ICT FOR DUMMIES | RISK MANAGEMENT EP. 11 transcript

Welcome to ICT for Dummies, episode 11. >> How to manage your [ __ ] risk. If you're in a Ford F-150 and you don't want to crash into a tree, you got to know how to manage your [ __ ] risk. You got to know how to manage your [ __ ] risk. >> This is how you manage your risk. Let your wins your losses. >> Holy [ __ ] bro. Digital footprint, more like digital [ __ ] stain. >> What the [ __ ] is up, chat? >> Oh my god. You're so [ __ ] God, bro.

Oh. Oh my god. Oh my god. Oh my god. Editor at this. Edit this out. Editor. Just kidding. All right, guys. For this episode, we are going to be covering risk management. This is going to be by far I know I pretty much say this like every episode, but I really do think that this is going to be the most important episode that you guys will ever receive um and ever watch. And the reasoning for that, guys, is because you can make, you know, money in the markets.

Anybody can make money in the markets by clicking buy or by clicking sell. The reason that people are profitable is because they're able to keep that money that they make. So, this is why risk management is so important. Being able to keep that money that you make, you know, we're going to show you the models. We're going to show you our whole entire strategy. We're showing you liquidity, all that stuff that you need to know to actually make money.

This lesson, we're showing you how to actually keep that money. That was really gross. And I didn't like that. So, >> so in one word, what Blake was trying to say, it's how you let your wins outweigh your losses. >> True. >> Yeah, that's that sounds about right. Why is this light so [ __ ] bright? >> Let's chill. >> Whatever. Um, anyways, we have it broken down into three big phases because we're assuming 99% of you guys are funded are funded traders or trying to become funded traders and you're using prop firms.

And so it really comes down to three major phases. The eval, the building the buffer process, which allows you to get paid out, and then of course uh getting your payout. Before you assume that this is all this video is going to be, we're also going to show you how you use that uh template tool to measure your risk, calculate your risk using minis, micros, all that stuff. Um, >> going through all >> because I know a lot of you guys were commenting, how do you know how many contracts to risk and all this [ __ ] Or do you just risk one mini?

Do you just risk uh 10 micros? It's like, no, your risk is always adapting to match a certain percentage, right? So, your contract size is always shifting. Um, anyways, that being said, I guess risk can sort of be subjective in this in the context of strate different strategies are going to require a different risk, but we're going to teach you in the proper way. If you're a profit trader, ideally, you want a strategy with a high win rate, lower R.

That's what's going to help you pass accounts consistently, get payouts consistently, etc., etc. Um, so of course, it all starts with the eval phase. If we're breaking down the eval phase, there's three ma major components to it. Well, really two. You have a max daily loss uh or just like a max loss limit for that eval account and a profit target. So, most profits, how they work is you'll have like a 3% um not 3%, you have a 4% >> 3 to 4% loss >> 3 to 4% max loss limit on the account with a 6% profit target.

That's how it's going to be for 90% of accounts. I think we should show them right now some what an alpha futures account looks like. Um show them the actual rules. You can just pause the recording. >> Okay, bet. >> All right. Just >> No, we'll just do it as we speak right now. How about that? I don't even know how to pause the recording. >> All right. Well, >> yeah. Well, >> don't don't log in. >> Okay. Don't log in.

Yeah. Scroll down. >> So, as you guys can see here, >> no, they can't see because I'm not showing them, but I'll show them now. >> You guys, I got a b a bunch of comments on the last video said you guys like this more raw style. So, we're keeping it raw. So, we're keeping it raw. completely wrong. >> I could give it to you raw. >> What? >> Um, no. What? What were we saying about alpha? >> Um, okay. Yeah. >> So, with alpha accounts, guys, you're going to have a 4% max loss limit.

So, on a, for example, let's just do 100k. >> 50k. I like 50k. >> I know, but in the middle, you're trying to make more sense. >> Whatever. >> You have a 4% max loss limit and your target is going to be 6%. So, again, for 100k, you need to make $6,000. Yo, I'm sorry. I'm sorry. you make $6,000 and you can't lose more than $4,000. Okay? And then with this also, you have a consistency rule. So what that means is you cannot make more than $3,000 in one day. >> Okay.

