The FTMO Challenge is a two-phase evaluation process that allows traders to prove their skill before managing a funded account. Understanding the rules in full, before placing a single trade, is essential because violations are irreversible. This article breaks down the FTMO challenge rules in plain language: what each phase requires, where traders most often fail, and how payouts are structured once a funded account is granted.
FTMO is a Prague-based proprietary trading firm that has operated since 2015. Its evaluation model has become a widely-used benchmark in the retail prop trading space. The structure is designed to filter for consistent, risk-aware traders rather than lucky high-risk speculators. Before reviewing any specific numbers, note that FTMO periodically updates its terms. All figures below are accurate as of this writing; always verify current parameters at FTMO's official website before you begin.
If you are still deciding which evaluation path suits you best, reviewing a prop firm challenge checklist before you start can help you clarify your readiness and choose the right account size.
The Two-Phase Evaluation Structure
FTMO's standard path runs across two sequential phases: the FTMO Challenge (Phase 1) and the Verification (Phase 2). Passing both phases leads to an FTMO Funded Account. There is no shortcut between phases; each must be completed independently.
Phase 1: The FTMO Challenge
The primary objective of Phase 1 is to hit a 10% profit target on the account balance while staying within all risk parameters. The minimum trading period is 4 calendar days, and there is no maximum time limit under the standard version. Traders receive an unlimited number of trading days to reach the target, provided they do not breach any rules.
Phase 2: The Verification
Phase 2 applies a reduced profit target of 5% on the starting balance. The same 4-day minimum trading period applies. The purpose of Verification is to confirm that Phase 1 performance was not a statistical fluke. Risk limits in Phase 2 are identical to Phase 1.
Profit Targets and Drawdown Limits
Two drawdown rules govern both phases and the funded account. Violating either results in immediate account termination.
| Rule | Phase 1 | Phase 2 | Funded Account |
|---|---|---|---|
| Profit Target | 10% | 5% | None |
| Maximum Daily Loss | 5% | 5% | 5% |
| Maximum Loss (Overall) | 10% | 10% | 10% |
| Minimum Trading Days | 4 | 4 | None |
The Maximum Daily Loss is calculated from the balance or equity at the start of each trading day (the higher of the two, as of this writing). If a trader's equity drops by 5% from that reference point at any moment during the day, the account is closed immediately. This is sometimes called an intraday drawdown rule and catches open positions as well as closed trades.
The Maximum Loss (also called the overall or trailing drawdown, depending on account type) is measured from the initial account balance. A 10% decline at any point, including open floating losses, terminates the account. Traders must track both rules simultaneously at all times.
The Consistency Rule and Trading Conditions
FTMO does not impose a hard numerical consistency rule in the same way some other firms do, but it does monitor for erratic trading behavior during account reviews. Traders who generate the majority of their profit in a single outsized trade may face scrutiny during the onboarding process. The spirit of the evaluation is repeatable, disciplined performance rather than a one-trade windfall.
Regarding instruments and sessions: FTMO permits trading on forex pairs, indices, commodities, stocks, and cryptocurrencies depending on the account type. Positions may generally be held over weekends and through news events, but FTMO recommends awareness of spread widening around major releases. There is no required stop-loss rule by default, though account-level drawdown rules effectively function as a system-wide stop.
Traders who want a detailed walkthrough of the mechanics behind evaluations like FTMO's can find practical guidance in this complete guide on how to pass a prop firm challenge, which covers preparation, position sizing, and rule management across phases.
Don't want to grind through the challenge yourself? Fast Funded gets you a funded account in 5-6 days: you only pay after we pass.
Account Sizes and the Scaling Plan
FTMO offers evaluation accounts starting at 10,000 USD and scaling up through 25,000, 50,000, 100,000, and 200,000 USD as of this writing. The profit target percentages remain the same regardless of account size; only the absolute dollar values differ. A hypothetical example for illustration only: on a 100,000 USD account, a 10% Phase 1 target equals 10,000 USD in profit, while the 5% daily loss limit equals 5,000 USD.
