Transcription
If your losses are not increasing, you are stagnating. You do have to be willing to push your comfort zone. What happened to me where I was always increasing size, risking 100 bucks, then 1,000 bucks, then now 10,000 bucks. If I'm increasing my size, I know I'm uncomfortable. I find that like sizing is so personal to the individual. It's our egos. It's our personality. It's our wanting progress faster that hurts us. How do you know when you're too big in a stock? And what do you do about it?
Today, my good friend, seven-figure trader Kyle Williams is here with me, Lance Brightstein, a trader with over a hundred million in verified trading profits and trader mentor to deep dive into sizing and the specific steps Kyle has taken this year to grow huge like a trading beast. We are going to answer all of your pain points. We're going to explain the two main ways to think about sizing. And we're going to share three super-effective tips and tricks, all while answering submitted questions from beginners on up to amazing seven-figure P&L per year traders. So, hit that subscribe button and commit to this video in its entirety.
If you want to succeed at trading, you need to know when and by how much to vary your bet sizing. And I promise you, regardless of experience level, you are going to take something away from it. In fact, most traders are guaranteed to lose if they don't develop the skill set. Let me explain why sizing is so important.
Imagine you're sitting at a poker table. Imagine if hand after hand you were to bet the same amount. 72, you bet $100. Pocket aces, you bet $100. The reality of poker and trading is there are magnitudes more bad hands and mediocre hands than good or great ones. By definition, if you bet the same amount on all hands, you will lose. Same goes for trading setups. And that is why so many traders can't break free.
First, I want to tell you two stories that emphasize, early on in my career, the importance of sizing. Let me tell you about what it was like to sit next to my boss. My boss was an amazing trader. He had his weaknesses, particularly risk management, but he had a lot of edge and he was incredible at when the cards when his hand dealt to him was really good, he bet big. That whole concept of exponential bet sizing I'm always talking about. That's because of him. And so often, early on, I would piggyback my way into a lot of the same trades he was in. That's kind of how it was. Monkey see, monkey do. And then at the end of the day, he would be green a large amount and I would be red. We would take the same trades. The big differentiator when there was a really good trade, he was betting exponentially bigger. So, yeah, he was losing on five jack or 510. But when there was pocket kings or ace king or something like that, he was betting way bigger. And that sole difference would make all the outcome just totally opposite. I would lose every day and he would be green.
One other quick story. Another person I was trading with in my trading class at the firm Trillium where I started, he had enormous edge, particularly in breaking news headlines. He was always lightning fast. The issue though, he would never size up. And as 1, 2, 3 years passed by, he was still trading the same size as when he first started. And that's what led him to eventually not make it. It wasn't that he didn't have edge. He found a really good niche. He would get in super early, 4 a.m., 5 a.m., 6 a.m., and he would catch all those headlines. But with the inability to size it up, it was never able to overcome all the mistakes you would make. Those two stories serve one point. Sizing can be the essential definitive trait that makes or breaks traders.
So, let's start from the basics, Kyle. I think of there being two ways that sizing actually gets done in practice. A lot of traders can think in percentage terms, right? Percentage of account. Or they can think in dollar risk terms, right? Which way do you think? Do you think of it in both ways?
I actually do both, but it depends on the strategy. Actually, I actually have three ways of looking at this. One is dollar risk, one is percentage of account, and the other is actually a mix of both. Um, so the way I would say it without going into too much detail, or we'd go for a whole another 40 minutes on just this topic, but when I'm day trading, usually in the small-cap space, it's going to be a set risk amount. So, and by grade, you know, exponential sizing, if it's A+, I want to risk something like 50, 60 grand. If it's, you know, just an average trade, I want to risk like 13 to 4. And if it's really subpar, I probably shouldn't even take it. But if I do, I'll risk, you know, 6 to 8 grand, something like that. Um, and I like to keep that range for day trades. Um, there's also another day trading style when it comes to gap and crap, that will be just a set dollar amount every single time. Not on a risk, but just how much money I put in the position. And it's not even a percentage of my account. It's just the most, it's the most systematic approach I have to where I don't know how to grade how good this gap and crap is over this one. I take them kind of just as a blanket statement as they all come. And that strategy is not the reason why I'm making millions, but it's a nice little daily, you know, P&L on top of things for me. So, that's not a big deal. Um, the one where it's both is I've recently gotten into swing trading. And so swing trading, I want to make sure I am risking a set percentage of my account, but I also want to make sure I have a certain size of my account in the trade. So like the last thing I want to do if I can get a really good risk reward on a on a swing trade on a like a large cap, you know, I don't want to be 50% of my account in just because my risk reward makes because I'm risking, you know, a fraction of a percent. So, if I can get under, let's say, like one R of a loser, but make sure I'm having at least 10 to 20% of my account in the trade, that's where it's like I'm trying to look at both. It's like, am I risking, you know, 12 grand, let's say, but do I have 10, 20, or at max 25% of that, you know, my account in that position. Um, so there's a mix. It depends on what I'm trading, but it it can work for anyone's style, particularly.
