In the previous lesson, we saw how Prop Firms can give us access to larger nominal trading capital without requiring us to provide the full account value ourselves.
We also established an important principle: funded capital becomes useful only after we have developed a trading process that we can apply consistently.
Now we can move from the concept to the practical process.
Using FTMO as our primary example, we will look at what happens before, during, and after an evaluation, how the main rules work, and how we can approach a Challenge without allowing the Profit Target to change the way we trade.
The opportunity is easy to understand.
Instead of needing $50,000 or $100,000 of personal capital, we can pay a relatively small evaluation fee and work to qualify for access to a much larger nominal trading account.
However, there is one distinction we should keep in mind throughout this lesson:
Access to a $100,000 Funded Account does not mean that someone gives us $100,000.
In FTMO's current model, the evaluation and FTMO Account operate with simulated capital, while qualifying traders can become eligible for real payouts under the programme.
We receive access to trade within a programme that has specific rules, risk limits, and payout conditions.
The evaluation fee gives us an opportunity to qualify.
It does not buy us funding.
And funded capital can solve a capital constraint. It cannot solve a trading problem.
If our strategy, risk management, or discipline is not ready, a larger account will simply expose those weaknesses faster.
How Does the Funded Trading Process Work?
We already know what a Prop Firm is, so we do not need to repeat the theory.
The practical journey can be simplified into a few stages:
Learn → Backtest & Demo → Free Trial → Evaluation → Funded Stage → Eligible Profits → Payouts
The exact structure depends on the Prop Firm and programme, but the principle is generally similar.
We first develop and test our trading process.
Once we can follow it consistently, we can test ourselves under evaluation-style conditions.
If we are ready, we can then pay for an evaluation, commonly called a Challenge, where we attempt to reach specific performance objectives without breaching the firm's risk rules.
If we successfully complete the evaluation and satisfy the applicable requirements, we can progress to the funded stage.
From there, eligible profits can be shared between us and the Prop Firm according to the programme's Profit Split.
The important part is the sequence.
A Challenge should test a process we already have.
It should not be the place where we try to build one.
Why We Use FTMO as Our Primary Example
There are many Prop Firms available, and their programmes can differ significantly.
As we established in the previous lesson, FTMO will be our primary reference throughout this part of the Academy.
By following one established example, we can understand the funded trading process without constantly switching between different firms, account structures, and rule sets.
This does not mean that every trader must use FTMO or that its current conditions will remain unchanged.
Prop Firm rules, available platforms, account types, fees, and programme conditions can evolve.
For this reason, whenever we decide to purchase an evaluation from FTMO or any other Prop Firm, we should always review the current conditions directly with the company first.
In this lesson, our objective is not to memorise a rulebook.
It is to understand how the process works and how we should approach it as traders.
Before Paying for a Challenge: Use the Free Trial
One of the most useful steps we can take before purchasing an evaluation is to test ourselves first.
FTMO provides a Free Trial, which allows us to experience evaluation-style conditions without paying for a Challenge.
This is where we recommend starting.
The purpose is not simply to see whether we can make money for a few days.
We want to become familiar with the FTMO environment and find out whether our existing trading process still works when we have predefined objectives and risk limits in front of us.
During the Free Trial, we can observe whether we are able to:
follow our strategy without forcing trades;
respect our risk limits;
handle losing trades without increasing risk;
become familiar with the environment and its rules;
remain consistent when there is an objective in front of us.
Our approach is simple:
We should not pay for a Challenge to discover whether we are ready for a Challenge.
First, we learn. Then we Backtest. Then we practise in Demo. Then we test ourselves under evaluation-style conditions.
Only after that should paying for an evaluation become a serious consideration.
A successful Free Trial does not guarantee that we will pass a real Challenge, but it gives us useful evidence about whether our process is ready for the next step.
Now, let us set one up.
Setting Up an FTMO Free Trial
The objective of this section is practical.
We want to start without an FTMO Free Trial and finish with an active practice account and the credentials we will need to connect it to MetaTrader 5 in the next lesson.