FTMO has a scaling plan for funded traders who meet certain performance benchmarks over a defined number of months. Under that plan, the funded account balance can be increased up to a documented maximum. The exact thresholds and maximum caps are subject to change, so consult FTMO's current scaling plan page for precise figures. Past performance in earlier funded periods does not guarantee continued eligibility or future scale-up approval.
Payout Mechanics and the Profit Split
Once a trader holds an FTMO Funded Account, profits are split between the trader and FTMO. The standard split is 80% to the trader, with an option to reach a 90% split through FTMO's performance-based program as of this writing. Payouts are processed on a monthly cycle, with the first payout becoming eligible after a defined initial period from account activation.
Traders request payouts through the FTMO client area. FTMO supports several payout methods including bank transfer, cryptocurrency, and certain e-wallet options, availability varying by region. There is no minimum profit amount required to request a payout, but the account equity must remain above the overall drawdown threshold after the withdrawal is processed.
It is important to understand that prop firm trading does not guarantee income. Payout eligibility depends entirely on profitable, rule-compliant trading performance. Traders should treat the funded account as a professional obligation, not a guaranteed paycheck.
Common Rule Violations and How to Avoid Them
The majority of failed FTMO evaluations trace back to a small set of predictable errors:
- Exceeding the daily loss limit on a single bad trade. Oversized positions relative to account balance are the leading cause. Position sizing discipline is non-negotiable.
- Ignoring floating equity. The daily loss and overall loss rules apply to open trades in real time, not just closed P&L. A position moving against you counts toward both limits immediately.
- Trading fewer than the minimum 4 days. Even if the profit target is reached in two days, the account cannot be passed until the minimum day threshold is met.
- Weekend gap risk. Holding large positions into Friday close can result in a Monday gap that breaches the daily loss rule before the trader can react.
- Profit target overshoot mismanagement. The profit target is a minimum, not a cap, but chasing extra profit after the target is already met increases risk unnecessarily in the final stretch.
Traders who want a structured, lower-risk approach to navigating these pitfalls will find the full strategy breakdown in this guide on passing a prop firm challenge with low risk. The core principle is that preserving the account matters more than maximizing profit during evaluation.
The FTMO Free Trial and the Swing Account Option
FTMO offers a free trial version of the evaluation, called the FTMO Free Trial, which mirrors Phase 1 conditions without a fee. It does not lead to a funded account on its own but allows traders to experience the platform and rules before committing capital. This is a useful diagnostic tool for traders who want to test their strategy under live-condition drawdown pressure.
FTMO also offers a Swing Account variant in which the trading rules are slightly modified, primarily around overnight and weekend holding restrictions compared to standard accounts. The profit targets and drawdown percentages remain the same, but the Swing account is designed for strategies that rely on multi-day position holding. Traders should review the specific terms for the Swing Account separately, as certain instrument restrictions may apply.
For traders looking to get funded efficiently, understanding timelines matters as much as understanding rules. A practical resource on prop firm challenge help for getting funded in 5-6 days covers how to approach Phase 1 with enough aggression to hit the target quickly while staying within daily loss parameters. Additionally, if you are evaluating multiple paths to a funded account in 2026, the broader comparison in this guide on the best way to get a funded account in 2026 provides useful context for where FTMO sits relative to alternatives.
The FTMO challenge rules are detailed and strict by design. The traders who succeed are generally those who treat the evaluation as a professional performance review, manage every position with explicit awareness of the drawdown rules, and do not deviate from their strategy under pressure. The rules themselves are consistent and publicly documented; the challenge is executing within them.
Disclaimer: Fast Funded is an independent service and is not affiliated with, endorsed by, or connected to any prop firm mentioned in this article. Rules and conditions change: always verify current terms on the firm's official website.