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ICT Mentorship Core Content - Month 05 - Position Trade Management
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ICT Mentorship Core Content - Month 05 - Position Trade Management

Lesson 8: Possession Trade Management

Introduction to Seasonal Tendencies

  • The tutorial focuses on bullish market conditions and the anticipation of potential seasonal tendencies, emphasizing that these are not guarantees but rather guidelines for price action.
  • Historical data over the past 40 years suggests certain patterns, but future outcomes may vary; thus, it's essential to approach with caution.

Analyzing Market Conditions

  • Identifying bullish seasonal tendencies is crucial for the next three to four months. This involves understanding which tendencies are most likely to manifest in current market conditions.
  • Inter-market analysis is necessary to confirm a bullish technical picture; without alignment between technical indicators and seasonal tendencies, price movements may not follow expected patterns.

Importance of Inter-Market Analysis

  • Monitoring interest rate yields can provide insights into currency performance; rising yields typically favor the currency being traded.
  • A divergence in yields might indicate a shift or pause in market direction. It's important to analyze all major asset classes—stocks, interest rates, commodities, and currencies—to validate trading decisions.

Utilizing Higher Time Frames

  • Transitioning to higher time frames (monthly and weekly charts) helps identify institutional reference points through Premium Discount Arrays (PDA).
  • Understanding these higher time frames aids in predicting daily chart movements and identifying quarterly shifts or intermediate price swings every three to four months.

Framing Bullish Setups

  • Daily PDAs help frame bullish setups by identifying order blocks, voids, gaps, rejection blocks, old highs/lows—all critical for establishing buy signals.
  • When multiple factors align (technical analysis, inter-market analysis, seasonal tendencies), it creates a high probability scenario for successful trades.

Order Types and Risk Management

  • Traders must decide between using buy stops or limit orders; while buy stops often result in more fills, they can create larger gaps between entry points and stop losses.
  • It’s recommended to risk no more than 1% of your account per trade while aiming for significant moves relative to account size.

Setting Stop Losses

  • After entering a position based on chosen order types, trailing stop losses should be set below the lowest low from the last 40 trading days.

Understanding Trailing Stop Loss in Long-Term Trading

Importance of Trailing Stop Loss

  • A trailing stop loss order is set significantly behind the current market price, allowing for substantial price movement before being stopped out. This approach helps avoid premature exits from trades.
  • In long-term trading, it’s crucial not to have ultra-tight stop losses; allowing some freedom in price movement can prevent getting knocked out too early.

Managing Price Movements

  • Traders must accept that initial trade entries may experience pullbacks; this volatility is part of the trading process.
  • Once a trend moves 50% of the expected range (e.g., 500 pips in a 1000 pip range), traders should reassess their stop loss based on recent lows.

Adjusting Stop Losses

  • After reaching 50% of the expected range, adjust your stop loss below the lowest low from the last 40 days to maintain position during upward movements.
  • As trends progress and reach three-quarters of their potential range, begin trailing your stop loss below recent lows within the last 20 trading days.

Navigating Bearish Market Conditions

Anticipating Market Trends

  • Understanding seasonal tendencies for bearish markets is essential; traders should focus on ideal conditions and timing throughout the year.
  • Inter-market analysis across major asset classes (currencies, interest rates, commodities, stocks) helps confirm expectations for upcoming market shifts.

Analyzing Market Dynamics

  • Consider how interest rate changes align with bearish expectations; rising or falling rates can influence market direction significantly.
  • Identify key levels such as old lows, bullish order blocks, liquidity voids, and fair value gaps to anticipate potential obstacles or accelerators in price movements.

Setting Up Bearish Trades

  • Once a bearish scenario is established, focus on daily charts to identify premium discount arrays and other setups that align with monthly/weekly trends.
  • Determine whether to enter trades using limit orders or stops based on personal preference and market conditions; selling on stops may ensure better fills during weakness.

Implementing Trailing Stops in Bearish Markets

Executing Trades Effectively

Understanding Premature Stopouts in Trading

The Frustration of Premature Stopouts

  • A premature stopout can lead to frustration as traders may be knocked out of the market before witnessing a potential move.
  • Exercising patience for long-term setups only to be prematurely stopped out can result in missed opportunities and fear of re-entering the market.
  • Losing potential profits due to being knocked out after extensive analysis and preparation is a significant concern for traders.

Managing Stop Losses Effectively

  • Tight stop losses on higher time frame trading can lead to unnecessary stopouts; wider stops are recommended.
  • Trailing stop losses should be set above the highest high over the last 40 trading days, allowing room for market fluctuations.

Adjusting Stops Based on Market Movement

  • When price moves 50% of the anticipated range, maintain the trailing stop above the highest high from the last 40 trading days.
  • As price approaches three quarters of its expected movement, adjust your trailing stop to reflect the highest high from the last 20 trading days.

Locking in Profits and Reducing Risk

  • Using a shorter look-back period (20 days) helps lock in profits as you approach your target while minimizing risk from potential reversals.
  • If a deep retracement occurs after reaching three quarters of an expected move, using a tighter trailing stop can prevent larger losses.

Practical Application with Examples

  • Real-world examples will illustrate how these strategies apply in practice, focusing on specific charts and setups.

Trading Strategies and Risk Management

Understanding the 40-Day Trading Range

  • The speaker emphasizes the importance of using the highest high from the last 40 trading days to frame risk for trades.
  • A stop loss should be set above this high, establishing a clear range of risk for traders.
  • For example, if a stop loss is set at 250 pips, it should be adjusted to 260 pips to accommodate market fluctuations in long-term trading.

Analyzing Trade Opportunities

  • The discussion highlights an opportunity where selling short could yield significant returns, with potential profits calculated as eight times 260 pips.
  • Traders are encouraged to continuously review past trading days to identify the highest highs and adjust their stop losses accordingly.

Managing Stop Losses Effectively

  • It’s crucial to keep stop losses above recent highs during deep retracements to avoid premature exits from trades.
  • When buying, protective sell stops should be placed below recent lows identified within the last 40 trading days.

Transitioning Between Trading Ranges

  • Once price moves through certain levels, traders should begin looking back over the last 20 trading days for trailing stop adjustments.
  • This strategy involves tightening stop losses below recent lows as price approaches key objectives.

Key Takeaways on Long-Term Trading Strategy

Playlists: 2017 ICT Private Mentorship Core Content Month 05
Video description

2017 Premium ICT Mentorship Core Content Video Lectures Audio and visuals are exactly as they were distributed in January 2017. 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.