ICT Monthly Mentorship: Study Notes

ICT Monthly Mentorship
October 2016 – ICT Teachings
Study Notes
Copyright 2016 TheInnerCircleTrader.com All Rights Reserved

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ICT Monthly Mentorship - October 2016 - ICT

Teaching Study Notes
Forex Risk Disclosure:
The National Futures Association (NFA) and CFTC (Commodity Futures Trading Commission), the regulatory agencies for the forex and futures market in the United States, require that customers be informed about potential risks in the forex market. If you don't understand any of the
information provided on this page, please contact us or seek advice from an independent financial advisor.
Risk Associated with Forex Trading Off-exchange foreign currency trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should
carefully consider your investment objectives, level of experience, and risk appetite.
The possibility exists that you could sustain a loss of some or all of your initial investment and, therefore, you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with off-exchange foreign currency trading and seek advice from an
independent financial advisor if you have any doubts.
TheInnerCircleTrader.com Market Opinions:

Any opinions, news, research, analyses, prices, or other information contained on this website is provided as general market commentary, and does not constitute investment advice. http://www.TheInnerCircleTrader.com, Michael J. Huddleston, aka "ICT" and or The Inner Circle
Trader will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
Accuracy of Information The content on this website is subject to change at any time without notice, and is provided for the sole purpose of assisting traders to make independent investment decisions. http://www.TheInnerCircleTrader.com has taken reasonable measures to
ensure the accuracy of the information on the website, however, does not guarantee its accuracy, and will not accept liability for any loss or damage which may arise directly or indirectly from the content or your inability to access the website, for any delay in or failure of the
transmission or the receipt of any instruction or notifications sent through this website.
Government Required Risk Disclaimer and Disclosure Statement:
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. By viewing any http://www.TheInnerCircleTrader.com text, audio, visual commentary, video or presentation, you acknowledge and accept that all trading decisions are your
own sole responsibility, and the author, Michael J. Huddleston and anybody associated with http://www.TheInnerCircleTrader.com cannot be held responsible for any losses that are incurred as a result.
ICT Monthly Mentorship - October 2016 - ICT Teaching Study Notes

Growing Small Accounts Without High Risk
A. What you need to avoid:
1) Do not try to rush to make massive gains in either pips or % returns.
2) Do not open yourself to large Risk in hopes of equally large returns or profits.
3) Do not assume taking small Risk defined trades will not grow your account.
4) Do not sacrifice trading equity for poor planning or lack thereof.
B. What you need to aim for:

1) Determine how to realistically anticipate a favorable Reward to Risk model.
2) Learn to respect the Risk side of the trade setups more over the reward.
3) Identify Trade Setups that permit three Reward multiples to one Risk or higher.
4) Frame good Reward to Risk setups that have little impact if unprofitable.

The Reality Of Reward To Risk Ratios
What Will You Need To See In

Performance For Profitability?
Not For Distribution – TheInnerCircleTrader.com ICT Monthly Mentorship - October 2016 - ICT Teaching Study Notes
Keeping
Drawdown Low Is
Key To Longevity
What Should You Focus On Initially?
It only takes 20 pips per week
It only requires 1.5% risk
Compounding
It only requires 1:1 Ratio
Account: $1000.00 USD

Risk per trade: 1.5% or $15.00 USD
Risk 20 pips from entry price.
Profit taken at 20 pips for a 1.5% return.
Where do these setups occur? Per Month

Where Do 6% Per Month Setups Form?
Daily Charts Make It Easy!
Locate a Institutional
Orderblock like the one
highlighted in the chart
to the left.
ICT Monthly Mentorship - October 2016 - ICT Teaching Study
Not For Distribution – TheInnerCircleTrader.com
Notes
Buy Stops
Buy Stops
Buy Stops
Buy Stops
Buy Stops
How To Frame Low Risk Trade Setups
A. What makes the setup worth taking?
1) Selecting Trade Setups on Higher Time Frame Charts is ideal.
2) Large Institutions & Banks analyze markets on Daily – Weekly – Monthly basis.
3) Locating Price levels that align with Institutional Order Flow is key.
4) Higher Time Frame setups form slow & provide ample time to plan accordingly.
B. What can we do to lower the Risk in the trade?

