← Back to Blog · 2026-09-03 · 6 min read · Challenge Guide
So, you’re staring at a futures evaluation target of 29% with a strict 5% maximum drawdown. Let’s be honest: that is a tight leash. A 5% drawdown limit means one bad week of overleveraging or ignoring your stops can wipe you out before you even find your rhythm. But a 29% target is highly achievable if you approach it with institutional-grade risk management and a deep understanding of the markets you are trading.
If you want to pass a Chinese commodity futures evaluation, you cannot just wing it. You need a mechanical, mathematically sound trading plan. In this guide, we are going to break down exactly how to construct that plan, using real contract specifications, position sizing logic, and volatility management.
The Math Behind 29% and 5%
Before you look at a single chart, you need to understand the math of your evaluation parameters. A 5% max drawdown on a $10,000 evaluation account is $500. A 29% target is $2,900.
If you risk 2% of your account per trade ($200), a string of just three consecutive losses puts you dangerously close to breaching your daily or overall drawdown limits. To survive and thrive, your risk per trade must be microscopic.
Rule #1: Cap your risk per trade at 0.5% to 0.75% of your account balance.
By risking 0.5% ($50 on a $10k account), you can theoretically endure ten consecutive losing trades before hitting your 5% drawdown limit. While ten losses in a row is psychologically brutal, it is mathematically survivable. It gives your edge the breathing room it needs to eventually hit that 29% target.
Selecting the Right Chinese Commodity Futures
Not all contracts are created equal. When trading China futures, liquidity and tick volatility are your best friends, but extreme volatility can be your worst enemy. You want markets that offer enough range to hit your profit targets, but enough liquidity to ensure tight spreads and reliable fills.
For global retail traders, the most accessible and liquid markets are typically industrial metals and ferrous materials. If you want to trade rebar/iron ore, you are looking at the backbone of Chinese infrastructure trading.
Contract Specs You Must Know
Here is a quick reference table for two of the most liquid Chinese commodity futures contracts. Memorize these, as they dictate your position sizing.
| Contract | Exchange | Contract Multiplier | Tick Size | Tick Value |
|---|---|---|---|---|
| Rebar (rb) | SHFE (Shanghai Futures Exchange) | 10 tons / lot | 1 RMB / ton | 10 RMB |
| Iron Ore (i) | DCE (Dalian Commodity Exchange) | 100 tons / lot | 0.5 RMB / ton | 50 RMB |
Notice the difference in tick value. One tick in Iron Ore (50 RMB) is five times larger than one tick in Rebar (10 RMB). This means a 10-tick adverse move in Iron Ore costs you 500 RMB per lot, while the same move in Rebar only costs 100 RMB. You must factor this into your stop-loss placement.
Position Sizing with Real Contract Specs
Let’s put the math into practice. Assume your evaluation account is $10,000 USD, and you are trading Rebar on the SHFE. You have decided to risk 0.5% per trade, which is $50 USD (roughly 350 RMB depending on the exchange rate).
You spot a setup on the Rebar daily chart. Based on market structure, your technical stop-loss needs to be placed 20 ticks away from your entry price to avoid normal market noise.
- Risk per trade: 350 RMB
- Stop-loss distance: 20 ticks
- Cost per tick (per lot): 10 RMB
- Total risk per lot: 20 ticks * 10 RMB = 200 RMB
To find your ideal position size, divide your total allowable risk by the risk per lot: 350 RMB / 200 RMB = 1.75. Since you cannot trade fractional lots in Chinese commodity futures, you round down to 1 lot.
By trading just 1 lot of Rebar with a 20-tick stop, you are perfectly aligned with your 0.5% risk parameter. This is how you protect your 5% max drawdown limit.
Navigating Volatility Regimes and Exchange Interventions
Trading China futures requires an understanding of how domestic exchanges manage risk. Unlike Western markets that rely purely on price discovery, Chinese exchanges will actively intervene to cool down overheated markets.
A prime example is the massive thermal coal rally around late 2021. Prices surged dramatically, leading to extreme volatility. To curb speculation, the Zhengzhou Commodity Exchange (ZCE) aggressively raised margin requirements, widened daily price limits, and implemented strict position limits. Traders who were caught on the wrong side of these interventions faced margin calls even if their broader market thesis was sound.
How to Adapt
When you trade rebar/iron ore or any other Chinese commodity, you must monitor exchange notices. If an exchange announces a margin hike or a widening of daily limits, it is a signal that volatility is expected to spike.
During these regimes, your mechanical stop-losses (like a 20-tick stop) will get eaten alive. You have two choices:
- Sit on your hands: The easiest way to protect a 5% drawdown limit is to not trade when the exchange is flashing warning signs.
- Reduce lot size further: If you must trade, widen your stop to accommodate the new volatility, but cut your lot size in half to maintain the same 350 RMB monetary risk.
The Trade Management Playbook
A trading plan isn’t just about entries; it’s about managing the trade until it is closed. To hit a 29% target, you need to maximize your winners while strictly containing your losers.
Entry Rules
Focus on trend-following pullbacks. In a China futures evaluation, you want high-probability setups. Wait for price to pull back to a moving average (e.g., the 20 EMA) or a clear support/resistance level. Enter only when you get a confirmation candle (like a pin bar or engulfing pattern) in the direction of the higher timeframe trend.
Stop-Loss Placement
Place your stop-loss below the structure of the setup, not at an arbitrary dollar amount. If the structural stop requires risking 1% of your account, skip the trade. Only take trades where the structural stop aligns with your 0.5% risk rule.
Scaling Out
Do not be greedy. When a trade moves in your favor by 1R (the amount you risked), move your stop-loss to breakeven. At 2R, sell half of your position to lock in profits. Let the remainder run with a trailing stop. This ensures you bank capital toward your 29% target while letting winners compound without risking your initial capital.
Practical Application: Your Daily Routine
Here is how you execute this plan daily during your futures evaluation:
- Pre-market (08:30 AM Beijing Time): Check exchange notices for margin changes or limit expansions. Check the higher timeframe trend for your target markets.
- Market Open (09:00 AM): Do not trade the first 15 minutes. Let the opening volatility settle and establish the day’s initial balance.
- Setup Scanning (09:15 AM - 11:30 AM): Look for pullback setups. Calculate your position size based on the 0.5% risk rule and the structural stop distance.
- Execution: Enter the trade, set your stop-loss immediately, and walk away from the screen. Do not micromanage the trade unless your scale-out rules are triggered.
- End of Day: Log the trade in your journal. Note the market condition, your entry rationale, and how well you adhered to your 0.5% risk rule.
Consistency is what turns a 5% drawdown limit into a safety net rather than a tripwire. By taking only A+ setups and sizing your positions down to the tick, you can steadily grind toward that 29% target.
Closing Thoughts
Building a trading plan for a 29% target and a 5% max drawdown is an exercise in discipline. It forces you to strip away the gambling mentality and trade like a risk manager. Understand your contract specs, respect exchange interventions, and let your mechanical rules do the heavy lifting.
If you have built your system and want to see how it holds up in live market conditions, you can test your strategy on a real-data China futures evaluation at XS Select, with challenges starting from just $29. It’s an honest, straightforward way to validate your edge before scaling up.