there's one big hidden trading key that the elite Traders on our desk have all mastered but which very few retail Traders ever understand or do correctly in this video our season Trader gett dryan dissects this one big hidden trading key it's stepbystep detail I'm Mike Bella Fury and we're one of the top proprietary trading firms located in New York City since 2005 and proud to develop num seven and even e figure per year Traders we hope you agree you you've found the right place to learn how many times have you found yourself wishing you'd bet bigger on a trade or regretted putting too much size on in a spot that was really not the moment to do that consistency is not just about picking winners or having your executions in the right spot consistency is also about knowing exactly how much to bet and when So today we're going to tackle the concept of dynamic bet sizing so by the end of this video you'll be able to apply this concept to your own trading to turn what may often feel like guesswork into a precise science Dynamic bet sizing is a skill it's something I've had to work on there was a time when I would risk way too much on a subpar trade idea and then risk not nearly enough on a big time opportunity there was way too much linearity between how I traded my B trades and how I traded my A+ trades and there was not nearly enough spread between those feeler positions and those real see it moments so it's amazing how many struggling Traders reach out to me who actually have edged somewhere in their trading but are simply not risking their trades properly so it's tough to get this right if you're relying purely on gut feel if you don't have a system for not only sizing your trades properly but also scaling this process consistently to grow your business so it'll be nearly impossible to get this right so today I have Jen with me and Jen is an intern here on the SMB desk in New York City and Jen has been working hard on her game so Jen's developed some playbooks some really solid playbooks and around these Playbook reviews the subject of sizing has come up a lot so I want to dive into some of these plays and discuss how we might think about the process of Dynam DC bet sizing within some real world examples so we'll start with a Tesla play that Jen traded right you actually traded this right yes okay we know I was a little too small you were okay yeah okay well good that's then then perfect Jen why don't you just kind of take us through the setup and what you were looking at like before you put on the trade like why you might even have been watching Tesla on this day okay so this was um the setup was that Tesla had uh this breaking news and it had just broken out of an important like technical level on the daily chart and there was this change of sentiment that was happening in Tesla um so these delivery numbers this was like the first beat that we've had in a while they beat by um having exceeded the Expectations by delivering 443k um units instead of the 439 that they had predicted um Tesla also reported a record deployment of 9. 4 gwatt hours of energy storage products in Q2 surpassing the previous High um of 4,000 megawatt hours and this is by more than double so that is also very important um for the follow through that we might see other important variables from this slide are the rall which was 3. 6 for a stock that's um like a mega cap like Tesla 3.
6 is like very high rall yeah and that's is that's probably one of the key factors for one of these plays right I highlighted highlight yeah I don't know why I high ATR so so coming into this expectations were pretty low for Tesla's delivery numbers right yeah yeah like I think I remember it must have been every day the week leading up to this like someone would come out and lower their estimates on the delivery numbers yeah I did write that in there that they had originally were expecting like 450k deliveries but then they readjusted them lower before the actual numbers and somehow Tesla kept trading higher so like as you said Tesla was already kind of breaking out on the daily chart but into this you know it hadn't really gotten going but it was just breaking out yeah and expectations were really low so so here's yeah so here's the daily chart and I mean we had been basing for for a long time right yeah so we had been basing for like several months um we had that musk pay package news but that didn't really um break us out above 200 it just kind of broke us out above 180 um and then in the days prior to this trade we were able to break the 200 level and we got some momentum going already I remember I think I traded Tesla like the day prior to this news and it was unusual because um the day before this news came out Tesla closed up higher like over 1 ATR um and like the several times before this is always closed down over 1 ATR going into delivery numbers so kind of we had some like changing sentiment too because um delivery numbers are becoming less and less important in Tesla is what I've been hearing and that they're becoming more of like an AI play and like the robo taxi and all that that stuff so um yeah and then one other important thing that I will point out from this slide Tesla it's a great momentum stock it can really get going off the lows um one thing that I heard Steve say was it's actually like the one stock that can go up faster than it goes down and you can see that here as I showed like there's been historically very large percentage moves um so like you might think like oh it looks so extended on the daily chart but not really considering what Tesla is cap see that's a huge factor for me I love that you went back and kind of measured other moves that had made because it's so easy on a play like this to say oh it's just like it's up too much like we can't buy it today but the fact that it's Tesla and not another stock yeah is is huge in that factor like we might not make this play with a with a similar type of catalyst on like a totally different kind of stock right like if it if this was like Ford or something you