So let's break this down. Uh actually showing you trading view. >> Yeah. >> Um >> so to go more in depth into this, let's break down an alpha account for example. So we have an alpha futures date account. Kidding so funny. And so your max draw down for this account is going to be uh 4%. And then on the contrary, your profit target is going to be profit target is going to be 6%. Assuming you're utilizing a 1% risk per trade rule here, 1% risk per per trade.

Then, you know, simple math would tell you you can only lose four trades. If you lose four trades in a row, you blow the count. Obviously, if you >> and you need to also switch models and probably stop trading if you lose four trades in a row. >> Yeah. No, I'm kidding, guys. It happens where you lose four trades in a row. But with these high wind, like that's the whole point why you want lower or high win rate models because it >> it makes it easier to avoid [ __ ] like that.

Um, in comparison to see like a huge problem with people is that you guys think that you need 12 RR and you forget that the trade-off to having high RR is a low win rate. Nobody who has crazy RR has a high win rate. So if you think about it, if you're trading like a [ __ ] one to 10 R model with a 10% win rate, you're probably going to lose [ __ ] nine out of 10 accounts that you try to pass. Um, but anyways, back to this.

Assuming a 1% risk per trade, you know, if you lose every single trade off RIP, you only have four trades of room to really work with. Um, and your goal is to get to six%, which is going to be $6,000 total. So, you have to win six trades. This is assuming a sequence where everything is consistent. You either lose all four or you win all six. Um, that being said, almost never, it's almost never like this where it's perfectly consistent and you win six or immediately lose four.

Uh, you probably win one, win two, lose one, win two, lose one. But that's why you want a high win rate model because your wins will outweigh your losses, right? Um, and so yeah, al this is like an alpha futures. Well, this is any account size, but if we do 100k, uh, this can all be translated towards max draw on is minus 4%, which if you have a 1/4 of a rain, you can, um, figure out that that's $4,000. And this would be why is that there? 6%.

This would be $6,000. Um, one thing I do want to say is this is like I said, assuming the 1% risk per trade, the only time I recommend people risk 1% or more on an eval is if you are already profitable. The reason being is because the eval phases are just a waste of time once you are profitable. But since we are talking about how to properly manage your risk here, we're going to assume that you're just like, you know, the average trader and we're going to give you good advice. >> Yeah. >> Um because guys, if you've already gotten a payout, then there's no reason for you to be wasting your time on these evals.

Like if you've gotten one payout, you reinvest that back into a prop firm, right? And you know, you understand the model, then you're literally just wasting your time when you could be making money in the live markets with a live account. So that's why we do recommend, you know, 1%. It might look like a lot. You know, you lose four trades in a row. That's very possible. But, you know, if you've already gotten that payout, you're reinvesting back into firms.

It's really not that much. You know, you're maybe losing like 50 bucks, you're maybe losing a hundred bucks, right? Um, and that's the risk you got to take with these profits. You got to treat it like a business model, you know? Um, so you can't be too too, you know, anal about, oh my god, I need to be risking 0.25% in an eval phase. If somebody's telling you that it's I'm telling you this though if you're unprofitable I would definitely say to risk at like the 0.5%.

So we'll show you what like the phase two and three look like and I want you guys if you are a complete beginner never passed a funded account before and you know you're just putting your feet in the water here then I would definitely suggest to risk lower so then you can build that um you know that muscle of actually having proper risk management. >> Yeah, I I completely agree. Um, and something I want to put a huge emphasis on like more so than just this just being like us talking to you about um, proper risk.

I also want to talk about the fact that if you are a beginner, your whole goal should be to get reps in. Um, you need market experience. So don't don't try to rush the process with these evals and be like, "Oh, I'm better than other people despite the fact that I haven't gotten a payout and I don't have like a model that I can consistently trade." Like your goal should be to get reps and build conviction in a model. So don't focus on making money.

Focus on passing the counts by following a strict set of rules. And that really should I mean we say it all the time. That's the whole goal of trading to be able to consistently follow a rule set that you give yourself. That's how you build good habits. That's how you build discipline. So once again, if you're a beginner trader, maybe even forget the 1%. Have 0.5% risk, which allows you um if we go back to this >> six trades in a row, guys. >> Yeah, you can lose No, you can in this case, you can lose eight trades in a row.

