there are, in fact, three separate drafts for the MLS in FM. the first one you will encounter is the waiver draft. Here all players who are not registered by teams are placed in a draft pool. the draft is two rounds. you do not have to participate in this draft, but know that is you pass on your first round pick you cannot chose a player in the second round. This is a good way of getting starter or backup caliber players without having to negotiate a contract, if you chose a player the contract that they had with their previous team is transferred over to you.
The next draft is the MLS SuperDraft. This is the draft with the best quality young players. It is 4 rounds and you can trade picks for players or money, etc. The best players can be found in rounds 1 or 2. A common strategy is to try and stockplile picks in these rounds.
the final draft is called the supplemental draft. this is another draft of young players that are fringe or project players. they probably will not ever impact your team, but if they develop properly you can profit off of them.
hope this helped, if i missed something or you have any other questions feel free to ask.