CHAPTER 8

Risk, Psychology and Journal

ICT teaches entries; risk management keeps you alive. A trader at 1 percent risk and a 50 percent win rate survives; the one at 10 percent risk with a 70 percent win rate still dies.

8.1The Math of Risk

Risk per trade means the percentage of the account lost if the stop is hit. Use 0.5 percent for the first six months, then at most 1 percent. Above that, five losses in a row takes half your account.

**Fig. 8.1** Position sizing: lot size comes from the risk, never the reverse

Account	0.5% risk	After 5 straight losses
$1,000	$5	$975 (-2.5%)
$1,000 at 5 percent	$50	$774 (-22.6%)
$1,000 at 10 percent	$100	$590 (-41%)

8.2R Multiples and Expectancy

R is your risk unit: 1R equals the distance to your stop. If TP1 is twice that distance, it is 2R. Your job is not to raise the win rate - it is to raise average R.

Win rate	Average win	Average loss	Expectancy per trade
40%	3R	1R	+0.6R
50%	2R	1R	+0.5R
60%	1.5R	1R	+0.5R
70%	1R	1R	0R (break-even)

Notice: 70 percent at 1:1 is break-even, while 40 percent at 1:3 is profitable. That is exactly why ICT traders hunt 1:3 or better.

8.3Drawdown: The Real Enemy

Recovering from a 30 percent drawdown needs a 43 percent gain; from 50 percent, a 100 percent gain. Recovery becomes mathematically brutal once you start breaking down.

**Fig. 8.2** The math of drawdown versus recovery

8.4Daily and Weekly Limits

Two trades per day, maximum.
Close the charts at -2R for the day and return tomorrow.
At -5R in a week, the week is over - demo only until Monday.
At -10R in a month, re-audit the model and the process.

8.5Psychology: Four Enemies

Enemy	Signal	Remedy
FOMO	Jumping in after seeing a candle	The checklist - no score, no entry
Revenge	Bigger lot after a loss	Close the charts for 30 minutes
Overtrading	Five or six trades a day	A hard limit of two
Doubt	Freezing when the setup arrives	A hundred backtests - confidence comes from data

8.6The Journal: Your Only Coach

Screenshot every trade - before entry and after exit. At the end of the week, review which model paid, which killzone you trade worst, and where you moved a stop.

**Fig. 8.3** A one-page journal: six fields are enough

8.7The Scorecard: 10 Points Before Entry

Nine or ten means full risk, seven or eight half risk, five or six demo only, below five close the chart. This rule will become your best friend.

8.8Ten Non-Negotiable Rules

No trades outside a killzone.
No sweep, no trade.
No trade below 7 out of 10.
Maximum 1 percent risk per trade.
Two trades per day maximum.
Never move a stop further away.
No new entries around a news release.
Never increase size after a loss.
Journal and screenshot every trade.
No live trading before 50 demo trades.

"Discipline is your only edge, because it is the only thing you control."

Educational material only · not financial advice.