Sometimes, traders tend to do silly and unnecessary mistakes in the Challenge that can easily be avoided. Minimizing errors in the Challenge will certainly help your chances to succeed and may help your trading overall. Being profitable is one thing but at FTMO, it is important to strictly follow rules and have a solid discipline. With these tips, we want to help you avoid the worst events that unfortunately meet some traders.
#1 - It is important to be aware of which timezone you live in.
In the Challenge, a trading day is defined according to the CE(S)T - [Central European (Summer) Time] timezone. Therefore, we will not evaluate your results according to the broker server time but according to the CE(S)T Timezone.
Avoid Maximum Daily Loss Violation
Assuming that a trader is trading a 50,000 USD Challenge with a maximum daily loss limit of 2.500 USD. The result for a day is let's say -2,000 USD, permitting only an additional loss of -500 USD for the rest of the day. Again, the results are measured in the CE(S)T Timezone (GMT +1/+2). Some traders, however, decide to trade according to the broker server time which, in most cases, is EET [Eastern European Time].
This trader now sees 00:00 midnight and the start of a new day on the broker platform, but realistically, it is still 23:00 according to CE(S)T. The trader with a realized loss of -2,000 USD now opens a position which goes into a loss of over -500 USD, violating the maximum daily loss. The trader assumes that this loss was realized on a new day but according to our rules, the loss happened on the same day in the CE(S)T Timezone.
Our application Account MetriX has a time zone converter with the added information when your daily loss resets.
#2 - Use Stop-Losses to avoid Loss Limit violations.
Many unexpected things can happen in the Challenge. Many traders believe that they have their trades under control but one never knows what can happen in the markets. It is always better to hit a Stop-Loss rather than hitting the loss limits which results in the violation of your Challenge.
Know where your Limit is
We take the example where we have -2,000 USD in closed positions on a day. Therefore, our allowed loss for the rest of the day now is -500 USD. If you decide to open a new trade, bear in mind that this new trade cannot be in a loss more than -500 USD. In that case, set a Stop-Loss such that your trade never exceeds this loss.
Our Account MetriX will provide you with very useful information regarding your permitted losses.
In the table 'Today's results' you can see how much more you are allowed to lose in regard to the day and the entire trading period. With this information, we hope that you can improve your risk management.
Please be reminded that our losses also take results from floating positions as well. The detailed explanation of the rule for loss calculation can be found here.
Protect yourself from major News Releases
In the Challenge, we won't punish you for holding trades during major news but we don't allow trading news on the FTMO Funded Account for a good reason. It is always a good idea to use our Economic Calendar and be ready for any event.
If you are not aware of News Releases, your Challenge might not see a tomorrow. Markets are very volatile during these times, therefore, we recommend to trade with caution.
#3 - Don't get too close to your limits.
Sometimes you are very close to your loss limits and it only takes one small accident to violate them.
If you set your Stop-Loss exactly on your loss limits then we have very bad news for you. Stop-Losses do not guarantee an order fill at your desired price level. You also have to account for a potential slippage and spread variation. Be reminded that Stop-Losses are pending orders that trigger a market order when a specific price level is hit. Market orders look for the best price at the current moment. If there is no liquidity in the market, you will receive an order fill at a bad price which might cause a violation of the loss limits.
Commission & Swaps
When you calculate losses in the MetaTrader4, the platform calculates the Trade Result, Commission & Swaps separately. If you buy 5 lots on the EURUSD, you pay let's say 35 USD round-turn commission. If your maximum allowed loss for a day is -500 USD, then your trade on the EURUSD can't have its Stop-Loss set to -500 USD. We also have to account for -35 USD commission. If you set your Stop-Loss to -500 USD in this case and it gets hit, that would be a total loss of -535 USD (trade result + commission) which would violate the limit.
Of course, we always recommend leaving a wider margin for the loss limit. If you stop trading once a 3% - 4% daily loss is reached (limit is at 5%), that would be very responsible from our point of view.
If you are interested in how much our brokers charge in commission, you might be interested in our Broker Review application where we review real-time spreads and fees.
#4 - Hedging doesn't fully protect you.
Even though your position is hedged, your P/L is still subject to change due to floating spreads. Be reminded that you buy with the ask-price and sell with the bid-price. The difference between the ask and the bid is the spread which is how brokers generate revenues. This is why the instant moment you open a trade, this trade is always slightly in a loss due to the initial payment of the spread. The spread changes based on the current market liquidity.
You can read more about hedging in our article here: https://ftmo.com/en/how-to-save-while-you-hedge/
Especially during News Releases and Rollover times, liquidity is very thin and as a result, the spread widens considerably. This spread widening causes a temporary loss which in a few cases may violate the loss limits. If you are very close to the loss limits, we recommend closing the position instead of hedging.