Study Notes: Market Maker Primer – Considerations In Risk Management

These are my study notes from ICT Market Maker Primer – Considerations In Risk Management. I’m documenting them for personal review and to share my trading journey.

Original ICT video: https://www.youtube.com/watch?v=tlKC9nvLRK0

Why most new traders lose money and how to avoid their biggest mistake

If you’re new to trading, you’ve probably heard stories about people making tons of money. But here’s what nobody talks about: most traders lose all their money within the first year.

The reason isn’t what you think. It’s not because they picked bad trades. It’s because they didn’t know how to protect their money when trades went wrong.

Today, you’ll learn the most important trading rule that can keep you in the game for years.

The Scary Truth About Losing Streaks

Let’s start with some bad news: You will lose trades. Even the best traders in the world lose money sometimes. In fact, losing 8 trades in a row is completely normal. It happens to everyone eventually.

The question isn’t if you’ll have a losing streak. The question is: Will your account survive it?

Why Most Beginners Go Broke Fast

Most new traders make the same deadly mistake. They risk way too much money on each trade.

Here’s what happens when you risk 10% of your account on every trade:

Starting account: $10,000

• Trade 1: Lose $1,000 (Account: $9,000)
• Trade 2: Lose $900 (Account: $8,100)
• Trade 3: Lose $810 (Account: $7,290)

After just 8 losing trades, your account drops to $4,783. That’s a 52% loss!

Your account is basically destroyed. You’d need to make over 100% profit just to get back to where you started.

The “Safe” 2% Rule Isn’t Safe Enough

You’ve probably heard the common advice: “Never risk more than 2% per trade.”

While 2% is better than 10%, it still has a problem. Let’s see what happens to two different traders who both start with $10,000 and face the same 8 losing trades:

Trader #1 (Keeps risking 2% no matter what):

• Total loss after 8 trades: $1,318
• Account drops by 13%

Trader #2 (Cuts risk after each loss):

• First loss at 2%: $200
• Then drops to 1% risk
• After second loss, drops to 0.5% risk
• Total loss after 8 trades: $538
• Account drops by only 5%

Same number of losses. But Trader #2 lost less than half as much money.

The Secret: Cut Your Risk When You’re Losing

Here’s the game-changing strategy that professional traders use:

When you lose a trade:

1. Cut your risk in half
2. Keep cutting it in half with each new loss
3. Stay at the lowest level until you start winning again

The Risk Ladder:

• Normal trading: Risk 2% per trade
• After 1 loss: Drop to 1% per trade
• After 2 losses: Drop to 0.5% per trade
• After 3+ losses: Stay at 0.5% until you recover

The Amazing Results

Using this method, Trader #2 could lose 24 trades in a row and still lose less money than Trader #1 who lost only 8 trades.

Think about that. You could be wrong 24 times in a row and still be in better shape than someone who was wrong just 8 times but didn’t protect their money.

How to Climb Back Up

Once you start winning again, you don’t jump straight back to 2% risk. Here’s how to recover safely:

1. Stay at 0.5% until you make back 50% of what you lost at the 1% level
2. Then move up to 1% until you make back 50% of what you lost at the 2% level
3. Finally, you can go back to 2% risk

This slow climb back protects you from giving back your recovery gains.

Why This Works

This strategy works because of one simple truth: It’s easier to lose money than to make it back.

• If you lose 50% of your account, you need a 100% gain to get back to even
• If you lose 10% of your account, you only need an 11% gain to get back to even

By cutting your risk when losing, you keep your losses small and your recovery realistic.

The Bottom Line

Most traders focus on finding the perfect entry signal or exit strategy. But the real secret to long-term success is risk management.

Your trading method doesn’t matter if you go broke before it has time to work.

Remember:

• You will have losing streaks – it’s guaranteed
• The trader who survives the longest wins
• Cut your risk in half after every loss
• This is more important than any trading signal

Your Next Step

Before you place another trade, ask yourself: “How much of my account am I willing to lose on this trade?”

If the answer is more than 2%, you’re gambling, not trading.

If you lose that trade, cut your next risk in half.

This one rule – cutting risk after losses – is what separates professional traders from gamblers. It’s the difference between having a long, profitable career and blowing up your account in the first few months.

The market will always be there tomorrow. Make sure your account is too.

Disclaimer: Trading involves substantial risk and is not suitable for all investors. Past performance does not guarantee future results. This content is for educational purposes only and should not be considered financial advice. Always consult with a qualified financial advisor before making trading decisions.