Yep. And so, I started in the day trading world working for Trillium. It was pure just intraday equity trading. And so for us, we had buying power that reset all day. That's kind of one of the advantages of working for a trading firm. And we had our daily risk allotment, which was in dollars. And so from the beginning, I was always thinking, what's what's my stop? How many shares do I have that equals my risk? We never thought about percentages because we weren't growing an account. It was just a set buying power that just gets set by the firm. And yes, they increase it over time, but it was a different way of thinking. So for me, I grew up in a world where it was always thinking of dollar risk. I have X amount of shares. This is my stop. That's the risk in the trade. Now that I've done more swing trading and now that I've worked with way more retail traders, I think it's sensical for many people, especially in the swing trading world, to be thinking percentage of account. Mhm. And I think the other advantage of thinking in percentage of account is then it also, I think mentally in some ways can be much simpler to scale because as your account is growing with your trading, if you're doing well, it's like, okay, I normally want to risk 2% or 1% or 5%. And I think like what a lot of people miss is then you can just kind of keep all that constant. So that is an advantage. And the other point I want to make, and I think, you know, you probably will agree with this, is I get a lot of people that ask me, oh, what percentage of account should they be risking or how much should they risk in a trade or B trade or whatever. And like for me, I find that like sizing is so personal to the individual, right? Like I think it depends your risk tolerances. I think it depends your goals. I think it depends the variance of the strategy. If you are somebody that wins 90% of the time with, uh, I don't know, your risk is 2x your reward, you can bet way more aggressively than if you win 5% of the time, but when you win 5%, you make 30x or something, right? So do you ever have like any generalized advice for traders when they ask you how much they should be risking?
I mean, no, I I agree with you, it's it's very personalized. But I do think there maybe is like pillars of objectivity where we can all agree on like, hey, this style or this methodology will get you the best results. But but when it comes to your personal styles. Yeah, like you said, like, you know, your your friend or another trader at Trillium who couldn't ever really push it. That will be a roadblock for traders. So, at some point, you do have to be willing to push your comfort zone. And that's kind of what happened to me where I was, I was always increasing size, dollar size. Like I would go from, you know, risking $100, then $1,000, then now $10,000. But from like 2022 to 2023, I got pretty complacent where I was really only risking the same dollar amount. Not on every play. I did have dynamic sizing, but that dynamic sizing never increased. Like I never increased how much I let risk on A+ or even average trades. I never, I never rose the bar for all of them. And it wasn't until you and I had a conversation late 2024 about getting back to that. So it's like, I do think for most day traders, having that set dollar risk is probably the best way to go about it. But just being mindful that like you do have to constantly push yourself because if you don't, you can just stay where you are if you don't do something about it.
So, can I now refer to you as my seven-figure millionaire trader student? Yes. That's all that matters. So, especially in your first answer, you touched on something interesting. And I, I even myself found this interesting. It sounded like you said for the quote unquote gap and crap strategy, you bet uniformly on those, but then there's strategies where you bet dynamically based on the situation, right? So, I know my answer to this, but why, what do you think is the reason why you have some strategies that you do uniform bet sizing and others you do dynamic? And what do you think of like this whole argument of some traders out there, everything is just the same bet size?
Well, so first part of that question. So I I do kind of a systematized sizing on the gap caps when I do trade them solely because I don't have a good read on the expected value from them. Like, so I know I know there is expected value that like 70% of them will fail. So I know that. But how they get there or how they go about it in the first hour or two hours of the day, I I never have any clue. Some drop and then spike. Some spike and then drop. Some do anything then spike out of nowhere. I'm doing another thing and then there's so much variance that I can never get a good enough read. But if I take a one-size-fits-all approach, I know, let's call it 70% of the time I will be green on that trade. So it's like I can't bet $100,000 on one and then only 10 on the other. I I have to keep it kind of uniform across the board. But where it gets dynamic is where I specialize in the day trading side of things when it's like, let's call like a mean reversion trade or something just goes exponentially parabolic that I've gotten good enough where I can tell like, hey, this runner over here is going to have way more of a, you know, high expected value to pull back than, you know, Joe Schmo XYZ ticker over here. Um, and so like you said, having pocket aces and betting bigger than having, you know, pocket threes, even though it's still a pair, but it's not as good as pocket aces. Like I have to, I have to know deep down that I need to be sizing more there and not on the other one.
Okay. Yes. Thank you. I knew it wouldn't take as long to bring up this topic, but expected value. Expected value drives every single trading decision. If anyone's followed any of my content, if I could impart one message to every trader trying to understand what, how do you beat this trading game? Expected value drives everything. And if you ever have an expected value less than zero, you want zero shares. You do not want to be placing any bet because in the long run, you will lose. If you have expected value greater than zero, over the long run, you will win. But essentially, as your edge gets better, the more you want to increase your bets. And I think intuitively, we all understand this from poker. Like, I love my poker analogies. And I think anyone that's played poker understands if you have pocket aces, pocket kings, you know, queens, jacks, whatever, you want to bet far more. And sometimes, while you can never have the nuts in trading, there's no guaranteed risk-free trade like there is in poker where you have the nuts. You know that when you have the nuts, you want to go all in. Again, that does not ever hold true for trading. But there's times when you got to go really, really aggressive because the expected value is so many magnitudes better than otherwise. And so there are traders that do uniform bet sizing, even like yourself, where like you said, it's because in that specific strategy, you do not have the ability personally to differentiate between those trades. You know it's positive expected value. So you know, across a basket of 10 trades, you will make money in in the long run. But you can't really say which one's better than than the other.
Right. When that holds true, that's when you want to do uniform. But in other strategies, there are times when you can say, "Okay, this is, you know, pocket eights. Oh, wow. This is kings." And that's when you can really stretch that.
And I think that is such an important differentiator. And it doesn't necessarily mean one is right or wrong. It's apply it to the right situation. But if you are able to differentiate between your setups, or essentially, oh, do I have a better or worse hand? It is mathematically optimal to do some form of exponential bet sizing. And I think that's where there's a lot of people getting confused on that little concept there.