Yeah, if you have a 4% draw down, >> you can lose eight trades in a row. Um but win or loss, it doesn't matter. The point is it'll it'll help you just build confidence in a model. Anyways, now let's go into like generally how Blake and I manage our risk when it comes down to three phases. Well, not Blake and I, this is how you guys should manage your risk. Uh, the eval phase. The reason we have 1% um for the eval phase is like we said, it's something we consider to be a challenge that you should be a little bit more I guess aggressive with. 1% is reasonable amount and we broke down the statistics. it gets you four losses if you were to lose everything in a row, like everything at once in a row or six wins.

Um, assuming you have a one to one, one to three RR model, you'll end up usually winning and your wins will outweigh uh more than your losses. And you could have, let's say, two trades that are like one to two RRing 1%, which will already put you up 4% in two trades if you hit two one of twos. Um, and you get you get the gist of that. And the way Blake this is generally how Blake and I trade though here, uh, we do max Oh, this is with Evals.

Yeah, max one trade a day. Um, or 1%. So, there's some profs that actually only even let you use lose 1% a day or or sorry, it's usually 2%. But I would limit yourself to 1%. And this is where giving yourself rules and restrictions is so important because it helps keep your psychology in check. Um, so with the eval phase, you want to be taking the most A+ setups and, you know, risking the same the entire time. So you risk 1%, you take one trade a day, win or loss, doesn't matter.

You're done for the day. This is going to help you start building that discipline and forcing you to take the highest quality setups. This is how I started. This is how Blake started. This is how we recommend everyone starts. One trade a day. It'll build a [ __ ] mental muscle in you that is so important. Um, and I don't know why it says two losses done for the day because we did one trade a day. >> If you have one trade, then one. >> So, anyways, it's here.

It's supposed to say >> one loss. >> One loss >> done for the day. One win done for the day. Point is, you learn to call it. You learn to get off the charts when you've already, you know, I guess, >> taken your setup. >> Taken your setup. >> All right. Yeah. So, that's that for uh phase two now. This is going to be after you've actually passed that eval. Now you're getting to the stage where you're building a buffer.

So most problem firms before you actually go to request a payout, you're going to need a little buffer in play because when you request that payout, your then account balance is going to go to not zero but whatever your account balance is. Like 50,000 is going to be like your max draw down or 100,000 is going to be your max draw down from whatever uh your payout was. Right? So, when we're looking at building a buffer here, again, same thing here with the per trade risk, max daily loss, and profit target.

For a per trade risk, I'm looking at a 0.5%. Okay? So, again, that's going to give me with Alpha, that's why I like Alpha so much because the rules are, you know, so good. You're able to lose eight trades in a row with a 0.5% risk. Most of these other prop firms have about a 3% max draw down. So, that's like six trades in a row. I think you can lose like eight, right? Um, and then, so we have these, right? 50K is going to be 250 bucks. 100K is going to be 500.

And then a 150K, you're going to risk 750 per trade. And I want you guys for every single trade to risk the same amount. Okay? I do not want you to be varying your risk, especially if you're more of a beginner because you guys don't really truly know at this stage like what an A+ setup looks like, what an A setup look like. That's going to be that's going to be happening when you have more market experience. like me and Pat were able to, you know, kind of see what an A++ setup looks like from a discretionary standpoint, but also mechanically.

Um, and that comes with a lot of screen time. >> Oh my god. >> What? No. >> Hello. Speak. >> Hello. >> Yeah, but we have the volume on nearly at zero. >> No, it doesn't matter. The thing doesn't matter. >> Oh, really? >> Yeah. >> How do you know that? >> I don't know. >> Okay, cool. >> All right. My bad, guys. We thought >> Oh my god, bro. Oh, you're gooning my [ __ ] camera. >> Oh my god. >> I'm going to hold this [ __ ] like this for now. >> All right, so this is mad intimate.

So next guys, we have a max daily loss of and a trade rule. Okay, so we have max two trades a day, right? So now that we're risking 0.5%, we can actually take two trades a day, which you know is going to be like a bit of a step up from your one trade a day. And this is the thing guys, if you take one win, be done for the day. This doesn't mean two trades a day, meaning you can take two trades a day, right? >> Doesn't mean you should take two trades. >> Yeah.

