FTMO rules compatible EA: DrawDown Limiter

FTMO rules compatible EA: DrawDown Limiter

23 May 2023, 20:14
Haidar, Lionel Haj Ali
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Introduction

If you are trying to pass the FTMO challenge and want an EA to protect your balance and help you pass it, you are in the right place, so you discover how DrawDown limiter will help you get it through. The following blog will explain the different FTMO rules related to drawdown and how DrawDown limiter is the must-have EA to help you pass the challenge. The most challenging part of this kind of challenge is to respect the drawdown limits on the account and the daily drawdown limits, which are both imposed rules to pass the challenge and trade real accounts with FTMO. You can lose your challenge if, in a couple of seconds, the market spikes and your daily drawdown limit is violated. Trust me, this can often happen with the current market conditions, international economic news, and geopolitical events that have been intensifying these last couple of years and directly impacting the market we trade. 

In this blog, we are tackling only FTMO as they are the most popular prop firms, but Draw Down limiter is very flexible and meets the expectations of other prop firms' challenges.

The Rules and DrawDown Limiter Configuration

The information I've included below is what is mentioned on the FTMO official website on the day I am writing this blog. You can find all official related information under: https://ftmo.com/en/#ftmo-section-objectives

First of all, you need to know that you have different types of risks and different types of challenges, requiring different sets of configurations.  So make sure to read well the challenge you are taking and adapt the parameters accordingly. In all those challenges, you have to respect two measures related to drown-dawn, with different levels, depending on the challenge you are taking and its level.

(1) Maximum Loss

FTMO states: 

This rule can also be called “account stop-loss”. The equity of the trading account must not, at any moment during the account duration, decline below 90% of the initial account balance. For an FTMO Challenge with a balance of $100,000, it means that the account lowest possible equity can be $90,000. Again, this is a sum of both closed and open positions (account equity, not balance). The logic of the calculation is the same as with the Maximum Daily Loss; the only difference is that it’s not limited to one day but the entire duration of the testing period. The limit is inclusive of commissions and swaps. 10% of the initial account balance gives trader enough space to prove that his/her account is suitable for the investment. It is a buffer that should keep the trader in the game even if there were some initial losses. The investor has an assurance that the trader’s account cannot decline below 90% (80% in case of Aggressive version) of its value under any circumstance.

So to respond to this, DrawDown limiter will allow you to configure the initial account balance and the maximum account drawdown percentage. Drawdown Limiter will continuously check your equity and compare it to those parameters. If the equity reaches a critical level, you will be notified via the GDD% traffic light changing its color and a notification alert.



(2) Maximum Daily Loss

FTMO states: 

This rule can also be called “trader’s daily stop-loss”. According to our rules, this is set as 5% (10% in case of an Aggressive version) from the initial account balance. The rule says that at any moment of the day [CE(S)T = Central European (Summer) Time], the result of all closed positions in sum with the currently open floating P/Ls (profits/losses) must not hit the determined daily loss limit. The counting formula:

Current daily loss = results of closed positions of this day + result of open positions.

For example, in the case of an FTMO Challenge with the initial account balance of $200,000, the Max Daily Loss limit is $10,000. If you happen to lose $8,000 in your closed trades, your account must not decline more than $2,000 this day. It must also not go -$2,000 in your open floating losses. The limit is inclusive of commissions and swaps.

Vice versa, if you profit $5,000 in one day, then you can afford to lose $15,000, but not more than that. Once again, be reminded that your Maximum Daily Loss counts your open trades as well. For example, if in one day, you have closed trades with a loss of $6,000 and then you open a new trade that goes into a floating loss of some -$5,700 but ends up positive in the end, unfortunately, it is already too late. In one moment, your daily loss was -$11,700 on the equity, which is more than the permitted loss of $10,000.

Be careful as the Maximum Daily Loss resets at midnight CE(S)T! Let’s say that one day you had a profit of $4,000. On the same day, you have an open position with a currently floating loss of $13,000. On this day, the maximum daily loss is not violated. The current daily loss is $9,000. ( $4,000 closed profit – $13,000 open position). However, if you hold this position with an open loss of $13,000 after midnight, the daily loss limit will be violated. This is because your previous day profit doesn’t count to a new day and the open loss of $13,000 exceeds the max daily permitted loss of $10,000.

The size of the Maximum Daily Loss gives trader enough space for trading and it guarantees a clearly defined daily risk to the investor. Both the trader and investor benefit from this rule as the account value will not drop below the limit. That’s also why the Maximum Daily Loss limit includes your possible floating losses.

Maximum daily loss may look simple, but let us go through them step by steps:

  1. First, you need to configure a maximum daily loss percentage, and this daily loss is calculated by comparing your current daily floating P/L from the initial balance for FTMO. And it is supported in DrawDown Limiter
  2. The second step is that the calculation is done based on CE(S)T (Central European Time) midnight for FTMO . Usually CET is the Daily Bar opening for almost a big majority of the broker in Europe, including FTMO. However, it may depend on the server time where your account is hosted on, and you may need to configure a specific time window. To support this, DrawDown Limiter propose even to set the range on daily bar opening or to manually configure the range. DrawDown Limiter will notify you via the DDD% traffic light about the current status, and via a push notification whenever this limit is breached, automatically it will close the open trades to preserve your challenge. 
  3. FTMO counts swap and commission inside your floating P/L and state them in their examples, and so does DrawDown limiter.
  4. The fourth step, and the trickiest one, it is there in the third sentence in the Maximum Daily Loss rules of FTMO. Read it twice before you continue. At the end of the day if you are respecting the current day drawdown as you have made previously some profit with your closed trades, however your current open positions P/L is negative and higher than the allowed Maximum Daily Loss, at the opening of the next day you will find your self breaching the rule and loosing your challenge. That's why DrawDown Limiter introduced the "End of Range Security Zone", this zone can be as small as 1 minute, it take place at the end of the current daily range, during this minute DrawDown Limiter will not only check your Daily P/L (closed and open positions) but it will also check your current open positions P/L and compare them to the maximum daily loss. If it is the case Draw Down Limiter will close your open positions and prevent you from trading during this zone as if you reached your daily drawdown. This will lead you to have a lower, even negative, P/L for current day but this action will save your challenge as you will start your next day with zero P/L, and you didn't breach the rule for the current running day.


Conclusion

Being a successful trader is to be able to add elements to your trading plan that will lead to higher probability to be profitable. DrawDown limiter is one of those elements, that will help you increase this probability! Fully compatible with FTMO, this is the ultimate EA to increase your probability to pass the challenge and keep your status as prop firm trader to last.

Where to download Draw Down Limiter

Draw Down limiter is available for MT4 and MT5, you can find the EA under:


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