ICT Risk Management

Definition

ICT Risk Management is the systematic approach to position sizing, stop loss placement, and capital allocation that ensures long-term profitability while protecting against catastrophic losses. Smart Money doesn't risk account on single trades.

Core Principles

1. Fixed Percentage Risk

• Risk 1-2% of account per trade (maximum)
• Professional traders: 0.5-1%
• Aggressive: 2% (not recommended for beginners)
• NEVER risk more than 5% even on "perfect" setups

2. ICT Stop Loss Placement

• FVG Trades: 1-5 pips below/above FVG
• OB Trades: Below/above Order Block
• OTE Trades: Beyond 79% retracement
• Liquidity Sweep: Beyond manipulation extreme
• ALWAYS use hard stops, never mental stops

3. Position Sizing Formula

Position Size = (Account Risk $) / (Stop Loss in pips × Pip Value)

Example:
$10,000 account, 1% risk ($100), 10 pip stop, $1/pip
= $100 / (10 × $1) = 1.0 lots

Risk-Reward Requirements

• Minimum 1:3 RR for all trades
• Ideal 1:5+ RR
• Never take trades below 1:2 RR
• ICT setups regularly provide 1:5 to 1:10 RR

Trade Management

Scaling Out:

• 50% profit at 1:2 RR
• 25% at 1:3 RR
• 25% runner to final target
• Move stop to break even after 1:2

Trailing Stops:

• Trail below swing lows (longs) after 1:3 achieved
• Trail above swing highs (shorts) after 1:3 achieved

Daily/Weekly Limits

• Max daily loss: 2-3% of account
• If hit, STOP trading for the day
• Max weekly loss: 5-6% of account
• Prevents revenge trading and drawdown spirals

Example

$10,000 account:

• Risk per trade: $100 (1%)
• EUR/USD trade: Entry 1.0865, Stop 1.0858 (7 pips), Target 1.0920 (55 pips)
• RR: 1:7.85
• Position size: $100 / (7 × $1) = 1.43 lots
• Potential profit: $550
• Max loss: $100

This is professional risk management.