It doesn't mean you should. But if your setup presents itself twice, you know, maybe the first setup you got maybe stop rated and then you're looking at, you know, the very similar setup and you want to take it again, then it's going to be okay. Why? Because you have 0 5% risk, meaning now you can risk up to 1% a day. >> Yeah. So, I mean, in a scenario like that, let's say Blake and I are trying to take longs right here, right?

We know that our our max limit that we've set ourselves is 1% for the day. Considering that we're trading 0.5%, let's say this setup fails, but then we get the same setup a few candles later, just shortly after. Well, we've already lost minus.5% here, but we still have 0.5% risk um to work with here because our max is 1%. Um, and so we can if the second A+ setup presents itself that's equally as good, just high quality setup, um, we still have 0.5% to risk.

And then we can take this and then let's say this hits for like a one to two. Um, cool. Now we are actually up >> 5%. Um, considering that this hits for a one or two, right? So obviously that's not the case. Maybe your second trade you're only looking to target a one to one and you end up break even on the day. But point is, you're calling it, right? You took your two trades of the day. You don't need to trade more. >> Um, and every single time that I win my first trade, dude, that's like >> my sign to just get off the charts, go hit gym, and forget about the rest of the [ __ ] day. >> Yeah.

And there's really a there is a reason for this. We don't just say one trade a day just because that's what people say, guys. There's a reason behind it, right? So, let's say, you know, in terms of accumulation, manipulation, distribution, right? We talked about AMD a lot in this ICT for dummy series. And when price is actually distributing, right, you're going to be, you know, if you take a good trade, right, and you hit your takerit, what is price doing?

Distributing, right? It's a big move up, right? Or a big move down, whatever it is, that's going to be a distribution in price. And what happens after price distributes? We accumulate, right? So after that, the session is most likely either taking the objective, right? and price action is just going to be choppy and you're just going to get caught in that liquidity generation which is not what you want to be trading.

You want to be trading that distribution phase. >> I didn't even know we were going to go over this but this actually happened exactly today. Yeah. Um I was helping someone with it. >> So for example, today I took a trade. Um I'm not going to break down all the confluences for you because that's not the point of this video. >> But I took a trade. I took a long I longed right here. Um, and I was able to catch a strong distribution move uh towards this buy side right here.

And so I took a long here. Price ripped up a little for a little bit after. And then I saw a lot of people Whoops. I [ __ ] hate when I do. And then I saw a lot of people after having a 200 point distribution try to start taking shorts around this level when a lot of objectives for the day have been met. And this is why it's really important as an intraday as a futures day trader and I'm not I'm sure I'm not I don't even know if any other person talks about this in risk management but this is just adding some technicals and I wasn't planning on talking about this but it does make sense. um you know if your first trade of the day hits then that means a drawn liquidity has been targeted price distributed towards that drawn liquidity and objective has been met and that means price distributed which usually is followed by accumulation and so I saw a lot of people after this big move happened start trying to short after and look what starts happening with price it starts going [ __ ] sideways um but yeah I wasn't really planning on talking about this but I guess it's if you guys want to just pair some sauce together >> I think It's definitely necessary just to understand why we actually have that in play.

And then also, you know, for two losses done for the day, there's also like a reasoning behind this. There's a reasoning behind everything here, right? We don't just say 0.5% because it's 0.5%. No, because you want to have that max loss in play, right? So, for two losses done for the day, there's really two reasons I have this rule in play. >> Yeah. One is just risk management, but two, I know you're gonna say it's the fact that if you've lost in the same setup twice, your drawing liquidity is most likely wrong on the day, and you're just going to keep getting stopped out, and you're probably emotional by the second trade. >> Um, >> yeah, exactly.

So, just like Pat was saying, you're, you know, your edge is not in the market at the moment. You might just have the wrong draw and then after, yeah, two losses, your psych is most likely just going to be cooked and you want to get off. The second you start feeling emotions in your trading, guys, the second you can start to recognize that is when you should be telling yourself, "Okay, I'm gonna get off here." Right?

Being able to recognize your emotions is going to be the first step. And actually, you know, taking accountability for setting these rules in play. Okay. Um, but yeah, that's pretty much why I have those rules in play for the two losses. And then we have a profit target also of the same one one to one three. And when we say one and one, one to three profit target, by the way, that's just what we have calculated as the average for our strategy.

