← Back to Blog · 2026-10-04 · 7 min read · Challenge Guide

It's 10:47 a.m. in Shanghai. You're two trades into your evaluation day, down 1.4%, and the rebar contract you're watching just broke below support. Every instinct in your body says "get it back now." But here's the math that should stop you cold: with a 2% daily loss cap, you have 0.6% of breathing room left. One more full-size loss and your evaluation day is over — maybe your evaluation entirely.

This is the scenario that kills more evaluations than bad strategy ever will. A 2% daily loss cap isn't a technicality. It's the actual game you're playing. And most traders fail it not because they can't find setups, but because they manage risk like the cap doesn't exist until it's too late.

Here are seven rules I've seen separate traders who pass from traders who don't. None of them are clever. All of them are non-negotiable.

Rule 1: Convert Everything to Currency Before You Click

The single most common mistake in Chinese commodity futures is misunderstanding contract size. These are not mini contracts. One lot of rebar (RB) on the Shanghai Futures Exchange represents 10 tonnes, with a minimum tick of 1 yuan per tonne — so every tick is 10 yuan per lot. One lot of iron ore (I) on the Dalian Commodity Exchange is 100 tonnes with a 0.5 yuan tick, meaning 50 yuan per tick. Methanol (MA) on the Zhengzhou exchange is 50 tonnes per lot. Crude oil (SC) on the Shanghai International Energy Exchange is 1,000 barrels per lot — one tick of 0.1 yuan is 100 yuan.

Why does this matter so much? Because a move that "looks small" on the chart is not small in your account. If your evaluation account is, say, $30,000, a 2% daily cap is $600. On a single lot of crude oil, that's roughly a 6-yuan-per-barrel adverse move — which crude can do in an afternoon, and did far worse during the 2020 oil crash, when WTI went negative and Chinese crude saw extreme volatility alongside it.

The pre-trade calculation

Before every entry, you should be able to answer three numbers instantly:

• Risk per contract at stop: (entry − stop) × contract multiplier
• Maximum lots: your per-trade risk budget ÷ risk per contract
• Cap distance: how many more full-stop losses fit between your current drawdown and the daily cap

If you can't do this math in your head for the contract you trade, you're not ready to trade it in an evaluation. Write it on a card. Tape it to your monitor.

Rule 2: Set Your Personal Cap at 1.2–1.5%, Not 2%

The 2% daily loss cap is a ceiling, not a target. Treat it like the guardrail on a mountain road — you don't drive with your wheels touching it.

The logic is simple: slippage, gaps, and fast markets mean your realized loss can exceed your planned loss. If your stop is placed to lose exactly 1.9% and the market gaps through it, you've breached the cap on a trade you technically managed "correctly." Leaving a 0.5–0.8% buffer absorbs that reality.

Practically: if your platform allows it, set a hard account-level daily loss alert at 1.5%. When it fires, you're done for the day — not "one more trade," not "I'll just flatten my risk." Done.

Rule 3: One Position at a Time Until You've Proven Otherwise

Correlation is the silent evaluation killer. Rebar and iron ore move together — steel mills buy ore to make steel, and the two contracts routinely trend in the same direction. If you're long rebar and long iron ore, you don't have two trades. You have one trade with double the size and two sets of fees.

This bit a lot of traders during the 2021 thermal coal rally, when coal futures roughly doubled over the autumn before exchanges raised margins, widened price limits, and regulators intervened. Traders who were long coal and long correlated energy-adjacent contracts thought they had diversified risk. They had stacked it.

Until you have a track record, hold a maximum of one open position — or, if you must run two, ensure they're in genuinely uncorrelated sectors and your combined open risk stays under 1% of the account.

Rule 4: Never Average Down. Ever. Especially in China.

Averaging into a loser is a bad habit everywhere. In Chinese commodity futures, it's uniquely dangerous for one reason: daily price limits. Most contracts have exchange-set daily move limits — commonly in the range of 4–10% depending on the product and current exchange settings, and these limits get widened during volatile periods, exactly when you're losing.

That means a position can lock at the limit-down price with no liquidity to exit. You can't stop out. You can't cut. You just watch. If you've averaged down into that position, your loss isn't a bad day — it's potentially a multi-day event, because locked-limit markets can open limit again the next session.