1) The Higher Time Frame has more influence on Price so we focus there.
2) The conditions that lend to a Trade Setup on a HTF can be refined to LTF.
3) Transpose the Higher Time Frame levels to Lower Time Frame charts.
4) Refining HTF levels to LTF charts allows smaller stop loss placement & Risk.

Buy Stops
Buy Stops
3:1 Before Buy Stops
Are Swept
Note that the hourly
long entry is where the
5min 3:1 unfolds.
3:1 Before Buy Stops
Are Swept
What If We Risked 2% and Collapsed
50% of the Long At 3:1 & Allowed the 2nd
portion to run for the Higher Liquidity
Pools on the 60min chart??
Notice using the 5min Risk
reduction concept – we
see astonishing R multiples
100 Pips
This Is After 1st Profit!
10% return 1st month
Why Losing On Trades Won’t Affect Your Profitability
A. What Trading With Fear Of Taking Losses Actually Does To Your Trading:
1) Staying concerned about taking a loss promotes Fear Based Decision Making.
2) Equity that is managed by Traders that can not take a loss – can’t profit long term.
3) Losing is inevitable – Fear Based Decision Making keeps focus on the adverse.
4) Fear Based Decision Making fosters Trader Paralysis or inability to execute efficiently.
B. Why Profits Are Achievable Despite Taking Reasonable Losses:

1) The Professional Equity Manager understands “Losses are costs of doing business.”
2) Using sound Equity Management & High Probability Setups yield handsome % returns.
3) Trading scenarios that encourage potential 3:1 Reward Ratios, provide initial foundation.
4) Defining Trade Setups that frame 5:1 Reward to Risk or more - efficiently cover losses.

Notes
The Market Setup
& Framing The Risk
to Reward Multiples

Notes
The Market Returns To Previous
Institutional Buying – Noted By
The Down Candle Prior To The
Previous Price Rally.

Notes
Noting The Down Candle Or
Bullish Orderblock High To Open
Price Defines The Fair Value Gap
– Or Most Probable “Support”.

Notes
Mean Threshold & Hypothetical Long
Entry On Secondary Bullish Orderblock

Notes
Using 20 Pips As The Trade Stop
Loss – Easily Frames Reward
Multiples Of –
3:1 Reward To Risk

5:1 Reward To Risk
Or Even Higher.

Notes
Let’s Assume You Went Long & Used
The Top Of The Bullish Orderblock For
Entry & The Mean Threshold For Stop
Placement – Resulting In The Trade
Losing After Being Stopped Out.
Long Entry
Plot
Twist!

Notes
Let’s Assume You Went Long & Used
The Top Of The Bullish Orderblock For
Entry & The Mean Threshold For Stop
Placement – Resulting In The Trade
Losing After Being Stopped Out.
Long Entry Stop Loss

Notes
Using 20 Pips As The Trade Stop
Loss – Easily Frames Reward
Multiples Of –
3:1 Reward To Risk

5:1 Reward To Risk
Or Even Higher.

Notes
Notes
Protective Stop Loss

Notes
Go Long With ½ Of The Position
Size Used On The Initial Loss.

Notes
If The Initial Loss Was 2% Of The
Equity Base – This Trade Would
Be 1% Of The Equity Base In Risk.

