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2022 ICT Mentorship - Episode 41 & Final
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2022 ICT Mentorship - Episode 41 & Final

Review and Final Discussion of the Free 2022 ICT Mentorship for YouTube

In this video, the speaker reviews the E-mini S&P September contract for 2022 on an hourly chart. They discuss their expectations for volatility around Fed Chair Powell's speech and how it fell short. The speaker also talks about how they use time of day to inform their trading decisions.

Expectations vs Reality

  • The speaker expected more volatility around Fed Chair Powell's speech but it fell short.
  • The speaker discusses how their expectation not coming to pass can be a catalyst for having an incorrect setup.
  • The market didn't hit the level the speaker was looking for, resulting in a trade getting stopped out.

Time of Day

  • The speaker discusses how they use time of day to inform their trading decisions.
  • The speaker notes that it is currently New York Index AM session operating hours or "killzone" (8:30am - 11am).

Lower Time Frame Analysis

  • The market dropped down and took sell side liquidity out before rallying up buy side.
  • The speaker was looking for a deeper run into a high level but it didn't happen.
  • A fair value gap is noted on the 15-minute time frame.

Trading Strategies

  • After being wrong on an initial run, the speaker shares that they find it better to move away from trading after high impact news events don't pan out as expected.

Market Analysis

The speaker discusses the market's movement during the morning session and lunch hour in New York, as well as his expectations for the day.

Morning Session

  • The market is likely to go over the high end of the fair value gap and run into another one.
  • The speaker expected it to hit a specific level, sell off, and go down to a discount area before creating a run.
  • However, it failed to reach that level and fell into another area instead.

Lunch Hour

  • The speaker was concerned about going short during lunch hour when the market consolidates.
  • A stop run occurred during this time, running down below a fair value gap before rallying up again.

Afternoon Session

  • There was a shift in market structure on the five-minute chart.
  • The market rallied away from an order block and ran up to the short-term high of the day.

Five-Minute Chart Analysis

The speaker analyzes the five-minute chart of the morning session in detail.

Morning Session

  • There was a run on the buy side followed by a displacement.
  • The market turned back up into an imbalance after dropping down to the low end of a fair value gap at 1 o'clock.

Two-Minute Chart Analysis

The speaker analyzes the two-minute chart of the morning session in detail.

Morning Session

  • The speaker drew attention to a potential long inside a fair value gap.
  • He expected it to run up to a specific level but did not take advantage of an opportunity due to wanting that specific level.

Trading Strategies and Risk Management

In this section, the speaker discusses his trading strategy and risk management techniques. He explains how he uses fair value gaps to identify potential trades and how he manages his stop loss.

Fair Value Gaps

  • The speaker uses fair value gaps to identify potential trades.
  • He explains that a fair value gap exists when the market moves away from its equilibrium price.
  • The speaker notes that he only takes fair value gaps where there is meaningful movement below the low of the gap.

Stop Loss Management

  • The speaker outlines his rules for stop loss management.
  • He emphasizes the importance of trusting partial profits and not rushing to move stop losses.
  • The speaker stresses that it is more important to continuously measure whether or not price action is giving what you're expecting in terms of bullishness or bearishness than worrying about being stopped out.

Afternoon Session Analysis

In this section, the speaker analyzes the afternoon session for index futures. He discusses market structure shifts and key times of day.

Market Structure Shift

  • The speaker notes a short-term shift in market structure during the afternoon session.

Key Time of Day

  • The speaker emphasizes the importance of paying attention to key times of day when trading.

Trading the Fair Value Gap

In this section, the speaker discusses trading the fair value gap and an optimal trade entry.

Optimal Trade Entry

  • An optimal trade entry is the gold standard of the ICT pattern taught on this YouTube channel.
  • The fair value gap with an order block is an optimal trade entry.

Objectives

  • Look for imbalances in liquidity from highs to lows.
  • The first low hanging fruit objective would be at 37 80 and a quarter.

Risk Management

  • Use free tools like lot size calculators to determine how much you should be trading.
  • Risk management involves determining your lot size, stop loss placement, and how much you're willing to risk per trade.
  • Use a hypothetical limit order to buy going long at 37 54 75 and use the low here for our stop loss at 37 45 0.75 essentially nine points of risk.