One thing I'll add there too is I I I very curious if people get that mixed up only because, and I'm very curious on what you think on this, and maybe it's different from me learning as a retail trader versus like Trillium, where I was so naive and young of like, I didn't know what I didn't know. So even before finding profitability, I did kind of risk the same amount on every trade only because it's like I had no expected value of anything. So I kind of had to tinker and test with a small enough amount of money to where I wasn't going to blow up my account. But at some point, once I got an edge on, which I came profitable, and once I kind of again got an understanding of that expected value, that's when things started to change and I said, "Okay, I can't just risk a hundred bucks anymore. I have to think about risking 300 on this one and only 50 on that one." And I I love this because you're bringing up what was going to be my next topic, which is how should one's bet sizing and skew change over time? And what I love about working and starting my career at a professional trading firm is I don't think there's ever been anybody in the whole firm past the first couple months that just sticks to uniform bet sizing. Because you see around you, whether it's your mentor or any good trader, or even on the internal stats page for the firm, you see that there's some trades where most of the time people are just betting couple thousand bucks, you know, couple hundred bucks, $10,000. But then it's readily apparent within the firm, oh wow, there's some trades where people are getting a hundred X more aggressive. And there's some traders that are making millions of dollars per trade or hundreds of thousands of dollars per trade when sometimes they're just barely trading the other stuff for any size. And so my personal belief is like, when you're a beginner, it's okay to start off with uniform bet sizing. In fact, it's, I even recommend it because it's less processing in real time. It takes a lot of mental RAM to be able to understand or grade your setup, especially when you're new. You don't have the back testing, you don't have the experience, you don't have the data points. So to simplify it and say, "Look, there's a lot on your plate. You're worrying about your entries, you're worrying about your exits, using the right stop. Let's just have you bet $100 of risk or, you know, 1% of the account, whatever," and do that. But then I think what traders embark upon is as they start to get more automated in their thinking and a lot of that they can process more and they can think more. As they get more experienced, their bet sizing goes from uniform, you know, the same for each bet. It then starts to go some form of linear. So maybe you're betting $100 of risk, $150, $200 of risk. Then it starts to get more exponential shaped where it goes 100, 200, and $400 of risk. Then I think as you really start to grow, rather than a thousand, 2,000, 4,000, it goes from really small amounts of risk to 10,000 to a 100,000 to 500,000 and 4 million of risk or or more. Right? And so I think the absolute best traders, any any elite trader I've ever met, they've not done uniform bet sizing. In fact, the probably defining skill of what separates a seven-figure from a six, an eight from a seven, and so on, is the extremes they bet in those very small subsets of, oh, I have pocket aces. Oh, I have a full house. I have four of a kind. Yeah, they are going really big.
Yeah. And question for you there. Would you say that those traders that are able to push that pocket aces, right? Do they ever need experience there? Because and I say that from my experience this year where I was doing really good the first half of the year where every single C-grade, B-grade, A, A+ grade of that exponential bet sizing was constantly increasing. And so if I upped my average risk from let's say 10K to 11K, well, my A+ pocket aces setup went from 50K to 60K. And I gradually increased it all for me. But something, and it's different for everybody. For me, you know, an A+ set for me only maybe comes once a quarter, once every half a C or half a year. So I can only get four to, you know, or one or four opportunities like that a year. And so what happened for me with CRCL in what was it May, June, whenever or July, where I had pushed what was my new A+ pocket ace risk level, but I had never actually tested that that level of extremes since increasing that all year long. So it's like, well, once was I able to risk 40k on an A+ setup turned into me risking 80K on CRCL. And I've never had tested anywhere in between. So I and I butchered it royally because I wasn't emot like that, that emotional groundwork for me wasn't built yet. Uh, and so I guess I'm curious is like, is that something you see where you because you know an average trade, I can easily bump it up from 12K to 13K because I take so many average, like I can get very comfortable very quickly with that because I take so many trades. But waiting for the A+ once a year and having to jump from what you were originally risking, it was 100 and now you're going to risk a million, it's like there, there's that emotional groundwork that I think people can struggle with for all levels. And you're not alone. A lot of questions we got were about that exact point.
So, I was you turned it on me. I was going to turn it back on you. But no, I'll I'll do I'll I'll take a pass at this and I'll also say a couple things. You know, I had this beautiful outline. You've tanked it and I'm very systematic, so you know, I'm going to just be twitching over here, but no, I'm just kidding. So, we're going to break the outline. And so, this touches on a lot of points that I think are super important. The first is what you're describing in your trading is essentially a barbell approach. You have what I like to call your playbook of easy money trades, and those are your smaller singles that you're hitting. And then you have that other side of the barbell where those are your home run hits, where you're risking multiples more in risk on those like the circle, right? And what I find is that barbell strategy of having a diverse playbook of easy money trades, these singles that you can hit, these free throws so that you can put up some score some points and all that, that allows you the diversification, the consistency, the cushion to actually take bigger swings on the other side. So, the traders that I've seen grow the fastest and the most effectively, whether it's at SMB Capital, whether it's at Trillium, whether it's witnessing yourself grow, or even our good friend David Hanlin, the fastest growing traders use this barbell method. And so, I think it's very wise to do that. I think it's smart to do that. But the thing is, you also need to be careful of just how aggressively you increase your risk. And we're going to touch on this in other points, but one of my favorite sizing heuristics is never increase your risk so severely so that it's if you lose, it's going to damage your psychology and your feedback loop. And never increase your risk so severely that it's going to affect how you trade the trade and how you execute. And so what you described was essentially a 100% increase in in risk for that that circle. It was close. Yep. Yeah. It was too much. And so I think most of the time when people struggle with those jumps, it's because they're making such a leap where it's not like, oh, I'm not good at. Like 99.9% of traders are not going to be able to take a 100% risk leap like that. And I think that's when people people will set this goal of, I want to increase my size this year. I want to grow. I want to reach the next level. And so they set this goal, but then they go about it imprudently and they do something like an overly large 100% increase. They take a rip because they often mistrade it. They take that rip. They take a psych psychological hit. They take a hit to their account, their confidence, and what should have been one step forward ends up two steps back. And they say, "Oh, wow. This sizing increase thing, this doesn't work for me." and they end up learning the wrong lesson. It's not that you can't grow or you shouldn't grow or you shouldn't push your comfort zone. The lesson they're they're learning is is that when it should be, oh wait, how I went about doing it was a little bit too aggressive. And so my message to you or or anyone in the audience because it's so common and people will think, oh, Lance, like you're you're a robot. You don't have emotions. No, I've I've made and make and continue will always make these same mistakes as everyone else, but like I've learned from some of it and I've tried to course correct and I've overall like made some of those adjustments.