With a 2% daily cap, you cannot survive a locked-limit move on oversized positions. Your only defense is refusing to build them.

Rule 5: Hard-Code a Loss Streak Circuit Breaker

Two consecutive losing days — or three losses in a single day — should trigger a mandatory 24-hour pause, regardless of how good the next setup looks. This isn't superstition. It's pattern recognition about yourself.

Revenge trading follows a predictable script: a loss → a slightly larger re-entry → another loss → a full-size "get even" trade → cap breach. The 2% cap doesn't cause this; it just turns the emotional spiral into a formal failure. The circuit breaker interrupts the script before the expensive chapter.

Also consider a time stop: many traders do their best work in the first two hours of the Chinese day session (roughly 9:00–11:30 a.m. Beijing time) and their worst work in the afternoon lull and night session. If your edge lives in the open, trade the open and close the platform. Night sessions in Chinese futures can be thin and violent — a great place to donate your daily buffer.

Rule 6: Size for the Limit Move, Not the Stop

Here's a question most evaluation traders never ask: what happens if my stop doesn't get filled?

Proper sizing means your worst-case scenario — a stop filled several ticks through, or a brief liquidity vacuum — still lands you under the cap. A useful framework:

• Assume your actual fill is 2–3 ticks worse than your stop on liquid contracts like rebar and iron ore
• On less liquid contracts, assume worse — or don't trade them in an evaluation at all
• Keep single-trade risk at 0.5–0.75% of the account, so even a badly filled stop plus slippage stays well inside a 1.5% personal cap

Yes, this means smaller size than you want. That's the point. Evaluations are won by the trader who can still trade on day fifteen, not the one who made a hero trade on day three.

Rule 7: Track Your Cap Like a Fuel Gauge

Think of your 2% daily cap as a fuel tank. Every trade spends fuel; every win refills nothing (most evaluations don't credit intraday gains back to your loss allowance — check your specific rules, but assume they don't).

Keep a running number on your desk: remaining daily risk budget. After each closed trade, update it. If your remaining budget is smaller than the risk on your ideal setup, the setup doesn't exist today. This one habit — a number, updated, visible — prevents more cap breaches than any indicator ever will.

The traders who pass evaluations aren't the ones with the best win rate. They're the ones who never let a single day decide their fate.

Putting It Together: A Sample Day

Let's make this concrete with a rebar trade on a hypothetical $30,000 evaluation account:

• Daily cap: 2% = $600. Personal stop: 1.5% = $450.
• Setup: long rebar at 3,400 yuan/tonne, stop at 3,380 (20 yuan risk × 10 tonnes = 200 yuan per lot, before fees and slippage).
• Risk budget per trade: 0.75% = $225. At roughly 7 yuan per dollar (use the prevailing rate), that's about 1,575 yuan — comfortably 7 lots by raw math. But apply Rule 6: assume 3 ticks of slippage (30 yuan per lot), and cap yourself at a size where a worst-case fill still fits. Two lots keeps the worst case around 460 yuan of risk — too close. One lot keeps you deep inside the buffer.
• After the trade: update the fuel gauge. One loss leaves you 0.75% used, 1.25% of personal budget left — enough for one more identical trade, nothing more.

Is one lot boring? Absolutely. But passing an evaluation is a consistency exercise, and boring compounds.

The Mindset Shift That Makes the Cap Work for You

Here's the reframe that changes everything: the 2% daily cap is not a restriction imposed on you. It's a mirror of how professional desk traders already operate — most prop desks have hard daily loss limits, and breaching one ends your day on the spot, every time, no negotiation.

So don't wait for the evaluation to enforce discipline. Enforce it earlier and tighter than the rules require. The cap becomes trivial to respect when your personal rules are stricter than the platform's. That's the real skill being tested — not whether you can call direction on iron ore, but whether you can survive long enough for your edge to show up.

If you want to pressure-test this framework before committing to anything bigger, you can run it against a real-data China futures evaluation on XS Select — evaluations start from $29, and the contracts, price limits, and session structure mirror what you'd actually face trading Chinese commodity futures. Whatever platform you use, though, the seven rules above travel with you.

Trade the cap like it's the game — because it is.