That doesn't mean we're just targeting one to one to target one to one or targeting one to three to target one to three. That's just where 90% of the time our targets are laying. >> Yeah. >> Um >> but yeah, and then the final stage is going to be phase three, which is uh payout time. And you know, as the name implies, um, this means you've built your buffer and it's ready to pay yourself out or you can obviously keep stacking the account.

So, pretty much what we're trying to get at with this is um, once you've established a buffer, this is you now working a bit over the buffer to get a payout. So, let's say you built like a and so I I actually want to write this down real quick. So, when we're speaking about a buffer, a buffer, um, a buffer is, I guess, a cushion. I don't even know how to [ __ ] to spell cushion. A cushion of capital you maintain to trade comfortably.

Comfortably. Yeah, this is actually a perfect definition. So buffer is a cushion of capital you maintain to trade comfortably. If you're like 13 years old and you don't understand what I was just saying and this doesn't sound like English to you, let's put it this way. You're trading in a 100K account, right? And usually if you're trading, can we just use 50? I just use 100Ks. You're trading in 100K account. And 100K account has 4K draw down, max draw down, and 6K profit.

Almost always when someone is trying to build a buffer, what that means is that they're trying to get $4,000 in profit for the account and then pay themselves out anything above 4,000 because that was the original draw down. So ideally the right way to do this is you get the 100K to 100 $104,000 and now any profits above you can pay out. And again guys the reason this is this is in play is because after you pay yourself out sorry I keep shaking this [ __ ] after you pay yourself out with what what happens with almost every prop firm is your u max draw down will then be the starting point of that account.

So, for example, after you pay yourself out the 4,000 or any profits above 4,000, right? Let's say you paid yourself out, >> let's say you were at like 106,000. >> Yeah. And you pay yourself out 2,000, right? Then your max draw down is going to be $100,000 flat, right? Which means you can then lose 4,000. So, you just want your draw down to be matched with your um buffer size. Basically, >> paid out 2K, which leaves you with 100.

Wow, those are cool buttons. I'm pressing 104K once again. So, you you had,600. Those are the profits you made above. So, since you got to thou 106,000, what the [ __ ] did I don't even know what I just said 4 seconds ago, but anyways, you started off with 100K. You built your buffer. Your buffer is $4,000 because that's original max draw down. Um, and that's just an easy way to calculate your buffer. And so any profits above a thou $104,000 uh that's it's reasonable to pay yourself out.

Why? Because you're still maintaining that original $4,000 um draw down, right? So let's say you get the count to 106,000 and you pay yourself out 2K. Now you have $104,000. The thing is when you pay yourself out with prop firms, it usually brings your max draw down to the original number which is 100K. Which means now that you're at 104K and they've brought it down to where your max draw down is now 100K. That means you have $4,000 of wiggle wiggle room, >> which is your original draw down, right?

So, you know, it's it's subjective. You can we do recommend to have that draw down be your buffer. Um, you know, if you want to play it a little more ballsy, pay yourself out maybe 3K and then, you know, you have only 3%. So just know what your max draw down is after you get that payout. >> Yeah. And the reason I mean the reason we're recommending you to go about it this way is because when you do this properly then you're more able to maintain an account and get multiple payouts.

Sure, you can build that account to like 104K and and be eligible for payout and pay out [ __ ] half of it or most of it, but now you have like one trade that you lose. If you're risking like 1%, you have like one or two trades that you can lose before you blow the account and then it's just like [ __ ] You know what I mean? That's why it's always good to build that buffer. Um, but yeah, hopefully that made a bit of sense. >> And then yeah, let's say you do get to like that 104K, right?

You you built that buffer. That's when I tell people you can up your risk now a bit and maybe go to 1% because while we were trying to build the buffer, we're usually maintaining like 0.5% risk because we want to be able to hold that account for a bit and um you know just not blow it relatively fast and have good wiggle room. So we try to do like 0.5%. Um when building the buffer, some people like to be more aggressive.

Point is just build a buffer and be smart about it and maintain consistent risk. Uh if you're going to be aggressive, just be aware that you're being aggressive and try not to, you know, take too many trades, overtrade or whatever. Uh be smart about it. But like I said, I this is how I like to do it. Once I build my buffer, then I up my risk to about 1% and I can trade more comfortably. Why can I trade more comfortably?