Trade Idea and Risk Management

The speaker outlines a trade idea and explains how to manage risk when trading.

Trade Idea

  • To take one percent risk per trade, multiply equity by 0.01.
  • For example, with $10,000 equity, the total amount of risk is $100.
  • Hypothetical entry for demo account is at 37.54 and stop loss at 45.75, which is nine points or nine handles.

Risk Management

  • Total movement willing to absorb as a risk or stop loss is nine points.
  • Divide the dollar amount (one percent of equity) by the total movement (nine points) to get eleven.
  • If trading mini or e-mini futures contract on S&P, the multiplier per contract is $50.
  • Two micro lots can be traded at $5 per point because eleven divided by fifty equals two.
  • Not factoring commission costs and fees with broker or spread for risk management purposes.

Profit Potential in Intraday Trading

The speaker discusses profit potential in intraday trading and warns against overtrading.

Profit Potential

  • Target profit is 25.5 points or $255 based on holding two micro lots at five dollars per point.
  • This represents a return of two and a quarter percent on one intraday scalp trade with less than one percent risked.

Overtrading Warning

  • It's not hard to make one to three to five percent in one day with intraday price swings.
  • However, it's easy to get overexcited and think that you can do every single fluctuation in price action.

Conclusion

The speaker provides insights into a specific trade idea and how to manage risks while trading. They also discuss the potential profits in intraday trading and warn against overtrading.

Trading Strategies and Risk Management

In this section, the speaker discusses trading strategies and risk management.

Achievable Rates of Return

  • One could make 22% a month by trading Monday through Friday for four weeks.
  • Professional money managers and fund managers don't try to achieve such high rates of return for a whole year.
  • A seasoned trader can average one percent per day, but it requires experience.

Framework for Trading

  • The best scenario is to risk two percent by using one limit order to buy at 37 54 and three quarters with a stop as explained here.
  • Do a second order the same way but don't use this as your profit objective. Use the short-term high or target outlined at 3805 and a half.
  • You could be making as much as four and a half percent more on the second position.

Drawdown Management

  • Drawdown is having your account reduced from either its starting balance or after you've made equity increases you start taking losses.
  • If you take a loss, reduce the risk on your next trade to half of one percent.
  • By reducing the risk on your next trade once you take a loss, then you have to make back fifty percent of what you lost before going back to your full one.

[t=0:32:26s] Risk Management

In this section, the speaker discusses the importance of determining one's risk and managing drawdowns to avoid blowing up an account.

Determining Risk

  • It is important to determine one's risk before trading.
  • This will reduce the number of trades that can be taken.
  • Starting with a small account can make it difficult to speculate with live funds.

Funded Accounts

  • Learning the skill set can help traders do funded account type things as a venture or find partners that'll come in with them.
  • Funded accounts provide a way for traders to go in with a very small amount of money and learn skills.
  • Traders can walk right into anyone's funded account challenges if they know how to manage their drawdown.

Managing Drawdowns

  • Managing drawdowns will keep traders from blowing their accounts.
  • Equity drawdown should not be sharp and jagged falling off a cliff but rather run up to new equity highs and have losing trades which are reasonable.
  • Taking consecutive losses at decreasing percentages is better than taking large losses all at once.

[t=0:35:39s] Psychological Game of Trading

In this section, the speaker discusses how trading is not just about numbers but also about psychology. He emphasizes the importance of managing emotions when dealing with losses.

Professional Money Managers

  • Professional money managers care about managing expectations and discipline required to operate and engage.
  • They are not allowed to touch their accounts when they're highly charged or emotional.

Managing Emotions

  • Managing emotions is part of risk management.
  • The desire to get back what was lost immediately after experiencing loss is infantile thinking.
  • Losses should be viewed as loans that you collect interest on, similar to how banks lend out money.
  • Professional money managers don't care about being in drawdown, they care about managing their expectations and discipline required to operate and engage.
  • Traders should quell the desire to get right back to where they were before taking a loss.

The Reality of Trading

In this section, the speaker talks about the challenges of trading and how it requires a long-term view. He emphasizes that every trade is not a make or break event and encourages traders to have patience.

The Problem with Being an Infant in This Industry

  • Traders need to have a long-term view.
  • It's easy for new traders to want to quit because they don't see past what's happening right now.
  • Every trader has to pay their toll, and nobody is exempt from losing trades.