know maybe wouldn't be thinking the same way but it's Tesla we know we know it can really move yeah all right so it's gapping up right it gapped up in the was it the was it the pre-market the premarket and had a great breaking news trade I believe I traded that trade as well yeah but then this one was like after the open of the next day I believe this was yeah the next day after the breaking news came out all right so so in the pre-market so you have this kind of mapped out right we we're gapping up on a good delivery number mhm with that had really low expectations on a chart that's already kind of breaking out and a name that's been basing and has been known to make huge moves yeah okay so at this point in time you probably have somewhat of an idea of how you're going to grade this trade now you don't have all the information right you only have those static things those things that we know before the Market opens but were you already thinking that this could be that an A+ trade could present itself here to the long side yeah yeah cuz it it's had just been so in play for like the last couple days I saw the rval I mean that is once it opens but that's definitely a huge factor for me and then just knowing how Tesla traded knowing that it produces like momentum moves and I'd say like that's one of my strengths that's where I prefer to get really big um I just find it a lot easier personally um so yeah so I was thinking that there could be like some a A plus opportunities of the day okay okay great so are you already visualizing the kind of risk that you might put on the trade ahead of time um yeah I try to do that and try to like calculate kind of a general idea of how many shares I might want just um to make it easier if I have to okay make any quick decisions okay great so in terms of like you know obviously we don't know whether this is going to set up we don't know what the price action is going to be it could just tank on the open right and not present you know the type of trade that you made um but in terms of visualizing that risk when you're thinking of the shares that you're trading um how are you doing that like how are you thinking like okay this is how I'm going to get an idea for the X amount of shares or the X amount of dollars that I want to risk on this trade okay so for me when I in one of these slides I actually go through and I calculate the expectation value and like this the first trade of this series had a very high expectation value as were like 3. 5 or something um which is huge yeah a lot of it is I I need to wait till I see it and it's like very clear on the tape because this is a momentum trade it's not like an idea trade it's not really like a trend day trade it's like I'm anticipating that there's going to be a moment where I may see the momentum and I need to have an idea of how much size I want to get in when I see it and depending on how clear it is is um so I remember like the tape in this one was one of the reasons it was like A+ because like me and cam both watched it together and we're like right there it's like 90% chance it's go okay yeah so there was a real moment in this trade okay that's great that's huge because with when we trade and we're trying to assess risk there's kind of like there's two factors for me right one of them is how am I grading this setup like is it an A+ setup or is it a a B+ setup right and there's going to be a big difference in the risk that I'm going to put on between those trades yeah the other factor is in terms of the actual execution that I'm putting on right is this a feeler position is this a position where um I kind of have an idea that the trade is starting to develop or is this a real seeit moment so here it sounds like you already have something that you think can be A+ that's setting up and then actually got your real see it moment like you saw it on the tape it was a momentum trade it it was getting tight in terms of the price action so you're able to kind of marry those things together because for me even if it's an A+ trade if I'm just going to be putting on a feeler because something starting to develop and I'm starting to see you know maybe the bids come in at a moment in an area where I think it's kind of reversing and and I want to get involved it might not be a place where I feel like I can put tons of risk on but I want some and so even that feeler is going to be way smaller than you know what we call like the see it moment and the see it moment really is when we want to put on the put on the A+ risk right so so we'll get into the price action in a second but first I just want to talk about kind of how we get from you know the idea of okay we have an A+ setup right we have our variables that we've described right the rball the the the price action on the daily chart the Catalyst the fact that it's Tesla right it already has momentum um low expectations be expectations all of these things right and and you mentioned the tape which is another Factor right so when we have all those things aligned um we need some way to contextualize the risk that we're going to put on right and the way that we do that is that we set ourselves every single day an intraday loss limit right like you you guys have that I have that everyone on the desk has that right there's a there's a limit to how much we're able to lose on a day before Carlton our risk manager comes over and Taps us on the shoulders right so if you're trading um if you're at home trading that you might not be trading intraday every day right you might be a swing Trader you might be a longer term swing Trader you might be a position Trader so you know you could have an intraday stop you can have a weekly stop you can have a month L stop right and and we kind of have all those things but if you're a longer term Trader like maybe an intraday stop isn't the thing for you maybe it's a weekly stop maybe it's a monthly stop but the key is is these are guard rails for us right they help us from ourselves right when the Market's difficult when we're not really seeing