2022 ICT Mentorship Episode 3

Summary

In this trading tutorial, the speaker takes viewers through the process of live market trading, emphasizing the importance of risk management and emotional control. The speaker focuses on understanding fair value gaps, using them to make informed buy decisions while keeping emotions in check when price fluctuations occur. With a clear max risk per trade of 4.5%, they demonstrate a trade execution, showing how to handle drawdowns and manage trades without overthinking minor price movements. The tutorial is geared toward teaching viewers how to trade confidently and safely in volatile market conditions.

Takeaways

• 😀 The trader emphasizes the importance of using fair value gaps to determine entry and exit points for trades.
• 😀 The trader uses a combination of technical analysis and price action to make decisions rather than relying on advanced tools or indicators.
• 😀 The trader shows that they are willing to take on drawdown and allow for potential retracements within their risk tolerance.
• 😀 Risk management is a key focus: the trader defines a maximum risk threshold of 4.5% per trade and aims for 3-3.5% risk for comfort.
• 😀 The trader practices patience and doesn't overreact to small fluctuations in the market, understanding that volatility is part of trading.
• 😀 It’s important not to focus on the money being gained or lost during a trade, but instead to focus on the chart and price action.
• 😀 The trader highlights the psychological aspect of trading, specifically the mental resilience required when dealing with drawdown and uncertainty.
• 😀 They explain that it's important to understand the potential for market movement and prepare for it psychologically, rather than hoping for an ideal scenario.
• 😀 The trader sets predefined profit targets based on the fair value gap zones, aiming for smaller, more achievable profits rather than aiming for the maximum potential.
• 😀 They demonstrate how to manage and collapse trades once targets are hit, offering real-time feedback on their trade execution, and providing transparency on gains.

Q & A

What is the trader's approach to handling the market's volatility when entering a trade?

The trader emphasizes the importance of not overthinking every market fluctuation. They focus on observing the chart and allowing the market to unfold, accepting that minor fluctuations are a normal part of the process.

How does the trader manage risk during their trades?

The trader has a predefined risk threshold of 4.5% per trade, with a preference for staying around 3-3.5% risk. This helps them maintain discipline and avoid excessive losses while trading.

What does the trader mean by 'fair value gap' and why is it important?

A fair value gap refers to a price zone where there is an imbalance or inefficiency in the market. The trader watches these gaps closely as they represent areas where price is likely to accumulate before moving in the intended direction, offering potential entry points.

What did the trader mean by 'low hanging fruit' in their trade?

The 'low hanging fruit' refers to the easy or more predictable profit target, which is at the lower end of a certain price range. The trader suggests aiming for smaller, more achievable targets when learning, instead of reaching for the ideal scenario.

Why does the trader focus on watching the chart instead of the profit/loss number during a trade?

The trader believes focusing on the chart rather than constantly watching the profit/loss number is essential for keeping a calm mindset. Emphasizing chart analysis over financial figures helps avoid emotional reactions during trade fluctuations.

How does the trader handle a situation where the market moves against their position?

If the market moves against the trade, the trader is willing to endure a small drawdown, as long as it stays within acceptable limits. They are prepared for the market to test lower levels before moving in the desired direction, as long as the price doesn’t breach key levels.

What is the significance of the pink rectangle mentioned in the trader's explanation?

The pink rectangle marks a price range that the trader considers the target zone for exiting the trade. It represents an area where the trader is likely to close the position, taking profit when the price reaches the lower end of the rectangle.

How does the trader manage to keep their emotions in check when trading live funds?

The trader consciously detaches themselves from the emotional pressure of seeing profits and losses in real-time. They remind themselves that minor fluctuations are part of the process and stay focused on the strategy and chart, not the immediate financial outcomes.

What role does the trader’s trading platform play in their process?

The trader uses a specific charting platform (TradingView) for analyzing trades, as they find its interface more user-friendly compared to TD Ameritrade. They use the latter only for placing live orders and tracking profits/losses in the pop-out module.

How does the trader decide when to exit a trade?

The trader has set criteria for exiting based on price action. If the price reaches the target area, like the bottom of the pink rectangle, they trigger the exit. They also have a predefined stop-loss or risk threshold in mind to protect against significant losses.