Because I know I have that quote unquote wiggle room. Um cool. So, that being said, that's pretty much a prop firm breakdown of how you should be managing your risk. Uh, I guess this is applicable to other things, too, even I don't know, maybe like a live account if you have something to take away from this. But now, what a lot of people were asking us to do is talk about um how to calculate your risk with uh minis tool >> and and the tool.

Just play guitar for me while I do this. But we're going to go to the second portion of the video, guys, which is going to be how to actually place a trade. All right, so you got your risk management down. You wrote down all your rules. And I want you guys to also with these rules, have a little sticky note. All right, I want you guys to all get your sticky notes or whatever you have. If you have a notebook, do that.

But something you can just look at every single morning, every single day, so you don't break this, okay? I don't want you to ever break your rules for risk management, especially. Okay, now we're going into how to actually place a trade. So, what I want you guys to first note is that one mini is equivalent to 10 micros. Okay? So, if you are trading anything but anything other than a $150,000 account, I would need you to be using micros.

Okay? Um, this is going to give you the most accurate risk. Um, and just you shouldn't be trading minis if you're on a 100k or 50k. If you're on a 150k, then you can use minis, okay? Um, but yeah, anything under that, use micros. It's going to give you the most accurate risk and you can get your stop-loss placement in the best place possible. So, you can look at this guys. I can I could have kept going on for, you know, longer, but you'll get the point, right? 10 points or 40 ticks is equivalent to $200.

This is all with using one mini, right? So, if I were to use two minis, what would this $200 be? $400, right? And then 15 points, this is all with one mini. Or on the contrary, let's say you you wanted a 10 point stop. Let's say you have a 20 point stop loss because on average with if you're trading like a model like ours, your stop loss is typically anywhere between like 20 to 40 points. But let's just say 20 to be safe. >> Yeah. >> So let's say you're on a 50k for example, right?

A 50k 1% is how much? $500, right? >> So let's say you want to take a trade that requires you having a 20 point stop-loss. You don't want to risk 1%. So, you're probably not going to use one mini. What are you going to use? You're probably going to use like six micros here, right? Because if you go five micros, what are you risking here? You're risking $200. U since 10 micros is $400 with a 20 point stop. Five micros is $200 with a 20 point stop.

But let's say you want it really accurate and you want to risk 0.5%. You're probably going to be anywhere between like six to seven micros. >> 67. >> Oh my god. Six. >> 67. Yeah. Yeah. So, you get the point. People always say, "How many minis should I risk? How many micros should I risk?" Are you [ __ ] >> That's like the worst question to ask ever. >> That's like saying That's like saying, >> "How many times should I?" So, let's show you guys what that actually looks like on the chart cuz I know that's going to be important, right?

It's gonna So, I'm gonna scroll down to the one minute time frame. Oh, it's going to [ __ ] everything up, isn't it? Yep. Okay. So, I'll show you guys kind of what it looks like. >> You know, if you double Yeah, there you go. >> Yep. So, I'll show you guys kind of what it looks like going through my head. Okay. So, let's >> Bro, that's a trade I took today. >> Okay. Let's just say we want to take this short. Let's just say we took this short. >> Wait, why not the long? >> You want to show everyone the trade you took today? >> No, just do the short.

It's fine. The short's more reasonable. >> I know. Okay. All right. So, let's say you want to take this short, right? You're taking an inversion, right? And you're going short right here. Okay. IG. Now, before this even happens, I don't know if I was I didn't think I was going to get into this, but I want to get into this now. >> What >> What do you want to get into? Cuz I had something important to say. >> No, just like how to you know, you're not going to Let me Let me just talk.

It's fine. So, for this, right, we're going to have an 87 point stop. I'm let's act I mean 87 ticks sorry 20 20 point stop. All right and let's act for example here that I'm on a 100k account and I'm at you know the buffer stage or I'm at get the getting the payout phase right where I want to be risking 0.5% consistently.5%. Okay. So, I'm going to go in for a sell here, right? But before I do that, I'm going to be calculating my risk, right?

So, for a 21 point trade, right, for 87 ticks, that's risking about 435 bucks um with one mini, right? And you know, I want to actually be using MNQ here because I think it's going to be um just better for you guys to see MQ, but same thing, right? For the close here and from here, it's 84 ticks. All right, which is 10 m and Q, which is 1 mini. That's going to give you 420 bucks. Now, why is this good? Right? You might be saying, Blake, well, I want to risk $500.