Notes
R
I
S
K

Notes
R
I
S
K

Notes
2% Loss Mitigated
R
I
S
K

Notes
Price Hasn’t Even Breached The High
2% Loss Mitigated
R
I
S
K

Notes
R
I
S
K

Notes
R
3
R
2
R
1
R
I
S
K

Notes
R Equity Base Permits Full
3 Leverage Again At 2%.
R
2
R
1
R
I
S
K

Notes
Consider The Numbers…
Wins Losses Account Size: $5000.00
30% 70% Accuracy Rate: 30%
3 Wins In 10 Trades 7 Losses In 10 Trades Reward To Risk: 3:1 Ratio
Aver. Profit = $150.00 Aver. Loss = $50.00
Sub Total = $450.00 Sub Total = $350.00
Risk Per Trade: 1%
Average Win: $150.00
Average Loss: $50.00
Net Profit = $100.00 2% Return
Risk Per Trade: 1%
Risk Per Trade: 2%
Risk Per Trade: 2%
Risk Per Trade: 2%
Risk Per Trade: 1%
Optimal Trading Goal

The Secrets To High Reward Trading Setups:
Entries
Experience
For Future
Understand Reference
Why It Should
Setups
Executable Pan Out
Criteria
Determine
Trade
Define Trade Parameters
Environments
Patience
Bullish or
Bearish Focal Point
It is crucial to understand that efficiency in Trading
comes by way of Process Oriented Thinking – not by
way of Reactionary or Impulsive Thinking - or rushing
ahead to Trade Signals prematurely.

Big Picture Perspective:
1. Macro Market Analysis

2. Interest Rate Analysis
3. Intermarket Analysis
4. Seasonal Influences
Intermediate Perspective:
1. Top Down Analysis

2. COT Data
3. Market Sentiment
Short Term Perspective:
1. Correlation Analysis
2. Time & Price Theory
3. IPDA – Interbank Price Delivery Algorithm


1
Big 1. Top Down Analysis
2. COT Data
Picture 3. Market Sentiment
2


a) Inflationary Market
1
b) Deflationary Market

a) Higher Rates
Big b)
c)
Lower Rates
Unexpected Change
Intermarket Analysis
Picture
3.
a) CRB Index – Commodities
b) USDX – US Dollar Index
2 4. Seasonal Influences
a)
b)
Bullish Seasonal Tendencies
Bearish Seasonal Tendencies


1
Intermediate 1. Top Down Analysis
2. COT Data
Perspective 3. Market Sentiment
2

1. Top Down Analysis

1. Monthly Chart Analysis
Weekly Chart Analysis
1
2.
3. Daily Chart Analysis
2. COT Data
1. Bullish Hedging By Smart Money
2. Bearish Hedging By Smart Money
Intermediate 3. Extreme Levels Historically

1. Extreme Market Bullishness
2. Extreme Market Bearishness


1
Intermediate 1. Top Down Analysis
2. COT Data
2

1 Short Term Perspective:
a) USDX SMT Analysis
b) Correlated Pair SMT Analysis

a) Quarterly Effect
b) Monthly Effect
c) Weekly Range
2
Short Term d) Daily Range
e) Time Of Day
Perspective
1. Institutional Order Flow
2. Liquidity Seeking
3. Market Efficiency Paradigm
3
Market Maker Trap: False Flags
A. False Bull Flags In Price Action:
1) Not all sudden Price Rallies that move into short term consolidations are Bull Flags.
2) In mature Bull Trends or in HTF Distribution Levels – Price will post false Bull Flags.
3) Retail Traders will see a Classic “continuation buy pattern” but it will result in a Reversal.
4) Understanding Higher Timeframe Charts & Premium Markets will assist in identifying.
B. False Bear Flags In Price Action:

1) Not all sudden Price Declines that move into short term consolidations are Bear Flags.
2) In mature Bear Trends or in HTF Accumulation Levels – Price will post false Bear Flags.
3) Retail Traders will see a Classic “continuation sell pattern” but it will result in a Reversal.
4) Understanding Higher Timeframe Charts & Discount Markets will assist in identifying.

Notes
Notes
Notes
A Classic “Bull Flag”

Notes
A Classic “Bull Flag”

Notes
Notes
What Happened?

Notes
What Happened?

Notes
Market Maker Trap: False Breakouts
A. False Breakouts Above Price Consolidations:
1) This condition generally manifests in Primary Bearish Markets.
2) At some measure of Equilibrium in Price, the market will move into a trading range.
3) Neophyte Traders or Breakout Traders will bracket the trading range in price with orders.
4) Market Makers will typically send price above the range to neutralize Buy Stops.
B. False Breakout Below Price Consolidations:
1) This condition generally manifests in Primary Bullish Markets.
2) At some measure of Equilibrium in Price, the market will move into a trading range.
3) Neophyte Traders or Breakout Traders will bracket the trading range in price with orders.
4) Market Makers will typically send price below the range to neutralize Sell Stops.