Yeah. Yeah. Well, it's it's fascinating to me how that's it ever remains true for all exponential levels, right? Because like I hear you say that I'm like, duh. Because I I see beginner traders all the time, right? They they've been risking $100 for months. They finally found some profitability and they want to risk 200 tomorrow. And like they said, they like it's like they feel like they touched fire as a baby and then never want to touch or size up again because they just did it too soon. And I always picture that as like, oh, that's just them trying to get their average risk up. But then here I am, you know, almost 10 years in, be like, no, no, that's still true for even trying to push your A+ pocket aces setup. And so here's the thing. If you're a beginner, the easiest place to increase your risk first, and I think most people sleep on this, is those easy money trades because there's so many more of them because they're because they're lower variance. They're they're more replicable. Those are often overlooked when increasing those, especially if the liquidity allows. Like if those are your free throws, like if I can choose, do I want to bet, you know, one or two points on a free throw? I want to bet two. And so many traders, they have like you, they have a higher risk tolerance that they've grown into, but then they'll let those easy money trades just kind of flounder when the best way to withstand some of those rips is, oh wait, if you if you were making twice as much on your easy money trades the rest of the month or the rest of the year, you have so much more cushion. You're so much more resilient. So I recommend people grow first those easy money trades. Build up that cushion, build up that confidence, then prudently grow the other side of that barbell when you have that feedback loop supporting you.
Yeah, makes perfect sense. My question now, so you've made some really great leaps this year. What were the tips and tricks you did to help you do that?
So, I actually have made it pretty public on my my YouTube channel. Um, so every month I'll do a monthly recap. And I actually will admit the last two I've actually forgotten to do them in the video, but the first half of the year it was like, so when I started the year, I wanted to start with like, I think it was 9K risk on average. Like if I took an average B trade, it was 9K and then if it was A, it was like taking like 13 or 14 or 15K and then A+ was like 50. Um, like I said, I had a setback with CRCL. So now my A+ is not 80 or 90. It's still in like the 60 range. It just bumped from 50 to 60. The one step forward, two back because you Um, but every month I would evaluate my performance of like, did I lay that new emotional groundwork level good enough? Like, was I able to take enough B-grade setups that were able and I felt very comfortable risking nine than 10 grand. And if I was, okay, great. Now in so that was January. Now in February, we're going to risk 11 grand on every single average setup. And the A+es are going to be not 50 but 55. And every A-grade trade is going to be not 15 but maybe 17 now. So it's like I incrementally increased every level more with basing it around, well, the average grade trade is going to be 1K more, which in this case was 10% more, you know, 10 to 11, then 11 to 12. And right now I'm sitting at like 13. Next month I'm going to go to 14. You know, my A grade will be probably like 20K and my, you know, A+ will grow like 65, you know, and so we'll keep trying to to increase it like that. And, uh, you know, forcing myself to do it is a big part because it's very easy for me to say, oh, I traded well and then not push it next month. So making those like forcing myself to make those incremental steps.
So I I want to dissect a couple parts of that that I think were all really great. So number one, you are setting a very specific intention. You are not trading with no goal in mind. So many traders will go into the trading day and they're just going through the motions. They're showing up to work like like they're a [ __ ] CPA doing a spreadsheet mindlessly. Oh, listen to music. Oh, 9 to 5 coffee break. Whatever. Like this is not the job to operate mindlessly. The difference between someone that operates each day with an intention where they are fighting to grow and improve in that area is so massive. It's the equivalent of you can go to the driving range, you can practice golf for 5,000 hours. If you're doing the same shitty mindless swing, you are literally getting worse. You are imprinting bad habits, right? The difference between that trader and that person that goes to the driving range and says, "I need to specifically work on this one aspect of my swing. It's not going to fix everything, but this is the aspect for today." So, I think that's massive. I would also say that's part of why I emphasize the daily report card, which people can follow in in different videos that I've covered, you know, a lot. The other thing that I find fascinating is you discussed a 10% increase effectively in your size, roughly 10%. Most people find 10% laughable. Like I think where people get into trouble is not even not even a 50%. Like I think when most people take these setbacks and these these injuries, it's from it's from taking like they've doubled or tripled quadrupled their risk. Not even 50%. Like I think most people will survive a 50% increase with not much damage. But like as a result, the thought of doing a 10% increase at a time seems absurd. Like nobody will sneeze. If your risk is $10 and you go to $11, no one's no one's going to sneeze at that. If you go from a $100 to $110, like no big deal. No one's going to like break down because they lost $110 rather than $100. Same for a thousand versus,00. But what people lose sight of is if you make that change every two weeks, right? You're essentially growing by 10% 26 times over the course of the year. Your sizing due to the exponential part of that is more than doubling or tripling over the course of a year. Nobody probably really needs to double or triple their size in the course of a year. Like that's a lot. Yet at 10% it just seems so small every two weeks. People can do that, but people don't. And so I think that was important and that's what's been effective for you. Um, the other analogy that I wanted to tie in somewhere in this conversation because I think it's so important is when we go to the gym, if we want to grow our muscles and increase our strength, we know that, okay, if my max lift is 200 lb and I throw 400 lb or 600 or 800 lb, no offense, Kyle, you would break. You would break. I'd break my back. You would break. We all would break. Any human would