it we might be fighting the market like we don't want to draw down past uh a certain limit right it really helps us put on the breaks the other thing that this does does is it gives us a benchmark with in which to risk against so if we know let's just say let's just say our stop is $1,000 a day well now we have an amount that sort of represents our risk right and so we're going to use these things called risk units and this is the key like this is this is how we're going to be able to scale our trading uh throughout time as we start to trade bigger right so a risk unit for me might be 10% of my stop right so when I'm thinking of putting on a trade I'm thinking in terms of risk units right so now a risk unit is $100 right my my intraday stop is a th one risk unit is 100 so I might say to myself okay this trade with these variables is worth three risk units right while this trade with these variables is only worth one risk unit and the reason that we use these risk units and think in terms of risk units instead of dollar amounts is that it helps us mentally and it helps us scale over time because what happens now if you know we're trading great you know we nailed the test trade and all these other trades throughout the month and then all of a sudden we Carlton gives us a risk bump and now our intraday stop is $55,000 right and and you at home might not have a risk manager but you can be your own risk manager and you can kind of set rules where okay like if I do this well over a month I'll increase my my my weekly stop limit or my daily stop limit and that's how we scale our trading that's how we go from a consistently profitable Trader that's trading smaller to a seven figure eight fig Trader the key is to be doing the same exact things at bigger size than we were doing at smaller size and this can be like a big trick for Traders because mentally sometimes it becomes even though it's the same trade even though it's the same percentage of our intraday stoploss right the same number of risk units it's a much bigger dollar amount so all of a sudden now that trade that was three risk units you know it used to be $300 like now that might be $1,500 right with a $5,000 stop so all of a sudden we're thinking oh gosh you know now you know now I'm drawing down 15500 $1,500 that doesn't feel too good but the key is is that it's still just three risk units right so mentally we can say well you know what I've lost three risk units plenty of times in my career and today I lost three risk units again and it helps us sort of stay level and kind of understand that okay like in terms of the risk rewards and probabilities over time like this is totally normal so that we don't have to get anchored to these dollar amounts and get sort of psyched out by seeing bigger numbers on the screen when we start to trade bigger I do like how you talked about um all the reasons that um this was good outside of just the price action because I find it very easy to like think that I see something but it's good to have that guard rail of needing it to be like a momentum stock like Tesla is like it has the 20% into anticipated it like Revenue growth per year which is like the momentum stock definition um and then that history of running and I think all those things are like the checks that I need to really know that I can play that momentum and like get big in it yeah yeah absolutely I mean for me that's huge like all the contextual stuff is huge because a lot of the times that's going to be what leads me to even be looking at something in the first place um and then we get to see when the Market opens if it's actually going to present itself you know which clearly it did here so so what was your trade here in Tesla okay so this is my actual trade that I made so you can see that I went long at 240 with 20% my daily stop risking 2 cents below the low of the 1 minute candle entry this triggered when we broke above the uh 23 minute consolidation that formed right below the pre-market high so I kind of chopped it off but yeah the pre-market high was also at that same level and I could tell that the bids were very sticky near the top of this opening range as they would not let it drop uh Below 23950 in the 2 minutes following the initial push through 240 um so I remember yeah there was some size at 240 but we like blew through it really fast we took it all out and we shot out like um maybe like a dollar a dollar or something above that price but then we came back and we retested lower um but then we broke out again from that recent high that was formed and there was a moment right there where like we skipped 20 cents on the tape but it was like already looking strong before that and that that was like skip to the upside yeah so they just took all the offers and and it and it went after yeah after so the first time they took all the offers and it went a bit which was good like I'm glad it didn't just take them and then stay close yeah but that it took them kind of accer but then came back okay but then when it came back it got going again with like even more momentum okay great I see that pause on the chart like that little consolidation like right above the H yeah so what I love about this is your waiting for Tesla to compress and prove itself and hold right because in terms of risk reward in terms of controlling risk and being able to calculate risk it's a lot easier when we have a real level to trade against yeah and here you do have a real level to trade against and it's breaking out of an intraday pattern so it's just starting a move right so that's just a great it's a great pattern it's a great spot to be getting long Tesla you know instead of you know say in the middle of a move or you know halfway through like a bunch of green candles and stuff like that it's a lot harder to find risk in those situations so so where were you risking against when you bought that that break um so I was risking two cents below the low of the one minute candle of Entry because this was a momentum trade okay great yeah okay so when that