I want to risk 420. Well, you don't know where this inversion is going to close, right? Which is why you want to give yourself a little bit of room. I would say like around, you know, let's say it closes all the way down here. Then you're risking, you know, let's say 103. Then you're around that $500 mark. A lot of the times with inversions, guys, you're not going to get the exact percentage every single time. It's but, you know, if you're around that $500 mark for 100K for 0.5%, you're good.

Just as long as you're around that and you're maintaining that consistently. Um, you know, if it's like, you know, in that range, that's all that matters. >> The point this dumbass is trying to get who sometimes sees, how'd you know I was going to close there? >> I didn't, but I didn't. I didn't. And that's 515 bucks. or you know you and you can see that maybe you see that really quick and then you can change to you know eight and now you're risking 103 and then boom or nine. >> This is why micros are so good because you can get your risk for something so [ __ ] accurate >> and then like 463 then you're under risk.

So as long as you're under risk just don't be over risk at the inversion. >> Yeah. Also I mean this is obviously Blake showing you guys how to use this template and calculate your risk and see how many micros to go in. Um and micros are just going to give you a a more accurate uh risk. Um, but anyways, what I was going to say, um, was, oh yeah, this is based off inversions. I mean, the risk thing still applies, but if you're someone who like trades price tapping into a Fred Valley gap, like let's say we wanted a [ __ ] >> Well, let's show this playing out.

Okay, this is a little one to two RR 1.79, right? And you have $500 risk and then you're trying to make 935. >> How do I know it's 1.179? 1.79. >> It tells you right there. >> Oh [ __ ] it's 1.8. Wait. And guys, especially with this though, also um you again, we already went over this when we were talking about the profit targets, but we're not risk we're not like looking for one to one. We're not looking for one to two.

We're not looking for one to three, right? We're looking for wherever our draw liquidity is. So, let's say for example here it was all this trend line liquidity, right? It was this. Did this hit? I don't know. We'll see. I guess it was all this trend line. Okay. Yeah, it did it. So, that's where our target is, right? And that's around like that 1 to two, you know, six, seven range. And it's around that. So, what are you going to say? >> I was going to say now, I mean, some of you may trade break a structure, fair value gaps.

We trade inversions, but obviously same rule applies. I mean like let's say for example price is up here and you're thinking okay I want to long I want to long see that I didn't do it that bad that was like really bad >> and then you're thinking like I went along when price hits >> don't do this >> I went along when price hits this four minute. So, let's say you're basing your stop loss off the top of this four minute and you have like a limit order.

Then, let's say this is a big boy trade. 44 [ __ ] points, brother. And you're on a [ __ ] 100K. You're on a [ __ ] 100K, which means $1,000 is 1%. Um, the three minute gap. >> And if you trade Shut up. And if you trade um one mini here, that would be $880. Uh but say you want to risk 0.5% which is 500 bucks here. What I do, I go to MNQ. I go to trade. I see that this is 1706. Let's put a limit order right here. Bang.

Oh, that's [ __ ] the limit order. >> Okay. Anyways, let's say we have a limit order right here and the stop loss is 176. So now what I do is I put 176 ticks and what I want to get I want to get my risk to 500. So what I do is that's >> Yeah, I know. I know. I realized I'll finagle with this with the amount of micro size until I get it to 500. Four or five is practically the same [ __ ] you know? So, I can either go six here or I can go five and it's going to be around 500 bucks.

I'm not I'm not too worried about a $50 difference. >> I would I mean for the sake guys try to always be like under risking like don't try to be over. No, but actually though because then you're going to >> $28 more. I know, but you need to account for you need account for fees and then there's $25 fees probably and then oh and then you're down like 600 or what if there's a Drake candle that happens and you know you don't get filled right. >> It's always better to be safe than sorry. >> Holy [ __ ] But >> that's just me. >> Thank god mama didn't raise me like a little big, bro.

Oh my god, bro. >> God forbid I use risk management. >> 22908 22 >> Yeah, bro. The trade's over, bro. The trade is over. You shut the [ __ ] up for one second. >> You're not getting your limit. >> Oh, this is my take profit. >> Yeah, if you take this long to set up your trade. >> Where's my limit order? Anyways, it would have hit my limit perfectly and then hit my TP because I'm so [ __ ] good at trading. It's crazy.

