CNY.
4. Risk per Lot: 20 ticks * 50 CNY = 1,000 CNY.

Here is the problem: Your risk per lot (1,000 CNY) is double your allowed risk (500 CNY). You cannot trade one full lot with this stop distance. You must either:

• Tighten your stop: Move the stop to 10 ticks away (risking 500 CNY per lot). This might increase the chance of being stopped out by noise.
• Reduce position size: If the platform allows fractional lots (rare in China, most require whole numbers), you trade 0.5 lots. If whole lots are required, you simply cannot take this trade with this stop distance. You must find a setup with a tighter stop or accept that this trade is too risky for your current account size.

This discipline is what passes evaluations. It’s boring. It’s restrictive. But it keeps you alive.

Execution Tactics: Avoiding Slippage and Overtrading

In high-frequency environments, slippage can eat into your 2% limit faster than you think. If you are trading liquid contracts like Iron Ore or Rebar, liquidity is generally good during the day. However, during the opening auction (8:55-9:00 AM Beijing time) or major news releases, spreads widen.

Practical Application:

• Avoid the Open: The first 15 minutes of the trading day in China are often chaotic. Spreads are wide, and price discovery is volatile. Entering a position here increases the risk of getting filled at a bad price, immediately putting you closer to your loss limit.
• Watch the Maintenance Margin: While the evaluation limit is about equity, your broker’s margin requirements still apply. If you over-leverage, you might face a margin call before you hit the 2% loss limit. Always ensure your available cash is sufficient to cover margin fluctuations.
• One Trade at a Time: Correlated trades are your enemy. If you are long Iron Ore and long Rebar, you are essentially doubling your exposure to the steel sector. If the sector dumps, you hit your 2% limit twice as fast. Stick to uncorrelated positions or reduce size across the board.

Psychology: The Art of Walking Away

The hardest part of the 2% limit is not the math; it’s the psychology. When you lose 1.5% in a morning, the urge to "make it back" before lunch is overwhelming. This is known as revenge trading, and it is the number one killer of prop firm accounts.

Set a hard rule: If you lose 1% in a day, you stop trading. This leaves a 1% buffer for slippage or errors. If you lose 1.5%, you are done for the day. Walk away. Review your trades. Go for a run. Do not click "buy" or "sell" again. The market will be there tomorrow. Your capital might not be.

Remember, the goal of the futures evaluation is not to maximize profit on Day 1. It is to demonstrate consistency and risk management. A trader who makes 0.5% a day with low risk is far more likely to pass than a trader who makes 3% on Monday and loses 2.5% on Tuesday.

Final Thoughts: Testing Your Edge

Navigating the 2% daily loss limit in Chinese futures is a test of character as much as skill. It requires you to respect the contract specs, understand the volatility of assets like iron ore and crude oil, and adhere to strict position sizing rules. The 2% cap is not a punishment; it is a simulator for real-world survival.

If you have refined your strategy and believe you can manage risk effectively, you need a platform that mirrors these conditions accurately. You can test your system on a real-data China futures evaluation at XS Select, starting from $29. It’s a low-cost way to prove your discipline before risking significant capital.

Stay disciplined, size your trades correctly, and remember: in the Chinese futures market, survival is the first step to success.