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Petko AleksandrovAs a trader, one of the biggest challenges you may face is passing the FTMO Challenge. This is a program that allows traders to prove their skills and get funded by a professional trading firm. FTMO Challenge rules are tough and passing this challenge can be difficult, especially if you are new to trading or have limited experience. That’s why developing a robust FTMO trading strategy would increase your chances of passing the FTMO challenge.
This guide combines various strategies and tips to help you succeed. From effective but simple money management system that can help you pass the FTMO Challenge with just two trades to developing a strong trading strategy that will prepare you for trading success. We will also cover the vital FTMO Challenge rules that you must adhere to throughout the process.
What is the FTMO Challenge?
The FTMO Challenge is a structured evaluation process that traders must pass in order to get funded. It consists of two main phases:
- The Challenge: You must trade a demo account with a specified profit target within a certain timeframe while adhering to strict risk management rules.
- The Verification: Once the Challenge is passed, you move on to the Verification, where you repeat the same process on a live account. If you pass the Verification, you get funded and can trade with larger amounts of money – or with other words you receive access to trading with FTMO’s funds.
The FTMO Challenge is a great way to prove your trading skills and get funded. However, it is not easy to pass, and many traders fail. The Challenge requires you to make a profit within a certain time frame while following strict risk management rules. The profit target and time frame depend on the account size you want to get funded with.
FTMO Challenge Rules
Understanding and following the FTMO Challenge rules is vital to passing FTMO Challenge. Key rules include:
- Profit Target: Achieve a certain profit target, usually 10% for the Challenge and 5% for the Verification.
- Maximum Daily Loss: The maximum amount you can lose in a single day, typically 5% of your initial account balance.
- Maximum Loss: The total maximum loss you can incur during the Challenge or Verification, typically 10% of your initial account balance.
- Trading Days: Trade a minimum number of days during the evaluation period to demonstrate consistent performance.
If you fail to comply with these rules, it will result in failing the Challenge, regardless of your profit performance.
Strategies for Passing the FTMO Challenge
Effective Money Management
Using a reliable money management system is very important for passing the FTMO Challenge. Here’s an effective approach:
Risk-Reward Ratio 1:3
The first step in this system is to use a risk-reward ratio of 1:3. This means that for every trade you make, you should risk 1% of your account and target 3% of your account. For example, if you have a $10,000 account, you should risk $100 and target $300.
To achieve this, you need to set your take profit three times bigger than your stop loss. This way, even if you lose a trade, your losses will be limited to 1% of your account, while your gains can be up to 3% of your account.
The second step in this system is to use a risk-reward ratio of 1:3 again. But this time, you should risk 4% of your account and target 12% of your account. For example, if you have a $10,000 account, you should risk $400 and target $1,200.
This step involves reinvesting your profits from the first trade into the second trade. This way, you are still risking 4% of your account, but your potential gains are now up to 12% of your account.
To summarize Risk-Reward Ratio 1:3:
- First Trade: Risk 1% of your account and target 3%. For example, with a $10,000 account, risk $100 to target $300.
- Second Trade: Reinvest your profits by risking 4% of your account to target 12%. With a $10,000 account, risk $400 to target $1,200.
Alternative Risk-Reward Ratio 1:2
If you cannot achieve a risk reward ratio of 1:3, you can use a risk reward ratio of 1:2 instead. This means that for every trade you make, you should risk 1% of your account and target 2% of your account.
Use a Trading System
Using a trading system is essential when trading the FTMO Challenge. A trading system is a set of rules that you follow to enter and exit trades. It helps you make objective decisions based on your analysis of the market. Accordingly, you can use a trading system that you have developed or buy one from a reputable source. Tools like the Forex Profit Supreme Meter will greatly help you achieve your goals.
Record Your Trades
One of the best ways to improve your trading skills is by recording your trades. By doing so, you can go back and review your mistakes, identify areas of improvement, and optimize your strategy. Plus, it can help you avoid making the same mistakes in the future.
