This article was written with AI assistance and reviewed by our editorial team. It is for informational purposes only and does not constitute financial advice.
Understanding FTMO Drawdown Rules in 2026
FTMO uses balance-based drawdown — not trailing equity. This is a critical distinction that makes FTMO one of the more trader-friendly firms. But the rules differ significantly between the 1-Step and 2-Step challenges. Here is exactly how each limit works, with concrete examples.
1-Step Challenge Drawdown Rules
| Rule | Value |
|---|
| Profit Target | 10% |
| Daily Loss Limit | 3% of initial capital |
| Max Loss | 10% (highest balance-based) |
| Best Day Rule | Best day < 50% of total profit |
| Min Trading Days | None |
| Profit Split | 90% |
| Leverage | 1:100 |
Daily Loss Example (1-Step, $100K Account)
Your daily loss limit = previous day's closing balance minus 3% of initial capital ($3,000).
- Day 1: Starting balance $100,000. Daily limit = $100,000 - $3,000 = $97,000. You profit $2,000 and close at $102,000.
- Day 2: Daily limit = $102,000 - $3,000 = $99,000. Your equity cannot drop below $99,000 during the day.
The limit resets every night at midnight CET based on the previous day's closing balance.
Max Loss Example (1-Step, $100K Account)
Initial max loss floor = $100,000 - 10% = $90,000. But on the 1-Step, the floor rises with your highest balance:
- You reach $105,000 → new floor = $105,000 - $10,000 = $95,000
- You drop to $98,000, then climb to $108,000 → new floor = $108,000 - $10,000 = $98,000
The floor only goes up. Think of it as a ratcheting max loss that rewards growth.
2-Step Challenge Drawdown Rules
| Rule | Phase 1 | Phase 2 | Funded |
|---|
| Profit Target | 10% | 5% | — |
| Daily Loss | 5% | 5% | 5% |
| Max Loss | 10% | 10% | 10% |
| Min Days | 4 | 4 | — |
Max Loss Example (2-Step, $100K Account)
- Max loss floor = $100,000 - 10% = $90,000. Period.
- Even if your balance grows to $115,000, the floor stays at $90,000.
- Daily loss limit = $100,000 x 5% = $5,000 below previous day's close.
This makes the 2-Step more forgiving for aggressive strategies — your max loss never tightens.
1-Step vs 2-Step: Which Drawdown Is Better?
| Factor | 1-Step | 2-Step |
|---|
| Daily Loss | 3% (tighter) | 5% (more room) |
| Max Loss Type | Ratcheting (rises with balance) | Static (fixed at initial) |
| Consistency Rule | Yes (best day < 50%) | No |
| Min Trading Days | None | 4 per phase |
| Profit Split | 90% | 80% (90% on $100K+) |
General Trading Rules
FTMO allows most strategies: scalping, news trading, weekend holding, EAs, and hedging are all permitted. Copy trading, HFT, and martingale are not allowed. Payouts are bi-weekly (every 14 days) on MT4, MT5, cTrader, or DXTrade. The challenge fee is refunded after your first successful payout.
Frequently Asked Questions
Q: How is the FTMO daily loss limit calculated?
It equals your previous day's closing balance minus a fixed percentage of initial capital (3% for 1-Step, 5% for 2-Step). It resets at midnight CET.
Q: Is the FTMO max loss trailing?
No. FTMO uses balance-based drawdown, not trailing equity. On the 1-Step, the floor rises with your highest balance. On the 2-Step, it is fully static.
Q: Can the max loss limit decrease on FTMO?
Never. On both plans, the max loss floor can only stay the same or increase. It never moves against you.
Q: What happens if I hit the daily loss limit?
All open positions are closed automatically and the account is soft-breached for the day. If you are in a challenge, you may continue the next day. A max loss breach ends the challenge.
Q: Which FTMO plan has easier drawdown rules?
The 2-Step has a wider daily buffer (5% vs 3%) and fully static max loss. The 1-Step has a ratcheting max loss but compensates with 90% profit split and no minimum days.
For our full breakdown of FTMO, read the FTMO review 2026.