break. It's not about your psychology. It's not about uh anything. Like if you do that jump, it does not matter who you are. Your body will break. My body will break. The strongest lifter in the world. If they double or triple their weight, they're breaking. They're everyone's breaking. It's not about you. It's about what you're doing that's so wrong. Now, if instead you try and grow by doing a couple percent more, like the the optimal way to increase your strength in the gym is to lift the maximum amount you can with 0% chance of injury pretty much or near zero, right? You're just you're if you're lifting 200, you're go you're going to 202.5, then 205 and you're compounding that. And people can kind of recognize that at the gym. Then when it comes to training world, it's like, yeah, we'll just triple the risk and it's like, how'd I get injured? So, I think that is like one of the most important analogies I can use. But then my final trick, and I know you have more to say, my final trick is I recommend people use what I call the sizing note card. And I've done tweets on this. I might even do another video on this. But I recommend people writing down for either overall or each playbook. This is my risk. For a risk, I want to do this. B risk is this. C risk is that. Then when you want to grow, you have I literally had a note card on my desk. Like literally I had a 5 by 12 note card and I would have A B C D would just be a no trade and I would start, you know, you can start uniform, you can then go some level of linear, you can then start to go exponential. And then when I wanted to increase my size, I would increase it on my note card and then I would mindfully each day have this consciousness and this awareness, what is my risk? I got it. It forces you to grade the trade, which is a huge win. It forces you to say, "I think this is a B, C, A, whatever. Does my size reflect that? Am I undersized? Am I oversized?" So, you have this game plan to protect you in the moment.
Right. Right. And it gets you to it puts it makes you actually make part of it a trade plan. So, like going into that day, you have to know, okay, I'm going in sizing B on this. I'm going in sizing A on this versus just on a whim the setups in front of you and then you have to just guess. Um, but the one analogy that I've never thought about that way with the the weightlifting, the analogy I've always gone to is like if if sizing up is the same objective as killing a frog in boiling hot water. Like if you just immediately make the water, you know, 200 degrees and you throw a frog in there, the frog's going to jump out immediately. But if you put a frog in a lukewarm or room temperature water and you slowly turn up the heat, it's never going to know a difference and it eventually dies. So it's like when you're sizing up, do it so slightly that you don't notice. And again, incrementally over time, over six months, a year, you all of a sudden you're 50, double, triple the size you were started with, and you maybe don't even know how you got here, but it was just small incremental increases.
Could could not agree more. And so, what do you do mentally to then prepare yourself or embrace the risk in the moment? Because I think a lot of traders um they struggle to actually embrace it. They hesitate, they this, they like what do you do when it's okay, I I got to size up?
Um, well, in real time when I'm taking the trade, part of it, what helps is that it is so minuscule, right? Going from when you put it, I mean, going from a thousand or going from 10,000 to 11,000 real world money sounds like a lot because a thousand more bucks, but when you put it as a, you know, 11 bucks to or to 12 bucks or 10 bucks to 11, it's like it's laughable. Um, so in the moment, like if I ever get nervous that I'm, you know, in my mind taking bigger size, well, it's like I look around and like like a thousand, it's a thousand more dollars of my, you know, million plus dollar account. Like it doesn't, it's not going to change my life. Uh, and I can take 10 losers like that and it's not going to change my life. Um, but in terms of like forcing yourself to do it, it's it's kind of like I in my brain it would be a commitment to the goal, right? Like you're you're not, no one's comfortable going to their first job interview, but you need a job, so you go. Or um, it's always uncomfortable meeting the in-laws for the first time, but like, do you really want to upset your significant other? Like it's like, it's how much do you care about being a good, well-rounded, efficient, and profitable trader? And for me, like I don't trade so that I can just stay the same for the next 20, 30 years. I want to trade to be better month over month, year over year. So, like whenever I catch myself being um uncomfortable or not wanting to do it, I be like, "Well, why am I here, right? Am I just here to just kind of flounder around and not progress?" And and that doesn't come with the setbacks. Like, we're all human. There are going to be moments where I need to take a break or I need to take time off. But I remind myself in the moment of like, if I'm undersized, well, what am I doing then? Or like, why am I undersized? Like, I start to cycle analyze myself. That I mean, that answer was so good because I think people wrongfully think that you can grow without suffering, without pain, without losses, without drawdowns. Like you can't. There is no growth without drawdowns, without struggles, without suffering. Of course, you want to try and minimize that as as much as possible, but there is no making more money without risking more. Like unless you unless you massively change your strategy somehow or find some improvement, the only way you can make more is by risking more. And so there's traders that are trying to avoid increased losses. If your losses are not increasing, you are stagnating. Like every year of my career, every single year, my losses have increased, and that is growth. And you cannot avoid that. You pretty much virtually cannot avoid that in trading. And um, I mean, a couple stories based on that, like I remember my boss always telling me the story that, uh, he was growing and he took this massive loss in Google earnings and he was talking to his dad about it after and his dad said, you know, God willing, like, may there be even bigger losses in the future because that's that's how you grow. And as your career goes and goes, like what seemed like a big loss at the time is now a rounding error over like any prior, you know, three-year, two-year, five-year period of of of my career. And I don't think you can avoid that. And it's just part of embracing that need to to grow.