Recording your trades is important when trading the FTMO Challenge. It helps you analyze your trades and identify your strengths and weaknesses. You can use a trading journal or a spreadsheet to record your trades. Make sure you record the entry and exit points, position size, and profit/loss.
Follow a Disciplined Approach
Trading can be an emotional rollercoaster, but it’s essential to stay focused and avoid letting your emotions dictate your trades. Greed and fear can lead to irrational decisions, so maintaining discipline in adhering to your trading plan and FTMO Challenge rules is fundamental. Avoid emotional trading and stick to your strategy.
What Happens If You Lose a Trade?
If you lose a trade, you should not worry. You can move on to the next trade and try again. However, if you lose 10 consecutive trades, you will lose 10% of your account and fail the FTMO Challenge.
In this case, you should reevaluate your trading strategy and make some changes. You can use other proven strategies and manage your money wisely to avoid consecutive losses.
Passing the FTMO Challenge with a Small Account
Below, we will discuss how to pass the FTMO challenge with a small account. If you have $1000 in total to risk, it can be challenging to pass the FTMO Challenge. You would have only one shot! However, it is possible if you follow the right strategy. Here are some tips to help you pass the Challenge with a small account:
Start Small
It is best to start with a small FTMO Challenge. For example, if you have a $1,000 to invest, start with the $10,000 Challenge instead of the $100,000 Challenge. Starting small will help you build confidence and improve your skills. Once you pass the small Challenge, you can move on to the larger ones.
Diversify your Risk
Diversifying your risk is important when trading with a small account. Instead of taking large positions on a few trades, take smaller positions on several trades. This way, you can spread your risk and increase your chances of making a profit. Diversification also helps you avoid losing all your capital on one trade.
How to Prepare for Trading Success – Developing a Robust FTMO Challenge Strategy
Preparing for the FTMO challenge is a critical step in becoming a profitable trader. While some YouTubers showcase passing the challenge within a few hours, it’s important to remember that consistency is key to long-term success. FTMO Challenge rules are tough and in next paragraphs, we’ll explore how to develop a strong FTMO challenge strategy to prepare you for trading success.
Consistency is Key
As we already mentioned above, consistency is key to long-term success. Trading every day with a certain target or maximum drawdown, which prop trading firms will set up for you, is crucial to your long-term success. It’s not about getting lucky with a few trades, but rather building a sustainable trading system.
Develop a Risk Management Plan
Risk management is an essential aspect of any trading strategy, and the FTMO challenge is no exception. Before you start trading, it’s fundamental to develop a risk management plan that includes your maximum daily loss, maximum loss, and target profit. These parameters will help you manage your risk and avoid blowing your account.
Currency Strength Analysis
When it comes to trading, currency strength is a crucial factor to consider. By using a tool like the Forex Profit Supreme Meter, you can identify which currencies are the strongest and weakest. This information can help you make more informed trading decisions and increase your chances of success.
Use of Technical Indicators: Fibonacci Retracements
Incorporate technical indicators such as Fibonacci retracements and moving averages (20, 100, 200) to identify potential trades and manage entry/exit points. Fibonacci retracements are a popular technical analysis tool that can help you identify potential support and resistance levels. By using these levels in conjunction with currency strength analysis, you can increase your chances of success.
Trade Selection
Select trades based on solid analysis and avoid pairs that do not align with your strategy. For example, focus on pairs like EURJPY, which show strong trends based on your analysis.
Tips for Successful FTMO Challenge Trading
To achieve successful trading in the FTMO Challenge, there are some tips you can follow:
- Follow a disciplined approach to trading
- Use specific indicators to identify potential trades
- Minimize your losses and take profits
- Look for confirmation on the daily chart
- Keep an eye on the 20, 100, and 200 Moving Averages
- Take advantage of free resources and educational materials
BONUS: The FTMO Challenge Strategy
This FTMO Challenge strategy requires a disciplined approach to trading. Once you grab your profits, it’s important to forget about it and not get into the same direction because the move is already gone. To identify potential trades, the strategy involves using specific indicators, including the Fibonacci retracement, Forex Profit Supreme Meter, and 20, 100, and 200 Moving Averages.
