Before you can trade on a demo FTMO, we need to see how you can manage risk. Because of this, we have developed Trading Objectives. There are four basic Trading Objectives you need to know to become an FTMO Trader and trade up to $200,000 on your demo FTMO Account. The third rule is called Maximum Loss.
The calculation of the Maximum Loss is similar to the Maximum Daily Loss. The only difference is that it’s not limited to one day but the entire duration of the testing period. We have developed this rule to protect our money, and at the same time we want to guide our clients and FTMO Traders to get used to following the rules of money management and risk management.
This rule can also be referred to as the account Stop Loss. The Maximum Loss limit simply states that the equity on your trading account must not drop below 90% of the initial account balance at any given time during the account duration. That means that on the Normal risk account you cannot lose more than 10% of your initial balance.
Please bear in mind that we’re talking about the account equity and just as the value of your closed positions, floating losses or profits are also always included in the calculation. It must also be taken into account that the limit is inclusive of commissions and swaps.
The rule remains the same during all three stages, so with a $100,000 Normal risk account, for example, your equity can never be less than $90,000.
As mentioned previously, for the calculation we use equity, not balance of your account. So even if your balance would be $92,000, but you had a floating loss of $2,001, the limit would be exceeded.
This 10% breathing space gives traders enough freedom to prove that their strategy is suitable to meet the conditions of the Evaluation Process and the demo FTMO Account. It is a buffer that should keep the trader in the game even if there were some initial losses.