Yeah, 100%. I agree. Yeah. One other question that I think is so common and so important is when you start to execute your size, are you doing it all at once or in tranches?
Depends on the strategy. Um, you know, back to that gap and crap example, like, you know, that in that example, it is all just the same uniform size, but I am just one entry. It's just all at once. Um, also, if I'm buying a breakout, like I I'm not this the biggest breakout buyer, but if I am buying breakouts, it's usually all at once, like I just want to be at the breakout level and I want to just trust it from the beginning. Um, if I'm shorting something like, you know, a mean reversion trade or like the first red day kind of idea or some parabolic move, yeah, there'll there'll probably be some scaling in because there's just no need to take all of your size in the front of a of a train, right? Like I want to make sure the train is slowing down and once it's stopped or going back the opposite direction, in this case, a stock dropping and I'm short, that is when I want to be adding to the winner and kind of and putting in full size as it's working for me and not being all at once in the most riskiest spot when it's going against me.
Yeah. And and so I would agree with that. So and if I can even take the principle behind a lot of this in general, I want my size all at once where expected value is maximum. So if there's a breakout, I want all my size as that breaks before it's already gone and my risk is increased, my reward is decreased and so on. When a lot of traders will wait for too much confirmation. That being said, you touched on a point where you're willing to get some size on the front side of a move, meaning while it's still going, if you're looking for mean reversion, it's going up and you're willing to bet before the turn because you suspect there's still some positive expected value. So, you want some exposure, but then the difference is once the turn is in the right side of the V, as I call it, that's when the expected value increases. So, as a result, the expected value has changed for the better. So therefore, you want more size, which is totally sensical. And I think a lot of traders have trouble understanding this, right? And it all comes back to expected value and how dynamic it is, right? And when expected value is best, you want the most size. As expected value starts to decrease, you want, in theory, less size. If it ever goes zero, you want no size. But that framework is how you decide, do I want it all at once? Do I want less here? And that's how I think about this. And it seems like you really think about that the same way.
Yeah, 100%. I uh I never viewed it as I I never think of expected value in that moment, but the way you put it is perfect example, like I'm just because my brain was saying I just don't want to risk too much when the setup isn't there. But when the setup is there is because you have confirmation, therefore the expected value is is going to full go. Like you need to be full size if you want to kind of follow what we just talked about, which is being proper risk management, having as much risk as you say you're going to have and just following your all-in general system, you know, in total that totality. So,
And so right now we've been in a hot market. A lot of traders are growing. They're pushing their size. I think especially as you grow, one of the hardest skills, one of the absolute last skills traders master is the ability to very quickly turn on and off the gas. And so, what have you found has helped you turn off the gas? Like, how does that awareness start to be, oh no, like I might need to dial back?
Yeah, earlier in my career, I definitely dialed back with less size. Like again, if back to the 10K per risk or per trade example, I would drop from 10 to eight or 8 to 7 um in a slower market. But I I will admit lately I haven't done that and I will still keep my risk as big as it is, but I I get hyper aware of like, well, do I even have a setup in front of me? Just period. Like if I'm trading, you know, C's, B's, and A's and all of a sudden the market slows down. Well, there's probably not going to be any A's. Maybe there's a couple B's and there's going to be a ton of C's. And so when I when I see that kind of shift and the quality of the setups come around, that's when it's almost it doesn't turn into, oh, I'm just going to size down. It's almost like I just take less trades in general. Like I just I go from taking 50 trades a month to 15, you know? Um, that way I have found it to be more worth not worth my time, but but conserving my energy, like my emotional capital, right? Just taking less of them. Essentially you're handicapping each trade or not not each trade, but each day.
And each trade very independently. Like, okay, it's, it's been awesome, but let me just go in with an open mind. Does this day actually have my setup, or am I reaching and grasping for straws, essentially?
Yeah, I think a lot of traders, when things are going good, when they're growing, they want to keep that momentum. And so, a lot of times, like for most strategies, it doesn't go from 10 out of 10 to zero overnight. And I think what you start to see is some of the stuff that was really working starts to not work as well. Then your win rate starts to trail off. Then the stuff that was, you know, not working as well, then it's failing. And so I think a lot of traders think it goes from 100 to zero overnight when it doesn't, and they're not absorbing all of the cues.
And so what was so cool at Trillium is, well, especially running an office, I could see all the office-level data, and you would see the traders, especially if they're younger, they would be slower. You know, they would, they would be pushing size and getting aggressive too late in the cycle of, of good opportunities, and they'd be the slowest to then turn it off. And then the medium traders would start to dial back, but also too slow. And the best traders would be like, "Oh, wow, this play is not working as well. My, my win rate's starting to go down." So, they would proactively cut and dial back, just by noticing some of those cues that I think a lot of traders don't, because they're just not as attuned to that skill set.
Yeah, 100%. The most recent example of this that I personally experienced was going into September of this year, 2025, where I've always been a proponent of, whether it happens or not, just going into like August and September with like my foot on the brake, so to speak. Like, I'm not going to just full-on stop, but I will expect maybe some choppier markets, maybe some lesser setups that appear, etc. But I remember like after the first two or three days into September, it was as busy as it ever was going to be. And I was like, "Wait a minute, this is not the September I expected." And so I immediately shifted. It's like, I can think all I want, September is going to be slow. But if there's 10 setups in front of me on a daily basis, like, that's just not the case. And I have to be objective about it and shift.
When you take a rip or you start to slow down, um, like, I guess how do you, how do you build back that confidence? Like, will you size down if, if you're, if you're taking a rip and stuff, or like?
