The FTMO funded trading program has specific rules that guide the traders in their conduct as well as describe the expectations and the targets that need to be met for traders to complete each stage of the program. The FTMO rules ensure that traders are disciplined in their approach to the program which will enable them to achieve the best of results through acceptable methods. Let us now examine these rules.
FTMO Rules: Trading objectives
Before FTMO provides traders with a funded account, the firm wants to assess their risk management level which is why the trading objectives were developed for both steps of the FTMO evaluation course. The trading objectives show the level of discipline, commitment, and responsibility that a trader has towards trading. There are two steps involved in the Evaluation course namely the FTMO Challenge and the Verification.
Maximum Trading days
This is also referred to as the trading period. The duration required for a trader to complete the FTMO Challenge is 30 calendar days while for the Verification, it is 60 calendar days. If the trader can complete the trading objectives earlier than the required number of days, then such a trader does not need to wait for the remaining days of duration before advancing to the next step.
For instance, if a trader can complete all the trading objectives of the FTMO Challenge within the space of 12 days, the trader does not need to wait another 18 days before moving to the next stage. He/she will be allowed to advance to the Verification step as soon as possible. And if the Verification step can also be completed within 45 days, the trader does not have to wait out the remaining 15 days before being given access to a funded trading account.
Minimum trading days
For traders to meet this objective, they are expected to trade for a minimum of 10 days during the period of the current duration. Traders are also required to open at least one trading position on each of these 10 days which are known as trading days. A trading day refers to a day that features at least the execution of one trade. Even if a trade was to be held over different days, it is only the day of trade execution that is considered as the trading day. Going by this logic, the trader thus needs to open at least ten new trading positions on each of the ten days.
This trading objective is put in place to ensure that the trader can generate profit steadily and consistently. This trading objective is easy to follow and the trader needs to note that the firm follows Central European Time (CET) or Central European Summer Time [CE(S)T].
Maximum Daily Loss
This rule is also referred to as the “trader’s daily stop-loss” and according to the rules of the firm, the maximum daily loss is set at 5% (10% for the Aggressive option) of the original account balance. The rule goes further to say that at any time of the day (CET), during trading, the outcome of all trades whether open or closed should not reach the specified daily loss limit. The formula is given below:
Current daily loss = results of closed positions of a given day + result of open positions.
For instance, for the FTMO Challenge with the original account balance of $200,000, the maximum daily loss limit is set at $10,000. If the trader happens to lose $8,000 in his closed trades, the trader is not allowed to have his account decline beyond $2,000 on that particular day. In addition to that, the account must not go -$2,000 in the trader’s open floating losses.
Let’s explain more, let us assume the trader closed trading positions with a loss of $6,000 and then opens a new trading position that enters a floating loss of about -$5,700 but eventually ends up being a positive trade. even if the the trade was successful, but the trader will be eliminated, because at a particular point of the day, the trader’s daily loss was -$11,700 on the equity, which has exceeded the acceptable loss of $10,000.
The maximum daily loss limit also includes swaps and commissions; the trader should take note of this.
On the other hand, if the trader should make a profit of $5,000 in a day, then the trader is allowed to lose $15,000 but the losses must not exceed that.
The trader should remember that his/her maximum daily loss also takes into account the open trades.
FTMO follows Central European Time
Traders also need to watch out because the Maximum daily loss resets at midnight CET. For example, if the trader had a profit of $4,000 one day, and also has an open position featuring a currently floating loss of $13,000 on that same day, then the maximum daily loss for that day has not been eclipsed. The daily loss for that day is $9,000 ($4,000 closed profit – $13,000 open position). However, if the trader should hold this position with an open loss of $13,000 after midnight, then the daily loss limit will be breached. This happens because the profit from the previous day does not carry over to a new day and the open loss of $13,000 is more than the maximum permitted daily loss of $10,000.
Overall, the size of the Maximum Daily Loss allows the trader to have enough wiggle room to trade and assures the investor (the firm) of a well-defined daily risk. This way, both the trader and investor stand to benefit from this rule since the value of the account will not be permitted to drop below the limit. This is another reason why the maximum daily loss limit encompasses the possible floating losses of the trader.
This rule can also be referred to as “account stop-loss” and it goes to say that at no point during the duration of the account must the equity decline beyond 90% of the original account balance. For the FTMO Challenge with an account balance of $100,000, it translates that the lowest possible equity of the account can be $90,000. It should be remembered again that this is an addition of both closed and open positions (the focus is on the account equity and not the account balance). The logic behind the calculation is similar to that of the maximum daily loss except that this is not limited to just one day but covers the whole duration of the evaluation period.