The exact appearance of the FTMO website and the available options may change over time. If a button, menu, or screen looks slightly different when you complete these steps, follow the current instructions displayed by FTMO.
The process itself remains straightforward.
Create or Access Your FTMO Account
Go to the FTMO website and create an account.
Enter the information requested during registration and complete any steps required to access the FTMO account environment.
If you already have an FTMO account, simply log in.
Once inside, find the option to start a Free Trial or access it directly here. Remember, at this stage, we are not buying a Challenge.
We are creating a practice environment that we can use to become familiar with the process before putting an evaluation fee at risk.
Understand and Configure the Free Trial
Before creating the Free Trial, we need to select the available account configuration.
Depending on FTMO's current options, we may encounter choices such as:
account size;
account currency;
trading platform;
other available account settings.
Before selecting them, let us understand what the main choices mean.
Account Size
Prop Firms may offer several nominal account sizes, such as $10,000, $25,000, $50,000, $100,000, or larger amounts, depending on the options currently available.
It can be tempting to assume that the largest account is automatically the best choice.
It is not.
The account size should fit our risk approach, objectives, and the amount we would be comfortable paying for an evaluation.
A larger nominal account does not make the Challenge easier to pass.
And if we cannot follow our process on a smaller account, choosing a larger one will not solve the problem.
Account Currency
Depending on the programme, we may also be able to select the currency in which the account is denominated.
This determines how the account balance, P&L, and related account values are displayed.
The important point is not to assume that selecting one particular currency will make us more profitable.
We should choose an available currency that we are comfortable managing and make sure we understand how our P&L and risk are being calculated.
Trading Platform
Prop Firms may offer several trading platforms.
Within the Academy, we use MetaTrader 5 (MT5) for execution, so this is the platform we will focus on where it is available.
For our Academy workflow, select MetaTrader 5 (MT5) when configuring the Free Trial, where this option is available.
In Lesson 5, we will connect this account to MT5 and prepare the platform for execution.
The strategy does not change because the account is funded. The platform simply gives us the environment in which to execute it.
Once the configuration is ready, review the selected options before continuing.
Create the Free Trial
Once we have reviewed the account configuration, we can create the Free Trial.
The new practice account should then become available within the FTMO account environment.
Before moving on, confirm that you are looking at the correct account and that the configuration corresponds to what you selected.
Spend a moment familiarising yourself with the account environment.
You should be able to locate the Free Trial and the information associated with it.
You may also see objectives, account statistics, and other information related to the trial.
We do not need to understand every figure yet.
Later in this lesson, we will explain the main evaluation rules and what they mean.
Locate Your MetaTrader 5 Credentials
For an MT5 Free Trial, find the necessary account credentials below, now visible under Account MetriX and Account Overview, to connect to the trading platform.
These typically include:
Login ID
Password
Server
These credentials allow MetaTrader 5 to identify and connect to the correct trading account.
Keep them available.
We will use them directly in Lesson 5.
Do not worry if you have never connected a trading account to MetaTrader before. We are not going to assume that you know how.
In the next lesson, we will install MetaTrader 5, use these credentials to connect the Free Trial, prepare the workspace, add our instruments, and practise opening, managing, modifying, and closing a Demo position.
For now, our setup is complete once we have:
FTMO Account → Active Free Trial → MT5 Login ID, Password & Server
Understanding the Evaluation
Now that we know how to create the Free Trial, we need to understand the main rules we will encounter within an evaluation-style environment.
When we first look at an evaluation dashboard, the number of rules and figures can make the process appear more complicated than it really is.
At this stage, we do not need to memorise every number.
We need to understand the logic behind the main rules.
Profit Target
The Profit Target is the amount of profit we need to generate to complete a particular stage of the evaluation.
For example, if a $100,000 evaluation required a 10% Profit Target, the corresponding objective would be:
$100,000 × 10% = $10,000
The calculation is straightforward.
The challenge is psychological.
Seeing "$10,000 remaining" can create the temptation to trade more frequently, increase our position size, or take setups that we would normally reject.
That is exactly what we want to avoid.
A Profit Target tells us where the finish line is. It does not tell us how fast we need to get there.