happens you have your context which you really love and you're you define that as A+ context and now you have kind of a see it moment right with the tape you've got what was it three and a half arall happening it's a great intraday pattern the price action is fairly clean mhm and you're really seeing it on the tape so would you would you combine all that and say that this is an A+ setup yeah absolutely okay so when you when it is an A+ setup an A+ momentum setup for you yeah um do you have a rule for how many risk units you are going to be risking or percentage of intraday stop yeah so it can also depend on like the level of A+ that it is yeah um like in the Playbook that I did um in the Playbook checkup with Bella and that one I rised 80% my daily stuff he like maybe that's a little much but big S yeah um so if it's really a plus I think you owe it to yourself to be in a minimum of 50% your daily stop okay yeah so so here I was too small because I was only in 20% my daily stop okay but then rewatching that tape me and cam did it together that's the trader sit next to we were just like we should have been so big and we like talked about it for like five days straight just like how we should have been bigger because it was it was so pretty yeah great well I mean that's a great review because like this is the thing and this is like what I see all the time and it's like it's happened to me too right is you got to set up like this everything aligns and then in the moment this is the whole point of this conversation yeah in the moment you end up putting 20% of your stop on when you know previously you had been putting 50% of your stop on a trade like this yeah and then this works you know and you only you only make half as much or less right or you know even worse there's a lesser play that sets up right that you think is good right but not all the variables are there yeah and you're kind of overvaluing it in your mind yeah and then you risk 50% of your stop and then you lose yeah right and of course now you're going to lose more and then you know you're going to make less on this and so that's where like when we kind of look at our stats at the end of the month and we evaluate what the best trades were and kind of ask ourselves like am I making enough in my best trades yeah am I controlling my risk enough when it's not really there yeah when it's be trades and a lot of the times that can be the difference in terms of you know a consistently profitable Trader and a Trader that's kind of turning breaking even or even losing right it's not it might not be that you don't have Edge in the trades yeah it might not be that you're trading poorly it just might be that you're not risking enough on your best setups and you're not controlling risk enough on the setups that aren't really fully developed yeah right and so I think that if you feel personally the way I feel about it yeah is that if you if you say to yourself I want to risk 50% of my stop on an A+ setup and that's a lot that's a lot of an intraday stoploss yeah like that that's that's an aggressive Trader but I think that there are definitely trades that waren that for sure um if you have trouble doing that consistently because it seems like a lot then it's better to risk 20 or 30% every single time on an A+ setup and just make sure you're risking less yeah on a b setup so what what an A+ setup risk is to you right might be different to somebody else the key here is that it's consistent yeah so the key is that we are defining the variables in our playbooks that warrant A+ risk yeah and then we're def in how many risk units A+ risk is and the risk units are a function of our intraday stop yeah so we have to have an intraday stop we have to know what our risk units are yeah and then we have to know what the variables are that define whether it's an A+ trade or an A or a B+ trade and then we also have to know is this a feeler position where I'm just starting to get involved I'm kind of in partial risk right now or is this a SE it moment M so that when it is the SE it moment we're putting on exactly the right amount of risk units for this level of trade consistently every single time and when it's a feeler trade or when it's a B+ trade we're putting on the appropriate risk units consistently every single time and that way it allows our Edge to actually come out in our trading mhm because a lot of the times like I said like we'll be we'll be breaking even just like just the mere fact that we're not doing this correctly that we're not doing it right so this is a great example because this does sound like you really saw this trade it was a fantastic trade um and so you know it seems like you're you were a little you guys were you and cam both were upset that you only risked 20% right was there what was there anything that was going through your head that like caused you to only arrest 20 and I because I this m i I do it all the time right this is why we R so I'm just wondering like do you know was there a reason behind not risking enough on this so as you see here I was fine to enter 20% where I did but I should have added another 30% at that key moment okay so there was an ad so there should have been an ad so the EV so so to you the EV and we Define EV as expect value right yeah and this is going to be a combination of what we think the probabilities and the risk rewards are in the play yeah right and it's it's a little bit conceptual right because we don't know exactly how the play is going to turn out but in terms of statistics right this is kind of how we have to think as Traders is in terms of risk rewards and probabilities and in some plays like this that are so fantastic and Jeff talks about this all the time he actually kind of put it in this framework last week when I was talking I thought was really smart is that sometimes on these really great trades the EV is actually expanding as the trade is developing yeah whereas if it's a b setup sometimes the EV is the best only at your first entry and then as it starts to work in your favor the