How to pass the FTMO challenge

FTMO is one of the oldest prop trading firms out there and the FTMO challenge is one of the best ways to get yourself a funded account and start making significant returns on your trading.

With FTMO, you’re not limited by a small account anymore and you can potentially trade up to $200,000.

However, the FTMO challenge is tough to pass, and most people fail it on their first, second, and even third tries.

With some smart trading and risk management, you can pass the FTMO challenge.

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7 tips to pass the FTMO challenge

1. Be honest with yourself about your trading

The first and perhaps most important factor to pass the FTMO challenge is to be honest with yourself about your trading skills and where you are on your trading journey. Are you a profitable trader already?

If not, it’s very unlikely you’ll magically pass a challenge.

Instead, it’s better to start a demo account or a small live account and try to hit the profit target before dumping $350 or more on FTMO challenges.

Sometimes, it’s difficult to simulate real risk on a demo account, so consider opening a small live account with $100 and trying to achieve a 10% gain on it.

If you’re able to achieve profits and manage risk, then consider investing some hard-earned money into a challenge.

Remember, once you have a good trading strategy and you’re confident of your trading style, it does not matter how big your account is!

2. Be mindful of FTMO’s trading rules

FTMO makes a good chunk of their revenue from people failing challenges, so the rules are sometimes kind of designed to make you fail. Even experienced traders can sometimes hit the maximum daily loss and end up getting disqualified from the challenge!

You must familiarize yourself with the rules and make sure you don’t end up prematurely failing the challenge.

FTMO actually has very relaxed rules for the challenge, but the rules change once you start trading a live account.

For example, you can trade news events in the challenge phase, but you must not trade within 2 minutes of news releases on a live account.

While failing a challenge is bad, losing an account after passing a challenge is even worse!

Like some other prop firms, FTMO also has a 10 minimum trading days requirement. If you take small trades, you’ll most likely hit this requirement before you reach the actual profit target, but if you end up hitting the 10% in less than 10 days, you’ll have to remember to continue placing small trades to fulfill this requirement.

3. Have a trading strategy and plan

Forex trading is all about having solid trading strategies and a trading plan that has rules you will follow.

Your trading plan and strategy is your own: you don’t need to use someone elses, but you DO need to create a plan that works for you and that you can follow to the letter.

This will help keep you disciplined and on track to hit the profit targets. The financial market is almost like a casino, so it’s tempting to keep playing in the hopes of a win.

A trading strategy and plan will help you break the casino mindset and put you in a business mindset that will have solid risk management and a reasonable profit target.

One of the most common pitfalls that come from the gambling mindset is holding trades for too long!

You’ll hold a losing trade in the hope that it will turn around and close you in profit, and you’ll hold a winning trade in the hope that it will continue going up!

Instead, the losing trade keeps going further and further against you, and the winning trade turns around closes you out at break even, or worse, in a loss!

Will you swing trade or day trade?

Swing trading and day trading are the two most common ways that most retail traders enter the Forex market.

Your trading plan should dictate whether you are swing trading or day trading. If you’re swing trading, you need to hold trades for longer and wait for the market to go your way.

If you’re day trading, you need to close your trades soon!

Essentially, don’t mix the two! It’s unlikely that a day trading setup will turn into a swing trade(unless you’re lucky and it’s one of those days), and if you close swing trades too early as if they were day trades, you’ll miss oout on potential profits.

4. Focus on one or two trades per day

The FTMO challenge has two primary rules regarding losses: the maximum daily loss and the maximum loss.

If you take too many losing trades in one day, you’ll probably hit the maximum daily loss and get yourself disqualified.

Taking too many trades also puts you in a gambling mindset instead of a trading mindset, so you have to remember to keep yourself on track and treat trading as a business, not a casino!

If you as a Forex trader have a rule to only take 1 or 2 trades every day, you’ll make sure to only take good trades and avoid risky or questionable setups.

As surprising as it may sound, the quickest way to reach a profit target is to take fewer trades per day. The more trades you take, the higher your chances are of making a loss!

Focusing on just one to two trades per day is one of the prime pieces of advice I’ve gotten from Raja Banks of WicksDontLie.

5. Aim to get through the entire challenge

10% is quite ambitious as far as profit targets go, so when doing the FTMO challenge, not only are you aiming to reach 10%, you’re also aiming to not hit the drawdown limits before your 30 days are over.

Many people fail challenges within a few days of starting them because they take on too much risk!

If you manage to get through the entire 30 day challenge period and you’re still in the positive, you can either restart yoru challenge for free or get a 15-day extension to hit the prescribed target.

6. It’s a marathon, not a sprint

One pitfall that many traders tend to fall victim to is trying to pass the challenge too quickly. This tempts traders to risk more money than necessary and they end up hitting the daily or maximum loss much before the end of the 30 trading days.

To pass the FTMO challenge, take smaller risks and plan on using up a good chunk of the 30 days to reach the target.

For example, if you risk 0.5% per trade with a 1:2 risk-reward ratio, you will hit 10% in 10 trading days. Risking 0.5% is a good amount for day traders, although swing traders will need to risk a little more because they won’t get trades quite as often.

Taking a small loss is much better for your overall trading psychology.

Either way, take it easy and remember: the FTMO challenge(and indeed succeeding prop trading and in the financial market) is a marathon, not a sprint!

7. Take bigger risks towards the end of the challenge

If you’re in profit near the end of the challenge and there are only a couple of trading days left, try using larger risks to reach the target as long as the risk will not put you into a net loss!

For example, if you’re 3% short of the target and you get a good trading setup, risk 1.5% or 2% instead of your regular 1%. This way, you can reach the remainder of the target in a single trade.

If taking more risk is not your thing, you can just take it easy, too: FTMO offers a 15-day extension to continue the challenge and meet the profit target.

Conclusion

With a good forex trading strategy and sound money management, you can pass the FTMO challenge and succeed as a prop trader.

With that said, the FTMO challenge is rather difficult to pass, and you may not get through it on your first challenge or even your second challenge.

That’s OK – as long as you’ve got a solid trading strategy and you’re confident in your abilities, you’ll be able to get through it!