Maximum Daily Loss
The Maximum Daily Loss defines how much the account is allowed to lose within the firm's specified daily calculation.
Its purpose is to prevent excessive losses over a short period.
For us, the practical lesson is straightforward.
Our own risk management should be conservative enough that one difficult session does not put the entire evaluation in danger.
A losing day is part of trading.
A losing day that threatens the account is usually a risk-management problem.
Maximum Loss
The Maximum Loss defines the overall loss limit of the account according to the programme's rules.
If we breach it, the evaluation or account can fail.
This is where the headline account size can become misleading if we interpret it incorrectly.
A "$100,000 account" does not mean that we have $100,000 available to lose.
What matters from a risk perspective is the Drawdown we are actually allowed before the account breaches its rules.
That is the capital boundary we need to respect.
All information regarding Profit Target, Maximum Daily Loss, Maximum Loss, and other personal statistics will be accessible in real-time within Account MetriX.
Understanding a Two-Phase Evaluation
A common evaluation structure uses two stages.
In the first phase, we need to reach a specified Profit Target while remaining within the programme's risk limits.
If we complete that stage successfully, we progress to a second phase with its own objective.
The second phase requires us to demonstrate performance again while continuing to operate within the programme's conditions.
Consider a simplified example.
Suppose a $100,000 evaluation required:
Phase 1: +10% Profit Target
The objective would be:
$10,000
Suppose the second phase then required:
Phase 2: +5% Profit Target
The objective for that stage would be:
$5,000
These figures are an illustration of how a two-phase evaluation can work. They should not be treated as permanent FTMO conditions, because programme rules can change.
Before purchasing any Challenge, we verify the current requirements directly.
More importantly, our approach should remain the same in both phases.
We do not need a separate "Challenge strategy".
We need our trading strategy, applied within the Challenge rules.
The Biggest Mistake: Trading the Target
Imagine that we begin an evaluation and lose our first two trades.
Nothing unusual has happened.
Even a profitable strategy produces losing trades.
But now we look at the dashboard.
Instead of thinking about the next valid setup, we start thinking about how far we are from the Profit Target.
We increase our position size.
We take a setup that we normally would have skipped.
That trade loses too.
Now we want to recover the loss before the day ends.
At this point, the Challenge is no longer evaluating only our strategy.
It is exposing our behaviour.
This is one of the most important lessons in funded trading.
The moment we start trading the Profit Target instead of trading our strategy, the evaluation has changed the way we trade.
That is exactly what we do not want.
There is no prize for passing an evaluation in the shortest possible time.
Passing more slowly while following our process is far more valuable than reaching a target quickly through risk that we could not repeat consistently.
What Is a Profit Split?
Passing the evaluation is only the first objective.
If we reach the funded stage, the next question is what happens to the profits we generate under the programme.
Eligible profits are generally divided between the trader and the Prop Firm according to a predefined arrangement.
This is called the Profit Split.
Suppose, purely as an example, that we generate $10,000 in eligible profit and the applicable Profit Split allocates 90% to the trader.
Our share would be:
$10,000 × 90% = $9,000
The remaining $1,000 would represent the firm's share.
The exact percentage, payout schedule, and eligibility conditions depend on the programme and may change over time.
We therefore verify the current terms before entering an evaluation.
The important concept is simple:
We do not need to personally own the full nominal account value to potentially receive a share of the eligible profits generated through the programme.
What Happens to the Evaluation Fee?
The initial cost of a Challenge is the amount we pay for the opportunity to attempt the evaluation.
Depending on the programme and its current conditions, that fee may be refunded after we successfully progress through the process and satisfy the relevant requirements.
This can make the economics of a successful evaluation attractive.
However, we should never use the possibility of a future refund as a reason to purchase a Challenge before we are ready.
Imagine that one evaluation fee appears relatively small, so we buy a Challenge before our process is consistent.
We fail it.
We purchase another.
Then another.
Individually, each fee may appear manageable. Together, repeated failed evaluations can become a significant expense.
This is another reason the Demo and Free Trial stages matter.