The limit also encompasses swaps and commissions. Ten percent of the original account balance provides the trader with sufficient space to show that his/her account is worth the investment. This rule is put in place to serve as a buffer that should keep the trader going even if some losses were suffered initially. It also gives the investor a guarantee that the account of the trader will not decline below 90% (80% for the aggressive option) of its value under any kind of condition.
For the FTMO Challenge, the profit target is set to 10% (20% for the Aggressive option) of the original balance and for the Verification, it is set to 5% while it is 10% for the Aggressive option. So, the profit target for the Verification is essentially half of the FTMO Challenge even though the duration of trading days is double.
Profit target is an indication that a profit was achieved by the trader in the sum of closed positions on the allocated trading account anytime within 30 calendar days for the FTMO Challenge or 60 calendar days if it is the Verification step. Furthermore, when the trading period comes to an end, all trading positions must have been closed for it to be determined whether the profit target has been achieved or not.
For instance, in the FTMO Challenge, if the trader opts for the account balance of $100,000, then going by the template mentioned above, the profit target is $10,000 for the FTMO Challenge and $5,000 for the Verification.
When can you get a free FTMO challenge?
Traders should note that they will be provided with a new free FTMO Challenge each time they meet all the trading objectives (irrespective of whether it is the FTMO Challenge or Verification) except when it comes to the Profit target. For traders to be eligible to receive the new FTMO Challenge for free, they need to have a positive account profit when the duration ends and all the trading positions have been closed.
What are the rules that doesn’t Excite at FTMO?
In this section of the article, we will be looking at some aspects that FTMO has no specific rules for. Unlike other platforms, FTMO doesn’t have rules about the following:
While undergoing the two-step evaluation course, traders are free to trade during news releases without restrictions. However, once traders complete the evaluation course, they have to be careful about trading the news unless the account type they have is the Swing account. In that case, they can trade the news as they wish. So, the restrictions only set in when a trader has access to an FTMO funded account that is being used for trading.
As long as the trader is still trying to pass the FTMO Challenge or the Verification, then they are allowed to maintain open positions overnight and even over the weekend. However, once they become a full-fledged FTMO trader, it is a different story entirely. The firm requires its traders to close their positions just before the close of the markets for the weekend. Traders are expected to respect and adhere to the market timings. The only exception is for traders with an account type like the FTMO Swing account, in which it is acceptable to hold open trading positions over weekends.
Traders are given total freedom here as all the assets available in the trading platform are eligible for trading which include Forex, Stocks, Indices, Commodities, Crypto, etc. The firm does not impose any restrictions on the instruments or position sizes that traders can trade while also allowing traders to use their preferred trading styles and strategies as long as they are legitimate and are in line with market conditions in real-time.
Additional information about FTMO
The firm offers leverage for forex trading which is set at 1:100 and it cannot go beyond that. However, if the trader requests for the leverage to be reduced, the request will be granted.
For the Swing account type, the value for the leverage is different for forex trading as it is set at 1:30 and no adjustment whatsoever can be made either to increase or reduce it. This is why traders need to ascertain and be aware of their level of risk exposure so that they can select leverage that they are capable of managing.
Always remember that the use of leverage is a double-edged sword which means as much as it has the potential to multiply profits, it can also increase losses exponentially which is why traders have to be careful when using leverage in forex trading.
Trading the FTMO challenge, the Verification, and the FTMO account can be done on some of the most popular retail platforms like cTrader, MetaTrader 4, or MetaTrader 5. Traders are free to select the platforms that suit them.
Traders can see the specification of the account directly on the trading platform. They can also view the instrument specification in the MetaTrader by opening their Market Watch (Ctrl + M), right-clicking on the instrument of interest, and then choosing ‘specification’. This is important because traders need to be familiar with the offer and conditions of every instrument they are trading.
There is also information on specifications of symbols, Trading hours, planned platform maintenance, and other necessary trading modifications so that traders are consistently aware of what is happening on the platform and can manage their trades accordingly while making the necessary adjustments. Traders are usually notified in advance whenever any of these modifications or maintenance is to be carried out. Traders also need to remember that the firm uses the Central European time or the Central European Summertime; therefore traders should time their trade entry and exit accordingly.
This sums up everything traders need to know about the FTMO Challenge rules to successfully pass the challenge and give themselves a shot at receiving a funded account from FTMO. So, if you are truly interested in trying this challenge and you feel you have the experience, skill, and knowledge to do well, then do not hesitate to sign up. It could be your chance to build a successful career as a trader and probably end up being a mentor to other aspiring traders like yourself.