EV is actually Contracting because it's moving away from that from that inflection and that's kind of where you need to be like covering risk taking profits but here it moves higher and then holds above that high you know with all the context that we laid out and this intraday pattern and what you saw on the tape and now it's holding above the high and it's proving itself and it's kind of presenting another opportunity to say okay like now if it goes from here it really shouldn't get back down into here and this is really where it's going to go so that's an interesting point because even though you added 20% risk on that first inflection point mhm there was another trade and maybe that was the true see it moment for you to get up to the risk that you really wanted to get to yeah so I actually have been working on this more lately after I made this Playbook but sometimes I notice when things break a range it's important to get in right as they break so that you don't miss it if it goes but often times It'll like come back retest a little bit and then really get going and that's why I like to add like about half my risk that I intend to be in for this particular trade in this particular setup as it breaks the range but then I like to add about the other half after it comes back retest and then proves it's going to keep going all right that's a great Point that's an awesome Nuance to this right because now you're talking about a very specific trade a momentum trade and you're outlining a very specific pattern within that trade and then exactly how you want to execute that particular pattern and it makes sense right because stocks do that all the time they like break out and then they like look like they're going to fail yeah and they test and they kind of scare people who are trading it too tight yeah and then they go right so you want some in case it just goes but you might not want the whole thing because you kind of want to be able to navigate that yeah and then once it really proves itself like it becomes even better and so that's a great way to outline like how going to deploy risk for this particular pattern yeah right and so you will now consistently know exactly how many risk units you're going to take on the first break and now you're going to know exactly how many risk units you're going to take when it really confirms yeah yeah for sure um yeah so he definitely should have gotten bigger there uh one thing also is like even higher up in this price action there were still some very high EV trades that were about like 1. 5 1.
7 is area of EV um which is still pretty good but that goes to show you that like the first one was definitely the highest EV it had about 3. 5 okay so this is something that I think ties in really well to this conversation um because you want to be risking more where there's highest EV um and this is like do actually going through and doing the EV calculations based on like the probability I estimate when I see it on the tape and then just using like what actually happened to calculate like the risk for reward so that from there I can kind of get a estimate of the EV and then when I go back and review my results um I can see like okay well this had this EV so was I actually like risking appropriately and like are the factors that looking at actually as important as I think they are yeah that's a great exercise like I I'll do that with my playbooks like I'll kind of reverse engineer the different spots MH and actually calculate the risk reward on that play like in terms of here's what I was risking here's what I got realistically and sometimes it's really surprising right like sometimes with some of these plays they're so good that it's like hard to realize in real time the amazing risk reward that you're getting yeah and so if you can get really good at actually recognizing that in real time like seeing that potential risk reward right like how tight can I have this stop to make this much right or how far can this go yeah what is the what is the potential of this tray for me to like visualize that and internalize that yeah helps me then put on the appropriate amount of risk units because then all of a sudden you just feel like you'd be doing a disservice not to right you just you you understand the reason why we do this the reason why we risk more on certain plays yeah and it it that's a that's an exercise that really helps me do yeah I think it helps me too because it just gives me that confidence um for example like uh the first trade had we calculated the EV to be 3. 5 or $3.
50 so that means every time I play the game with $1 I get that $1 that I played the game with back and an additional $3. 50 that's what's mathematically expected to happen so why would I not want to do that with like 80% my daily risk right especially if it has a a decent win rate yeah on the play and you know on a I think that like you're you're calculating the risk reward and then you're looking at all that context that we talked about Tesla Tesla's just got a huge bid right on the daily chart on the intraday chart on the tape it's got a great Catalyst and so now the probability that a p intraday pattern like this that act that breaks out for that to work it's a it's a very high probability trade yeah so if you see here like this trade was four to one risk to reward and then the tape was so clear and and the variables and everything so we said it was like n 20% chance at that moment that at least we knew like it wouldn't Wick us out at least it was going to like go in the money and give us time we at that point you don't know how far it's going to go but we both had like 90% confidence that it wasn't going to just like wig us out anymore that it was going to go from that point um well that's the definition of an A+ trade right there so yeah yeah so so this does the EV accounts for both the probability because we had a 90 % probability times the $4 we made minus the uh 10 cents the uh 10% chance of it not working times the $1 um we were risking in the trade and then the EV was $3.
