2022 ICT Mentorship - Episode 41 & Final

Summary

This video guides traders through a systematic approach to risk management and stop-loss strategies. It covers how to adjust stop-loss levels as price moves in favor of the trade, offering a structured method for reducing risk without prematurely exiting positions. Emphasizing patience and individual adaptability, the speaker highlights the importance of evolving one’s trading model over time, rather than relying on rigid rules. The goal is to develop a trading system that aligns with personal preferences, with a focus on long-term improvement and understanding market patterns that repeat.

Takeaways

• 😀 **Stop-Loss Management**: Adjust your stop-loss progressively as the price moves in your favor. When the price moves 50% of your expected range, you can move your stop-loss by 25%. At 75% of the expected range, move your stop to break-even.
• 😀 **Partial Profit Taking**: If using leverage or multiple positions, consider taking partial profits when the price moves significantly in your favor (e.g., 15 or 20 points), but tailor this decision to your individual strategy.
• 😀 **No Static Rules**: Trading is personal and should align with your own preferences and risk tolerance. Avoid rigid, fixed rules—your trading model should evolve over time based on experience.
• 😀 **Trust the Process**: While there will be challenges and losses, trust that the strategy will work over the long term if you follow it consistently and with faith in its repeatability.
• 😀 **Patience is Key**: Trading takes time to master. After six months to a year of focused study, you’ll begin recognizing patterns and understanding your system better, even if there are still occasional losses.
• 😀 **Continuous Learning**: Keep learning and backtesting. Even if you don’t understand everything initially, persistence and review will make patterns clearer as you gain experience.
• 😀 **Know Your Entry and Target Range**: Always define your entry point and expected target range before placing trades. This allows for clear risk management and easier decision-making when adjusting your stop-loss.
• 😀 **Risk Reduction Early**: You can reduce your risk early (by adjusting your stop) once the price has moved halfway in your favor, offering a bit of a safety cushion without immediately eliminating all risk.
• 😀 **Focus on Market Structure**: Pay attention to short-term price action, such as whether it’s respecting previous highs/lows, running into support/resistance, or creating fair value gaps, to gauge the strength of the trend.
• 😀 **Customizable Trading Plans**: Don’t let external sources enforce strict, inflexible strategies. Your personal traits and risk tolerance should guide your approach, leading to a more sustainable and comfortable trading practice.

Q & A

What is the importance of multiple time frames in the ICT trading strategy?

Multiple time frames help traders identify key liquidity points, fair value gaps, and order blocks across different market perspectives. They allow traders to align their entry and exit points based on a broader understanding of market behavior, improving trade accuracy.

How does the trader handle a trade that is not performing as expected?

The trader advises stepping back if a trade is not progressing as planned. If the market conditions aren't ideal or expected volatility doesn't occur, it's important to avoid forcing a trade and to wait for a better setup.

What is the recommended approach for risk management in this trading model?

Risk management involves risking a small percentage of your equity per trade, typically 1%. The trader suggests using micro E-mini contracts if necessary to reduce the risk exposure, especially when dealing with smaller accounts or aiming for tighter control over losses.

What does the trader mean by the term 'tax on success'?

The term 'tax on success' refers to the inevitable drawdowns and losses in trading. They are considered a part of the process and a cost of achieving long-term success, similar to how taxes are a part of a profitable endeavor.

How should a trader adjust their stop-loss once a trade moves in their favor?

When price moves 50% of the expected range, the trader can adjust the stop-loss to 25% of the range, reducing risk while still allowing for potential profit. Once the price moves 75% of the range, the stop-loss can be moved to break-even, ensuring no loss on the trade.

What role does psychological discipline play in this trading model?

Psychological discipline is crucial in this model. Traders must control their emotions, avoid overtrading after a loss, and not attempt to recover losses immediately. Maintaining consistency and patience, and not chasing quick profits, are key components of the strategy.

Why is it important to take partial profits in high-leverage trades?

Taking partial profits helps lock in gains and reduces the emotional pressure of holding a full position. It also allows the trader to manage risk effectively by taking profits at key milestones (e.g., 15–20 points), which provides a buffer if the market reverses.

What is the recommended method for determining when to scale down position size after a loss?

After a losing trade, the trader suggests scaling down the risk on subsequent trades—either by reducing position size or risking less capital (e.g., ½ or ¼ of the original risk). This helps prevent emotional overreaction and ensures a more methodical recovery.

What should a trader focus on when managing a trade instead of obsessing over stops?

A trader should focus on market structure, liquidity behavior, and whether the price is moving according to the expected pattern (e.g., reaching for liquidity or moving into fair value gaps). Constantly adjusting stops can lead to unnecessary stress and emotional trading.

What is the key takeaway for traders starting to learn this model?

The key takeaway is that mastery comes with time. Traders should expect to take 6–12 months to understand and apply the patterns effectively. Consistent study, backtesting, and observing market behavior will help develop confidence in the model and increase the chances of success.