Yeah, if I did, let's run in a drawdown, um, I definitely will. The one area where I maybe gain that confidence, though, is I will really dive deep into why I took that loss or why, why did that draw to happen? Like, am I, am I just making the same mistake 10 times in a row? I can't fix it. Or if I take in 10 setups and I would take them every single time, they're just not working right now, and I need to be more nimble in even taking them in the first place. So, I think it depends because if it is, if it is like, "Hey, I'm doing, I'm taking the strategy seriously. I'm doing everything I possibly can correctly," then it's like, "Just keep going." But if I'm doing it like, "Oh, you've screwed up every rule in the book and you've done it every twice in one month." Okay, you need to take a serious, like, reality check and like regroup because it's you, it's not the market. It's like you're screwing up.
And I think that's one of the hardest things in trading is so often traders will too readily say, "Oh, this was just a bad beat." Like, look, I agree with you. If it's a bad beat, you don't need to make changes necessarily. But I find that too often traders want to blame the market. Attribute loss to, "Oh, it was a bad, bad beat," or "Oh, it's the market." "Oh, that was just one time." When it's like, "No, something has changed. Either you're not being selective, the opportunities have changed, and you're not facing reality." So, I think like you need to do a really, really difficult objective analysis. Like, did other traders lose in this? Did they agree with the assessment? Um, getting outside opinions and really trying to be objective. Because so often I'll see traders take losses because they're fighting the trend, they're not being selective, or or whatever, and they'll say, "Oh, bad beat, bad beat." Then couple bad beats, it becomes a trend, and they're in a tough spot.
Right, right. 100%. Yeah. Being, being very brutally honest with yourself is a huge factor because if you're not, then who, who's really there to double-check? You have your pods, or you have your groups of traders that you can rely on, but at the end of the day, if you know, if something bad happens in that very second moment, you can't get a trader to come over. You know, for most people, like, again, in a proper, I'm sure that you have that, that resources, but like for me myself, when I'm sitting in my office by myself, like I don't have someone who can tell you, "Hey, you screwed up." I have to be that one for me. So, yeah, it's a big.
And as Richard Feynman would say, oftentimes we're the easiest person to fool. You know, we fool ourselves all the time. Uh, especially when a level of randomness is involved. It's not as easy as poker. Uh, markets are constantly adapting, which is what makes that so difficult.
Yeah, 100%.
So, now we're going to jump to some of the more advanced questions from seven-figure trader David Hanland, who has had incredible growth this year. We were actually talking about this before the interview. He's grown amazing. And so he's wanting to know, is there anything you do to be more systematic in your approach to risk as you've grown this year?
Well, to me, and maybe he has a different definition of systematic, but to me, committing to that 10% increase and then committing to that, not well, 10% increase for average setup, but then exponential increase for every higher grade from there on is that systematic approach for me that gets me to stick with it, you know? Because if I was very subjective about it, where, "Oh, I traded, you know, B setups really good, but this setup over here, like, and I'll give you an example. I used to do this, and maybe this is why I got stagnant in 2022. I would start to trade different levels of risk, not only by grade, but also by setup to where there was almost too much variance where it was like, "Oh, if this is a, you know, a breakout setup, well, I'm not too good at breakouts, so it's going to be like one, like a fraction of a percent of an average grade setup on a on a first red day." To where I, I get that, like there are some setups that aren't going to be your strong suits, but it was like I had 15 different variances of what I would like. It was too much to where I never took it seriously enough. Where I do, I like the actual letter grade because now I only have four options. It's C, B, A, or A+. You know what I mean? And so I have to commit to one of those four based on how well the setup actually is or not.
Yeah, and I think just the benefit of forcing you to grade it into a couple categories is so, so powerful. And, um, I think the other thing too is, like I mentioned, my sizing note card is very good for some of that stuff. But I think it's also just recognizing that like, whatever is right for you, being consistent and intentional about it. Like, I think a lot of people have the ability to grow incredibly, but it's just doing it consistently if that's your priority at the time.
Right, 100%. So after that, we're going to now take another final question from seven-figure trader Alex Teamez. How do you know when you're too big in a stock and what do you do about it?
For, for me, my sirens go off in my brain when I'm extremely uncomfortable. Like we talked about earlier, like, I, you know, if I'm increasing my size, I know I'm uncomfortable. Like if I go, like if I raise my bar from, again, 13K to 14K, it's so incremental, but it's enough to make me just nervous enough to where when I take the trade, I'm like, "Okay, this is new, but I can handle it." I'll know pretty quickly. Like if I go try to jump from 14K to 28K on an average setup, I mean, immediately, like I'm sweating. I'm sweating on a place I've never sweat before, right? So, it's like I almost get this, this, you know, physical reaction to where I know I'm not okay with this loss if it happens. And so, therefore, in that moment, I have to either size down or pray. And I don't like to pray because usually when you pray, it leads to the loss that you don't want to take, you know, in and of itself. So, I mean, that's my own instinct reaction. But I, maybe some people don't have that. Like, if someone is maybe a little bit more robotic than me, they might not have that, you know, sign go off in their brain. Um, but that's usually what triggers for me. I get very uncomfortable beyond the comfortable uncomfortable, you know what I mean?