The cheapest Challenge is the one we do not buy before we are prepared for it.
A Practical Example
Let us follow the process from the perspective of a developing trader.
John has already completed a substantial amount of Backtesting and Demo practice.
He has clearly defined Entry, Stop Loss, Take Profit, and risk rules, and he has demonstrated that he can follow them with reasonable consistency.
He now wants to test whether the same process can work under evaluation-style conditions.
1. Free Trial
John begins with a Free Trial rather than purchasing a Challenge immediately.
His objective is to apply the same strategy and risk parameters he has already practised under evaluation-style conditions.
He does not increase his risk simply because the nominal account size is larger.
During the trial, he has both winning and losing trades.
More importantly, he respects the risk limits and does not change his behaviour after a loss.
2. The Evaluation
After demonstrating that he can operate within those conditions, John decides to purchase an evaluation that fits his risk approach and objectives.
His first trade is a loss.
The following day, he analyses the market but finds no valid setup according to his strategy.
He does nothing.
He does not enter a trade simply because a Profit Target is displayed on the dashboard.
3. Following the Process
On the next session, a valid setup appears.
John takes it according to plan.
Whether that individual trade wins or loses is less important than the behaviour being demonstrated.
He is allowing his strategy to determine when he trades rather than allowing the Challenge to determine when he trades.
This may sound uneventful.
That is the point.
A Challenge should not suddenly transform our trading.
If we have prepared correctly, it should simply be another environment in which we execute the process we already know.
From Funded Capital to Personal Capital
As we established in the previous lesson, funded capital and personal capital can serve different purposes.
If we reach the funded stage and begin generating eligible payouts, part of those profits can be withdrawn and, over time, used to strengthen our personal trading or investment capital.
This can gradually reduce our dependence on external funding programmes.
The Prop Firm can therefore help us overcome an initial capital constraint, while our own capital gives us greater independence as it grows.
Funded capital can be one tool in our development, rather than the final objective.
Your Turn
If you followed the setup exercise earlier in this lesson, you should now have an active FTMO Free Trial and the credentials required for MetaTrader 5.
If not, complete those steps before continuing to Lesson 5.
Keep your:
Login ID;
Password;
Server
available for the next lesson.
Now define a simple set of rules that you will follow when you begin practising on the account.
For example:
maximum risk per trade;
maximum loss for the day;
the setups we are allowed to trade;
the conditions that tell us to stop trading.
Once the account is connected and ready for use, trade it for a predefined period without changing those rules because of short-term results.
At the end, do not look only at the P&L.
Review the process.
Did we respect our Stop Loss?
Did we avoid unnecessary trades?
Did we keep the same risk after a loss?
Did we wait when our strategy gave us no valid setup?
Did the presence of a target change the way we traded?
If the answer to these questions is consistently positive, we have useful evidence that our process may be ready for a paid evaluation.
If we cannot yet respect the process consistently, that is useful information too.
We have identified what needs more work without paying an evaluation fee to discover it.
The Xcelerate Trade Perspective
We do not view passing a Challenge as proof that someone has become a professional trader.
A Challenge is a set of conditions.
Our job is to demonstrate that the trading process we have already developed can operate within those conditions.
This is why we prefer Backtesting and Demo practice before a Free Trial, a Free Trial before a paid evaluation, and controlled risk once the Challenge begins.
We are not trying to become good at passing Challenges.
We are trying to become good at trading.
If our process is strong enough, funded capital can give us access to opportunities that would otherwise require considerably more personal capital.
If our process is weak, a larger nominal account will not fix it.
The same principle applies after we become funded.
The objective is not simply to say that we "manage $100,000".
We want to protect the account, generate eligible profits, build a track record, withdraw profits when appropriate, and gradually strengthen our own financial position.
Access to capital can accelerate a trader who is ready. It cannot make a trader ready.
We now know how to create an FTMO Free Trial and locate the account credentials required for MetaTrader 5.
In the next lesson, we will use those credentials to install and connect MT5, prepare the execution workspace, and practise opening, managing, and closing our first Demo positions.
See you in the next lesson!