Notes
Notes
Notes
What Type Of Orders
Rest Above Here?

Notes
Notes
Notes
Notes
?

Notes
Notes
What’s In
Here?

Notes
Notes
Notes
Notes
Old
High

Notes
Notes
Notes
Notes
Notes
Notes
What’s Up Here?

Notes
Notes
Notes
Notes
Notes
Daily Bearish
Orderblock
Mean Threshold

Notes

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ICT Monthly Mentorship

October 2016 – ICT Teachings

Copyright 2016 TheInnerCircleTrader.com All Rights Reserved

ICT Monthly Mentorship - October 2016 - ICT

TheInnerCircleTrader.com Market Opinions:

Government Required Risk Disclaimer and Disclosure Statement:

ICT Monthly Mentorship - October 2016 - ICT Teaching Study Notes

B. What you need to aim for:

ICT Monthly Mentorship - October 2016 - ICT Teaching Study Notes

What Will You Need To See In

Account: $1000.00 USD

Where do these setups occur? Per Month

Daily Charts Make It Easy!

B. What can we do to lower the Risk in the trade?

ICT Monthly Mentorship - October 2016 - ICT Teaching Study Notes

B. Why Profits Are Achievable Despite Taking Reasonable Losses:

ICT Monthly Mentorship - October 2016 - ICT Teaching Study Notes

ICT Monthly Mentorship - October 2016 - ICT Teaching Study

ICT Monthly Mentorship - October 2016 - ICT Teaching Study

ICT Monthly Mentorship - October 2016 - ICT Teaching Study

ICT Monthly Mentorship - October 2016 - ICT Teaching Study

3:1 Reward To Risk

ICT Monthly Mentorship - October 2016 - ICT Teaching Study

ICT Monthly Mentorship - October 2016 - ICT Teaching Study

Long Entry Stop Loss

ICT Monthly Mentorship - October 2016 - ICT Teaching Study

3:1 Reward To Risk

ICT Monthly Mentorship - October 2016 - ICT Teaching Study

ICT Monthly Mentorship - October 2016 - ICT Teaching Study

ICT Monthly Mentorship - October 2016 - ICT Teaching Study

ICT Monthly Mentorship - October 2016 - ICT Teaching Study

ICT Monthly Mentorship - October 2016 - ICT Teaching Study

ICT Monthly Mentorship - October 2016 - ICT Teaching Study

ICT Monthly Mentorship - October 2016 - ICT Teaching Study

ICT Monthly Mentorship - October 2016 - ICT Teaching Study

ICT Monthly Mentorship - October 2016 - ICT Teaching Study

ICT Monthly Mentorship - October 2016 - ICT Teaching Study

ICT Monthly Mentorship - October 2016 - ICT Teaching Study

Net Profit = $100.00 2% Return

Net Profit = $400.00 8% Return

Net Profit = $800.00 16% Return

Net Profit = $1400.00 28% Return

Net Profit = $2000.00 40% Return

Net Profit = $1000.00 20% Return

Optimal Trading Goal

ICT Monthly Mentorship - October 2016 - ICT Teaching Study Notes

1. Macro Market Analysis

1. Top Down Analysis

Short Term Perspective:

ICT Monthly Mentorship - October 2016 - ICT Teaching Study Notes

1. Macro Market Analysis

Picture 3. Market Sentiment

ICT Monthly Mentorship - October 2016 - ICT Teaching Study Notes

1. Macro Market Analysis

2. Interest Rate Analysis

ICT Monthly Mentorship - October 2016 - ICT Teaching Study Notes

1. Macro Market Analysis

ICT Monthly Mentorship - October 2016 - ICT Teaching Study Notes

1. Top Down Analysis