Yeah, and knowing Alex and knowing that he's a really great trader, I would actually make the point that if you are a pretty experienced trader, when you're too big, you know it. And there's that voice in the back of your head where you feel that pit in your stomach, you're sweating, and you're just like, "Oh shit, like, I know this. If this goes against me, like I'm in real trouble." And I think it becomes rather than, "Oh, I'm okay with this loss, that's my parameters." You know, like, "Oh man, this could really get away from me." The other thing, especially when you get really, really big size, if I ever look at my position and I'm looking at the volume the stock is doing and I'm saying to myself, "Oh my god, like, if this goes wrong, I am not going to be able to get out of this." Like, if I know I'm not going to be able to get out of it and I have the potential of going for a ride, that voice in the back of my head, it knows it. And like, it's, it's one, it's so hard to answer to. It's so hard to listen to that voice. And it's like, it's that fine line of, this weight is difficult and I'm challenging, but I'm in control. And there's, I am praying if this doesn't work, I'm going for a ride, and this could be way outside my parameters. And I think with an, with experience where you're growing that fast, you, you kind of know it. And it's then taking that step back, it's almost like that, that Buddhist, like taking that breath, taking that step back, that observation of, "Oh wow, if this is how I feel, I'm in trouble." And I think the first step, the hardest step, is just reduce something. There's something so weird in our minds about going from zero to one and taking that first step. Even covering a hundred shares, if you just cover a hundred shares and start to reduce the pain, there's something, at least in my experience, where it's like, it's like that little release valve where it's like, "Oh my god, I psychologically took the leap. Like, okay, I can, I can cover another 5,000 shares, 10,000 shares." And just knowing if this isn't working, if I have that pit in my stomach, just, just get out of some. Just get out of some. And anytime I don't, oh my god, I would assume my win rate, not listening to that voice in my head, my win rate's got to be like 20%. And it's my net P&L, not listening to that voice, has got to be horrific. Tens and tens of millions of dollars. And even in my big trade last year in the NIK, I was maxed out essentially. But I knew I can get out of this. And even if there's slippage, I'm okay with that loss here. And like, it was controlled discomfort as opposed to uncontrolled, "Oh my god, I'm praying, and if this goes wrong, I am, I am not in a good spot."
Yeah. As you were describing that, I was getting PTSD because one of my bigger weaknesses, and I'm assuming this is probably a weak point for most traders, which is like, right, if I, if I get that, you, that physical feeling of like, "Oh my gosh, I'm going to be in trouble if this goes the wrong way." The, the very, this is my biggest weakness. The very first thought that goes through my head, "Well, I'm just not going to cut it." You know what I mean? Like it goes from being super disciplined, super comfortable, super in control, your brain goes the wrong way. Yeah. Naturally, I'm just okay. I'm just going to go for a ride with this. I'm okay. I just. And your brain naturally really does go the wrong way. And I think, I think every trader in our heart of hearts, if we have that self-talk awareness, we know we are screwing up.
Yeah. Oh, I know. I'm just like, I just don't want to take this loss because now I haven't accepted that loss going in, and now I'm in this. And that's almost such a powerful thing of like, I think if you just cover a hundred shares, sell a hundred shares, just initiating that, and then being like, "Oh, wait, okay, no, I can just." It's such a zero to one. I don't know. It's so crazy, isn't it?
Yeah, it's that release. Well, too, also for me, I know maybe a precursor to even getting in that position is when I start thinking about, well, how much can I make versus how much am I willing to risk? Because like, if you ever got into a big, too big of size, then you either didn't think about it, or you thought you were just going to have to be right, and you didn't have to deal with being wrong. So like going in knowing of like, this is exactly how much I'm going to risk, no more, no less, given that there's liquidity, like you said, you can easily get out safely with not much slippage. Like that should be the first thing in that trade plan. Because anytime I do the opposite, where like I think about how much I can make first for how much I can risk to make what I want to make, then it goes all haywire because I'm not thinking about risk, I'm just thinking about reward.
It's, it's kind of funny to me as we get to the end of this, just how universal this experience is. Like, I think it's so integral in the trader's journey that to find success, to find high levels or extreme levels of success, you need to work through these problems. You need to find your, your method. You need to stumble. You need to hold on to a trade that you should have cut. You need to take big rips. So, Kyle, loved everything. Any final thoughts or things we didn't, didn't touch on?
Just that everything we talked about, like you're pro, like the viewers, you guys are probably going to experience it. You know what I mean? Like, if there's anything I think it would take away from our conversation here is that like, we've all experienced these emotions, and it's whether you take them and then make yourself better as a trader with them as you're experiencing them. Because everyone's going to take a loss they don't want to take. Everyone's going to, you know, get stubborn like we just talked about, you know, a minute ago. Like, you, you will go through it. But just use this conversation between you and I as, like, we all experience it, and it's the guys who use that education and experience to then further better themselves are the ones that will continually get better and make their six, seven, eight figures.
Yeah, and I think it's, it's one of those things where most people should be in demo longer than they are. Most people should be trading a hundred shares longer than they do. And most people try to move too fast. And as a result, like so many of these questions where it was like, "Oh, I can't, I hesitate to pull the trigger or this or that." It's like all of that stems from that means you're risking too much too quick. No one hesitates to pull the trigger in demo with no stakes on the line. It's only when the stakes get too big. No one hesitates to trade, you know, one share of something, risking $1. It's, it's only when you're doing too much. And just that gradual growth you described, I think is how so many people solve a lot of their issues, but it's our egos, it's our personality, it's our, just wanting progress faster that hurts us.
Yeah. So, you mean there's no risk on a $10 million paper trading account?
I thought it was a real deal the whole time. Yeah. Exactly. Like, it's very easy to risk nothing versus actually real-world money. For sure.
Agreed. So, there you have it, traders. This has been one of the most comprehensive conversations about sizing that I have ever done or ever seen done anywhere. I hope that addresses all of your questions. If you enjoyed this conversation, give Kyle Williams a follow on X as well as his YouTube, and also subscribe to my channel as well. Thank you so much for watching.