But yeah, you get the point. So, you use this tool to man calculate your risk. Go use micros is the easiest way to keep consistent risk. I'm a hella brain dead today. Yeah, it's pretty late, guys, but we didn't want to bang these series out for you. But yeah, as you can see here, stop loss here. O, >> that's 10 micros, bro. >> Oh, sorry. Sorry. I tried that, bro. >> Oh, I don't know why I did that. Sorry. >> There you go.

Okay. So, then your stop loss here, right here. All right. You know, wants to be a little bit riskier today on this setup. He likes it a lot. So, 500 ducks, ducks, and 863. >> You thought that was funny. 500 ducks. Wait, the fact the fact that you know how to use all these like super zesty tools, it blows my mind. Like, who the [ __ ] knew you can drag your stop loss >> every bro everybody >> that's you're a replay mode warrior.

Oh my god, >> how do you not know how to use this? >> I mean, anyways, what I also want you [ __ ] bro. Um, what I also want you guys to really take from this video, and this is what we've been emphasizing like since the start, is to be more worried about like how much you're losing like when you're entering a trade. And this is going to be a lot of risk management. I mean, sorry, psych psych talk right now. Um, but whenever I'm entering into a trade, what I'm always thinking about is the potential loss that I can have, right?

I'm never entering into a trade and I'm like, "Oh my god, but I'm going to make this much." No, like I'm always thinking about the loss and then from that point, if I'm able to go break even, then it's going to be a win in my book, right? Um because then the risk is off of the table, right? So, always be looking to minimize the amount of risk that you can have every single day because at the end of the day, that's what's going to make you profitable, being able to keep the profits that you make.

Holy [ __ ] I sharpened us. Say that again. Give like a motivational speech and I'll give you some uh some sounds over that. Same thing. Okay. Well, yeah. I mean, what I This is crazy. I mean, what I really want to talk about, guys, is just overall with risk management. You know, stop caring about how much money you're going to make. Don't go into a trade and think, "Oh my god, but if I make $1,000 on this trade, that's what I'm going to happen." No.

Going to a trade thinking, "I'm ready. I'm allowing myself right now to lose this amount of money. Let's say it's 500 bucks. Go into that trade idea. Go into the day. >> Being okay with that loss. >> Okay? Have that mindset ingrained into your mentality. >> Because if not, when that loss comes, then what's going to happen? Oh, you're going to be like, "Well, I wasn't expecting that loss. Now my psych is all fucked." >> Be ready all the time. and be ready for that.

Okay? >> And that's the problem. >> And that's the true problem with, you know, traders nowadays. >> Sad. It's a sad world we live in. >> It's a sad sad world. But if you manage your risk properly, [Music] You can make a whole lot of money. I remember the days where I didn't have a dollar. I remember the days was filled with sorrow. Now I've made it to the top. Pay out every day. I can't stop winning. This is how we play.

[Music] God, bro. I think I want to quit YouTube. >> Holy brain rot. >> Yeah, I feel fried. Let's rip the yard pen. Are we still talking about more? >> What? >> We're still going over more stuff. No. >> Okay, end the [ __ ] video. >> All right, guys. This is all you need. Real [ __ ] though. >> Hope you guys learned a lot in this video. Um, a lot of sauce given. Lot of sauce given. Um, main takeway. >> Sued by We're going to get sued by other [ __ ] um traders, bro.

Oh, they're going to be >> because of how much [ __ ] we're >> They're going to be like, "Bro, you're freeing up." >> How much you want to bet >> for the free >> two months down the line, people are going to be using these videos and selling them. You know what I mean? >> But it's on free for YouTube, so you have to be really stupid to do that. But that being said, chat, um, what is that, >> dude? I [ __ ] There's a [ __ ] mosquito on it. >> Oh, [ __ ] You need to get that [ __ ] off.

Um, anyways, if you guys took any anything away from this video, guys, um, it would be to use >> use consistent risk all the time >> up until you know you get >> your buffer and then you're eligible to take out a payout. Say with me, you're eligible to take out a payout. >> Pay out. But all out. >> But that's it. That's wraps. >> Yeah, just wrap it. Wait, I have a confession to make though. I look I'm just going to expose my model right now.

Okay, now I'm just going to tell you my model. Practically what I do every single day is I wake up, I