Quitting Trading

  • Some traders may feel like quitting, but it's important to understand where your breaking point is.
  • Posting about quitting on the internet may be a cry for help rather than an actual intention to quit.
  • If you're going to quit trading, you're not going to talk about it; you just won't be here anymore.

Managing Risk

  • Traders need to limit their risk by doing the math and sticking to it.
  • Placing a hard stop loss is essential for managing risk.
  • After experiencing drawdown, traders should come back incrementally by reducing their risk.

Example Trade

  • A hypothetical example of a trade with four micro lots entering at 37 54 and three quarters with a stop loss at 37 45 and three quarters nine points risk across four micro lots.

Conclusion

In this section, the speaker concludes by emphasizing that trading requires patience and a long-term view. He encourages traders to manage their risk and limit their losses.

Final Thoughts

  • Trading requires patience and a long-term view.
  • Every trader has to pay their toll, and nobody is exempt from losing trades.
  • Placing a hard stop loss is essential for managing risk.
  • After experiencing drawdown, traders should come back incrementally by reducing their risk.

Risk Management and Stop Loss

In this section, the speaker discusses risk management and stop loss in trading.

Determining Stop Loss

  • A trader needs to determine where their trade is defined in terms of points or pips.
  • The number of points required for a stop varies depending on the trade.
  • Traders need to consider what that will do for them in terms of risk management.

Managing Risk

  • Traders need to be diligent about managing their risk and controlling drawdown.
  • Using low threshold objectives is important when starting out.
  • Longevity and impeccable risk management are key to becoming consistently profitable.

Losing Trades

  • Losing trades don't mean anything despite anyone watching you publicly.
  • A losing trade is nothing but a tax on success.

Stop Management

In this section, the speaker talks about stop management in trading.

Placing Stop Loss

  • Traders need to determine where they're getting in at and where they're trying to get as a target.
  • The range from entry point to target determines the expected range of points.

Moving Stop Loss

  • If price moves 12.5 points above the entry point, then the stop loss can move 25% up from where it was placed initially.
  • When price moves 75% of the expected targeted range, then the stop goes to break even period.
  • Traders should watch if down closed candles keep supporting price or if it runs below short-term loan and runs higher with a lot of energy.

Incorporating Partial Profits

In this section, the speaker discusses the concept of partial profits and how it can be incorporated into a trading model.

Incorporating Partial Profits

  • Once a trade goes 20 points in your favor, you have a static number that it always hits (15 or 20).
  • At this point, no matter what you're doing, take something off.
  • This is a foundational point that can serve traders well but should not be considered an ironclad rule.
  • Traders should incorporate their own individualism and uniqueness into their trading models.
Playlists: 2022 ICT Mentorship
Video description

CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN Trading performance displayed herein is hypothetical. Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance trading results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results. U.S. Government Required Disclaimer – Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with money you can’t afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. Trade at your own risk. The information provided here is of the nature of a general comment only and neither purports nor intends to be, specific trading advice. It has been prepared without regard to any particular person’s investment objectives, financial situation and particular needs. Information should not be considered as an offer or enticement to buy, sell or trade. You should seek appropriate advice from your broker, or licensed investment advisor, before taking any action. Past performance does not guarantee future results. Simulated performance results contain inherent limitations. Unlike actual performance records the results may under or over compensate for such factors such as lack of liquidity. No representation is being made that any account will or is likely to achieve profits or losses to those shown. The risk of loss in trading can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. If you purchase or sell Equities, Futures, Currencies or Options you may sustain a total loss of the initial margin funds and any additional funds that you deposit with your broker to establish or maintain your position. If the market moves against your position, you may be called upon by your broker to deposit a substantial amount of additional margin funds, on short notice in order to maintain your position. If you do not provide the required funds within the prescribed time, your position may be liquidated at a loss, and you may be liable for any resulting deficit in your account. Under certain market conditions, you may find it difficult or impossible to liquidate a position. This can occur, for example, when the market makes a “limit move.” The placement of contingent orders by you, such as a “stop-loss” or “stop-limit” order, will not necessarily limit your losses to the intended amounts, since market conditions may make it impossible to execute such orders.