To use the Fibonacci retracement, you need to take the retracement after the first move.
The Forex Profit Supreme Meter is another important indicator in this strategy. You can download it for free using this link. The indicator helps identify potential trades by measuring the strength of the currency pair.
The daily chart is also crucial in this FTMO strategy. You need to look for confirmation on the daily chart to confirm a potential trade. Additionally, the 20 Moving Average is used to help identify potential trades. If the price is below the 200 and 100 Moving Averages, you should consider selling. The 20 Moving Average is also used to identify potential trades, as a break below it can increase momentum.
The FTMO Challenge Strategy: Example
To demonstrate the FTMO Challenge strategy, let’s take a look at a recent trade. The trader identified the GBPUSD pair as the best pair to trade based on the indicators. On the second day, the trader took a small loss, which is normal in trading. However, the trader minimized their losses and continued trading.
On the third day, the trader identified a strong Aussie against the Euro and took a short trade. They placed a Stop Loss above the tops and a Take Profit above the support level. The price went in the trader’s favor, and they minimized their loss to just $12.71 before the market hit their Stop Loss.
The trader achieved their profit target of $500 in just 3 days, surpassing the objectives of profit and maximum loss. The trader also had an average reward risk ratio of 3.01 and a Profit Factor of 4.01, indicating profitable trading.
The FTMO Challenge Strategy: Trade Selection
To start off, it is important to select the right trades. In this strategy, we avoid trading Swiss pairs, especially Swiss/Yen, and instead focus on the EURJPY pair. We make this decision based on the Forex Profit Supreme Meter, which indicates that the Euro and Swiss are on the top while the Yen is the weakest. We buy EURJPY, which is the strongest at the time of the trade.
The FTMO Challenge Strategy: Risk Management
We place our stop loss just below the recent lows, and our take profit way higher, at 146.95. This decision is based on three reasons: the counter trendline on the daily chart, the zone of resistance, and the desire to have it below the 147 roundish number. Our risk is 124.77, which is just above 1.2%. We execute trades on M1 but always look at the higher time frames.
The FTMO Challenge Strategy: Analysis on Higher Time Frames
We perform our analysis on higher time frames, specifically the daily and M15 charts. From there, we observe a series of higher highs and high lows on the daily chart, and a very good momentum from the trading session on Friday on the M15 chart. We notice that the price is already above the 20 Moving Average on daily charts, as well as the 100 and 200 on M15. We keep a close eye on the moving averages, as they are crucial indicators for our trades.
The FTMO Challenge Strategy: Improving the Average Price
After a great reversal in the market, we open a second trade to improve our average price. We keep our stop loss at a safer place and place our take profit at 146.65, which is below the top of the most recent move or below the highest point of the London session. We take profit manually at a point where we notice resistance in the market.
The FTMO Challenge Strategy: Closing Trades
We close our trades manually several times due to strong resistance in the market. When we notice that sellers are stronger, we exit the trade and take our profit and are very happy with the session because we achieve our target without any losses. In the trial period, it is important to prepare as if it were an actual funded account and to spend longer if necessary.
The FTMO Challenge Strategy: Key takeaways
In conclusion, achieving the 5% target in the FTMO Challenge is possible with the right trading strategy. It is important to select the right trades, use proper risk management techniques, perform analysis on higher time frames, improve average price, and close trades manually when necessary. By taking the challenge seriously and mastering your trading system, you can pass the FTMO Challenge and move on to trading with a funded account.
How to Pass the FTMO Challenge: Conclusion
Passing the FTMO Challenge can be challenging. But with the right money management system, you can increase your chances of success. This simple system involves using a risk reward ratio of 1:3 for the first trade. Then, 1:3 again for the second trade, risking 4% of your account and targeting 12% of your account.
Remember, FTMO Challenge rules are tough and passing the Challenge is not easy. However, it is worth the effort if you want to get funded and trade with larger amounts of money. A great course to show you how to pass every step of the way is available. You will see live examples and you will have a ready-to-use Robot to help you pass FTMO challenges. Grab it here.
Good luck and happy trading!