III AdvancedWeek 31 • Lesson 84Duration: 35 min

FTMO FTMO Compliance

Prop firm rules, risk limits, and how V7 stays compliant

Learning Objectives

•Understand FTMO rules and how V7 complies
•Learn the challenge and verification process
•Implement FTMO-specific risk controls

Explain Like I'm 5

FTMO gives you a funded trading account if you pass their challenge. Rules: make 10% profit without losing more than 10% total or 5% daily. V7 is specifically designed for FTMO compliance — the entire risk management system (S40, DD scaling) exists to make breach nearly impossible while still generating consistent returns.

Think of It This Way

FTMO compliance is like passing a driving test. There's a maximum speed limit (max drawdown) and you must reach the destination (profit target). V7 is like a self-driving car programmed to stay within speed limits while still making good time. 0.08% simulated breach probability means a 99.92% chance of passing.

1FTMO Rules

Challenge phase (Step 1): - Profit target: 10% of account - Max daily loss: 5% of starting equity - Max total loss: 10% of starting balance - Minimum trading days: 4 - Time limit: 30 days - No restrictions on instruments, styles, or lot sizes Verification phase (Step 2): - Profit target: 5% of account - Same drawdown rules - Time limit: 60 days Funded account: - No profit target - Same drawdown rules FOREVER - Profit split: 80-90% to trader - Monthly payout cycle How V7 handles these rules: - Daily limit: engine enforces 4.5R daily max (with 0.5R buffer under FTMO's 5%) - Total limit: S40 DD scaling reduces risk as drawdown increases - Profit target: at 4.35% monthly, challenge takes ~2.3 months, verification ~1.15 months - Breach probability: Monte Carlo validated at 0.08%

2V7 FTMO Risk Controls

The V7 engine implements multiple layers of FTMO protection: Layer 1: Base risk (config/risk_params.json) - Base risk: 0.30% per trade - Max daily R: 4.5R - Max total R: 9.5R - These are HARD limits, never exceeded Layer 2: DD scaling (S40) - NORMAL (0-4%): full risk (0.30%) - CAUTION (4-6%): reduced (0.25%) - DANGER (6-8%): survival (0.20%) - CRITICAL (8-10%): emergency (0.15%) Layer 3: Position limits - Max simultaneous positions: 10-15 - Max per cluster: 3-4 - Total open risk < daily limit Layer 4: Monte Carlo validation - 5,000+ simulations with block bootstrap - Regime-conditioned scenarios - Result: 0.08% breach probability Layer 5: Walk-forward validation - Ensures strategy works OOS, not just in backtest - WFER = 0.91 (excellent) The result: 99.92% confidence in FTMO challenge success.

Key Formulas

FTMO Daily Loss Check

FTMO checks equity at day start and compares to current equity. If the difference exceeds -5%, the account is breached. V7 uses a 4.5% buffer limit.

Hands-On Code

FTMO Compliance Monitor

python

class FTMOComplianceMonitor:
    """Monitor FTMO rule compliance in real-time."""
    
    def __init__(self, starting_balance, daily_limit_pct=5.0, total_limit_pct=10.0):
        self.starting_balance = starting_balance
        self.daily_limit = starting_balance * daily_limit_pct / 100
        self.total_limit = starting_balance * total_limit_pct / 100
        self.day_start_equity = starting_balance
    
    def check_compliance(self, current_equity):
        """Check all FTMO rules."""
        daily_loss = self.day_start_equity - current_equity
        total_loss = self.starting_balance - current_equity
        
        daily_pct = daily_loss / self.day_start_equity * 100
        total_pct = total_loss / self.starting_balance * 100
        
        daily_ok = daily_loss < self.daily_limit
        total_ok = total_loss < self.total_limit
        
        # Buffer warnings (V7 uses tighter limits)
        daily_buffer = daily_pct < 4.5  # V7 buffer
        total_buffer = total_pct < 9.5  # V7 buffer
        
        print(f"=== FTMO COMPLIANCE ===")
        print(f"Daily loss:  {daily_pct:.2f}% / 5.0%  {'[PASS]' if daily_ok else '[ALERT] BREACH'}")
        print(f"Total loss:  {total_pct:.2f}% / 10.0% {'[PASS]' if total_ok else '[ALERT] BREACH'}")
        
        if not daily_buffer:
            print(f"  [WARN] Approaching daily limit!")
        if not total_buffer:
            print(f"  [WARN] Approaching total limit!")
        
        # Recommend action based on DD zone
        if total_pct > 8:
            print(f"  [ALERT] CRITICAL: Reduce to emergency risk (0.15%)")
        elif total_pct > 6:
            print(f"  [WARN] DANGER: Reduce to survival risk (0.20%)")
        elif total_pct > 4:
            print(f"  [WARN] CAUTION: Reduce to cautious risk (0.25%)")
        
        return daily_ok and total_ok

# monitor = FTMOComplianceMonitor(starting_balance=100000)
# monitor.check_compliance(current_equity=96500)

Real-time FTMO compliance checking prevents rule violations. The V7 engine checks this BEFORE every trade and adjusts risk level based on current DD zone. Automated compliance is essential — you never want to manually track these limits.

Knowledge Check

Q1.Your FTMO account started at $100K. Current equity is $92K. What DD zone is this and what risk should you use?

Assignment

Implement a complete FTMO compliance monitor with: daily/total loss tracking, DD zone detection, automatic risk scaling (S40), and alert generation. Test it by simulating various drawdown scenarios.

← Previous Lesson Next Lesson →