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ICT Mentorship Core Content - Month 02 Growing Small Accounts
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ICT Mentorship Core Content - Month 02 Growing Small Accounts

Growing Small Accounts Without High Risk

Introduction to the Mentorship Program

  • The session marks the second month of an ICT mentorship program, focusing on strategies for growing small trading accounts with minimal risk.

Key Principles for New Traders

  • New traders should avoid rushing to achieve massive gains in pips or percentage returns; this mindset can lead to unrealistic expectations and losses.
  • It's crucial to suppress the desire for high returns, as wealth is built through consistent percentage returns rather than chasing large profits.
  • Large risks do not equate to large profits; new traders often mistakenly believe that significant investments are necessary for substantial gains.

Understanding Compound Interest

  • Recognizing the power of compound interest is vital; even a small initial investment (e.g., $100) can grow significantly over time if managed properly.
  • Many traders prematurely risk all their capital in hopes of quick wins instead of allowing their accounts to grow steadily through defined trades.

Risk Management Strategies

  • Effective trading requires well-planned strategies that prioritize low-risk parameters, ideally limiting risk per trade to 2% of total equity.
  • Establishing realistic reward-to-risk ratios is essential; traders should focus more on managing potential losses than solely pursuing profits.

Respecting Risk in Trading Decisions

  • New traders often enter trades driven by greed but must learn to respect the risk involved before executing any trade.
  • Acknowledging that every trade carries a potential loss helps mitigate fear and promotes better decision-making during trading.

Identifying Favorable Trade Setups

  • Seek trade setups with at least a 3:1 reward-to-risk ratio, meaning for every dollar at risk, aim for three dollars in profit.
  • Maintaining small risks allows traders to endure losing streaks without jeopardizing their overall trading career or financial goals.

Long-Term Financial Goals

Understanding Reward to Risk Ratios in Trading

The Reality of Trading Performance

  • Many new traders believe they will never incur losses, often overestimating their system's effectiveness and underestimating the reality of trading risks.
  • High accuracy is not essential for profitability; instead, time is crucial as it allows compound interest to work effectively in wealth building.

Win Rates and Profitability

  • A trader with a 75% win rate has a low risk-to-reward ratio, meaning they don't need to risk much to earn a dollar. Conversely, at lower win rates (like 50%), the risk increases significantly.
  • To be profitable at a 33% accuracy level, traders should seek trades that offer two dollars for every one dollar risked.

Low Accuracy and High Returns

  • If 75% of trades are losing trades, the minimum reward-to-risk ratio must be three to one for profitability. This means risking one dollar could yield three dollars in return.
  • Even with only 25% accuracy, if traders can find setups that pay out three dollars for every dollar risked, they can still achieve net profitability.

Growth Through Understanding

  • As traders improve their skills and increase their win rate above 50%, their potential for finding high payout trades also increases exponentially.
  • With a higher win rate (65%-70%) while maintaining a three-to-one reward-to-risk ratio, wealth accumulation becomes more attainable.

Practical Example of Trading Success

  • Achieving a 50% return on investment within one month is ambitious but possible with selective trade setups focusing on high payouts.
  • Starting with an account balance of $5,000 and employing effective strategies can lead to significant returns without needing numerous trades.

Compounding Returns Over Time

  • After achieving initial success with high payout trades, traders can adjust their strategies to include smaller but consistent gains (e.g., two-to-one or three-to-one scenarios).
  • A demonstrated return of over $2,500 from an initial $5,000 account showcases the potential growth achievable through strategic trading practices.

Long-Term Goals and Expectations

  • While achieving a consistent monthly return like 50% isn't standard practice, even annualized returns at this level would outperform traditional investments significantly.

What is the Goal of Trading?

Understanding Drawdown and Performance Goals

  • The primary goal in trading is to minimize drawdown, acknowledging that some drawdown will occur but aiming to avoid significant losses.
  • A typical target for weekly performance is 50 to 75 pips, with an average win of approximately 51.80 pips per trade, leading to a monthly total of around 518 pips.
  • The speaker reflects on past experiences where attempting to exceed performance goals led to negative outcomes, likening it to King Kong's fall from the Empire State Building.

Compounding Returns and Risk Management

  • Focus should be on achieving a consistent return of six percent per month through compounding equity.
  • Achieving this requires only 20 pips per week with a risk level of one and a half percent and a one-to-one reward-to-risk ratio.

Trade Selection and Market Conditions

  • Emphasis is placed on selective trading rather than trying to achieve daily targets consistently; doing so can lead to unnecessary losses.
  • Even with low reward-to-risk ratios, it's possible to find trades yielding one and a half percent returns weekly by focusing on quality setups.

How Does Compounding Work in Trading?

Practical Application of Risk Management

  • Compounding six percent monthly can double your investment annually regardless of starting equity size; even small accounts can manage risks effectively.
  • For example, with a $1,000 account risking $15 (1.5%), traders should not let minor losses affect their emotional state or personal life.

Identifying Trade Setups

  • Successful setups are often found using daily charts; traders look for specific price points where significant moves occur (order blocks).

Understanding Order Blocks in Trading

Recognizing Key Price Levels

  • An order block indicates where price quickly moves away from a level; identifying these levels increases the probability of successful trades.

Confirmation Before Entering Trades

  • Traders should wait for confirmation before entering trades at identified levels; this includes observing market behavior after hitting key price points.

Analyzing Market Behavior: Turtle Soup Conditions

Liquidity Pools and Market Dynamics

  • When prices drop below old lows, it may indicate potential upward movement as liquidity pools are targeted by market participants.

Planning Profits Based on Market Structure

Understanding Market Reactions at Key Levels

Importance of the 0.7512 Level

  • The 0.7512 level is significant as it frames trades based on daily charts rather than short-term setups, indicating a focus on institutional levels.
  • A bullish order block is identified when price trades through a down candle, marking an entry point for buying.

Entry and Risk Management

  • The limit order is set around 0.7542, with expectations to fill upon price drop into this area.
  • Traders aim to double their money over the year by managing risk effectively, starting with a stop loss of 20 pips.

Trade Execution and Profit Taking

  • Stop loss is strategically placed below the midpoint of the down candle to ensure good risk management.
  • Once reaching one-to-one profit ratio, traders can consider taking profits or adjusting positions to secure gains.

Scaling Out Positions

  • As profits increase (e.g., reaching 1.5%), traders can take partial profits while allowing remaining positions to run for further gains.
  • By scaling out portions of their position at logical profit objectives, traders can manage risk while maximizing potential returns.

Final Thoughts on Position Management

  • After achieving multiple profit objectives, it's crucial to adjust stops to breakeven to protect against losses.

Trading Strategies for Consistent Growth

Understanding Position Management

  • The discussion begins with a hypothetical scenario where a trader takes off half their position, resulting in a return of 0.75% on that portion. This illustrates the importance of scaling out positions to maximize profits.
  • The speaker emphasizes the potential growth of capital by executing trades multiple times a week, suggesting that consistent trading can significantly enhance returns over time.

Structured Trading Approach

  • A structured approach is highlighted, where traders buy and sell at specific levels while trailing stops only when certain conditions are met. This method aims to create disciplined trading habits.
  • The concept of a "five to one setup" is introduced, indicating that this strategy is designed for high reward-to-risk ratios and relies on institutional support based on daily order blocks.

Long-Term Growth Potential

Playlists: 2016 ICT Private Mentorship Core Content Month 02
Video description

2016 Premium ICT Mentorship Core Content Video Lectures Audio and visuals are exactly as they were distributed in October 2016. 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.