The rules that guide the traders in their conduct as well as describe the expectations and targets that need to be met for them to complete each stage of the program are all contained in the rules of the program. The best of results can be achieved through acceptable methods if traders are disciplined in their approach to the program. Let us look at the rules.
FTMO Rules: Trading objectives
The trading objectives were developed for both the first and second steps of the evaluation course because the firm wants to assess their risk management level before they provide traders with a funded account. The trading objectives show how committed a trader is to trading. There are two steps in the evaluation course.
Maximum Trading days
The trading period is also referred to. The duration required for a trader to complete the challenge is 30 days while the verification is 60. If the trader can complete the trading objectives earlier than the required number of days, they don’t need to wait for the remaining days of duration before moving on.
If a trader can complete all their objectives within 12 days, they don’t need to wait another 18 days to move to the next stage. The person will be allowed to go to the verification step as soon as possible. If the verification step can be completed within 45 days, the trader doesn’t have to wait out the remaining 15 days before being given access to a funded account.
Minimum trading days
To meet this objective, traders are expected to trade for a minimum of 10 days. Each of the 10 days are known as a trading day, and traders are required to open no evaluation prop firm at least one trading position on each of them. A trading day is when at least one trade is executed. It is only the day of trade execution that is considered a trading day. The trader needs to open at least ten new trading positions each day.
A trading objective is put in place to make sure that the trader can generate profit consistently. The trader needs to know that the firm follows Central European Time (CET) or Central European Summer Time (CE(S)T).
Maximum Daily Loss
According to the rules of the firm, the maximum daily loss is 5% of the original account balance. At any time of the day, the outcome of all trades should not exceed the daily loss limit. The formula can be found below.
The current daily loss is the result of closed and open positions.
For the original account balance of $200,000, the maximum daily loss limit was set at $10,000. If the trader loses $8,000 in his trades, his account cannot decline beyond $2,000 on that day. The account must not lose more than $2,000 in open floating losses.
If the trade was successful, but the trader was eliminated, then let’s assume the trader closed their positions with a loss of $6,000 and then opened a new position that ended up being a positive trade.
The maximum daily loss limit also includes swaps and commission.
If the trader makes a profit of $5,000 in a day, then they can lose $15,000, but they can’t lose more than that.
The maximum daily loss also takes into account open trades.
FTMO follows Central European Time
The maximum daily loss can reset at midnight. If the trader had a profit of $4,000 one day, and also has an open position with a currently floating loss of $13,000, then the maximum daily loss has not been surpassed. There was a daily loss of $9,000 on that day. The daily loss limit will be broken if the trader holds this position with an open loss of $13,000 after midnight. The open loss of $13,000 is more than the maximum allowed daily loss of $10,000 because the profit from the previous day does not carry over.
The size of the maximum daily loss gives the trader enough wiggle room to trade and assures the investor of a well-defined daily risk. Since the value of the account will not be allowed to drop below the limit, both the trader and investor stand to benefit. This is another reason why the maximum daily loss limit is in place.
At no point during the duration of the account must the equity decline beyond the original account balance. The lowest possible equity of the account can be $90,000. The focus is on the account equity and not the balance account. The logic behind the calculation is similar to that of the maximum daily loss, except that this is not only one day, but the entire evaluation period.
The limit also covers swaps and commissions. The trader has enough space to show that his/her account is worth the investment. The rule should keep the trader going even if some losses are suffered. It gives the investor a guarantee that the account of the trader will not fall below 80% of its value under any condition.
The profit target is 10% for the Aggressive option and 5% for the Verification option, which is the same as the original balance. Even though the duration of trading days is double, the profit target for the Verification is only half of what it was.
If it is the verification step, a profit was achieved by the trader in the sum of closed positions on the allocated trading account anytime within 30 calendar days. When the trading period ends, all trading positions must have been closed so that the profit target can be determined.
If the trader opts for the account balance of $100,000, then the profit target is $10,000 for the test and $5,000 for verification.
You can get a free FTMO challenge
When it comes to the profit target, traders will only be given a new free FTMO Challenge if they meet all the trading objectives. When the duration ends and all the trading positions have been closed, traders need to have a positive account profit in order to be eligible for the new challenge.
No More rules
In this section of the article, we will be looking at some aspects that have no rules at all. Other platforms have rules about the following.
The two-step evaluation course allows traders to trade during news releases. If you have a Swing account, you have to be careful about trading the news. They can trade news as they please. When a trader has access to an account that is being used for trading, there are no restrictions.
If the trader is still trying to pass the verification, then they are allowed to keep open positions over the weekend. It is a different story once they become a full-fledged trader. The firm requires its traders to close their positions just before the markets close on Saturday and Sunday. The market timing is expected to be followed by traders. The only exception is for traders with an account type like the FTMO Swing account, which is acceptable to hold open trading positions over the weekend.
The firm does not impose any restrictions on the instruments or position sizes that traders can trade while also allowing them to use their preferred trading instruments.
Additional information about FTMO
The firm’s leverage is set at 1: 100 and it cannot go past that. The request for leverage to be reduced will be granted if the trader requests it.
For the Swing account type, the leverage is set at 1:30 and there is no way to change it. This is why traders need to be aware of their risk exposure so that they can manage it.
The double-edged sword of leverage is that it can increase losses as much as it can increase profits, which is why traders have to be careful when using it.
Some of the most popular retail platforms for trading are c Trader, MetaTrader 4, and MetaTrader 5. The platforms that suit traders are up to them.
The account can be seen on the trading platform. They can view the instrument specification in the MetaTrader by opening their Market Watch, right-clicking on the instrument of interest, and choosing the specification they want to view. It’s important that traders know the offer and conditions of every instrument they are trading
Information on specifications of symbols, trading hours, planned platform maintenance, and other necessary trading modifications are included so that traders are aware of what is happening on the platform and can manage their trades accordingly. Whenever any of these modifications are to be carried out, traders are usually notified in advance. The firm uses the Central European time or the Central European Summertime so traders need to time their trade entry and exit accordingly.
This sums up everything traders need to know to pass the challenge and get a funded account. If you feel you have the experience, skill, and knowledge to do well in this challenge, then sign up. It is possible that you will end up being a mentor to other aspiring traders like yourself if you build a successful trading career.