Trading fundamentals · not a setup, how much to risk on the setups you already trade
Dynamic Risk Sizing
Two traders watch the same tickers and take the same trades. Four trades later, one is up $7,065 and the other $4,797. The difference isn't intelligence or discipline.
One sizes every trade the same. The other sizes each trade to its grade.
$200baseline risk, the B setup
+50%on an A, not ten times more
20examples of each trade to grade
The mistake: the same risk on every trade
Most developing traders start with static sizing. They risk the same amount on every single trade, whether it's an A+ setup or a C setup they aren't even confident in. A really clean VWAP reclaim gets the same risk as a breakout in the middle of a midday chopfest.
1
Same edge, wildly different outcomes
Imagine trading next to someone. Same tickers, same setups, same trades.
They finish the day up $7,065. You walk away with $4,797.
It isn't intelligence and it isn't discipline. It's how much each of you risked on each trade.
It's the one mistake that quietly drains more P&L than anything else, and it's avoidable.
2
Press the gas, then coast
Every trader who scales learns to size dynamically.
Press the gas when the edge is real. Sit back and coast a little when it isn't.
Dynamic doesn't mean wild: it doesn't mean risking either $100 or $1,000. It starts with small steps.
It's these little subtle shifts at first that get magnified over time.
Static vs dynamic
Same playbook, same entries and stops. Only the risk per trade differs.
staticOne size for everything
“I'm going to risk $200 because that's what I risk in the trade.” The A+ and the C get the same dollars.
dynamicSize to the grade
“These variables define why I want to increase the risk in this trade.” More on the A, less on the C.
Sam and Jack
The names are changed. Two traders on the same team, in one trading day with three opportunities.
Same team, same training✓
Same stocks on the screen✓
Same setups and the same trades✓
Same entries, stops and exits✓
Risk per tradedifferent
Everything else identicalthe gap is sizing
Trade 1 · an A premarket high break
In premarket planning: what if the stock breaks $125 to the upside? A positive catalyst, and a key resistance level on the higher time frame. If it gets volume and a clear premarket high break, that's the A version of the trade.
Same trade, 50% more risk
A
Why it's an A
The setup: a break above a higher-time-frame level with a positive catalyst. Pretty straightforward.
The trade: a premarket high break, a momentum trade. Only take it when something breaks a key level on momentum.
Volume plus a clear break of the premarket high: those are the variables that make it the A version.
Sam didn't go from $200 to $2,000. He risked 50% more.
↻
Same exit for both
The stop for a premarket high break is the low of the day.
A momentum trade gets a momentum exit: after the acceleration, exit when a bar breaks the low of the prior two.
You could argue for holding it longer. That's outside this lesson: here both traders do exactly the same thing.
The only difference between their results is the size they chose before the entry.
Trade 1, side by side
Entry $125.00, stop $124.48, exit $127.61: about +5R for both.
Jack · static · $200 risk384 shares
Sam · graded it an A · $300 risk576 shares
Jack's result+$1,002
Sam's result+$1,503
Gap after one trade$501
The trade on this site
The premarket high break has its own page, with the rules and a walkthrough.
A stock with awful news gapped below its 52-week low, out from under every key support area. After 10:00 the traders were weighing a big dog consolidation, a VWAP continuation, an offside scalp, or a second chance scalp as it rose quickly into old support.
A little better than baseline
B+
Why it's a B+, not an A
Second chance: price drives right back up into the area that was key support before. Now it's resistance.
You see the turn on the tape and take the short, with the stop right above the highs of that area.
An A would have been a big dog consolidation all below $330. The stock wasn't offering that.
Sam: “I think it's a little bit better than baseline. Just a B+, not an A.” So $250, not $300.
↻
Same target, same exit
Let price look for the lows: cover half into the prior low.
Trail the rest.
Both traders use the same exit strategy, so both make about +5.7R.
Instead of being static with his risk, Sam is being a little bit dynamic.
Trade 2, side by side
Short $329.00, stop $330.50, out at $320.50: about +5.7R.
Jack · static · $200 risk133 shares
Sam · graded it a B+ · $250 risk166 shares
Jack's result+$1,131
Sam's result+$1,411
Running total, Jack vs Sam$2,133 vs $2,914
Gap after two trades$781
Trade 3 · a B− range break, then the A
Another stock with a positive catalyst, looking for a range break to the upside. Volume's coming in and it looks like it might break higher and continue. Jack enters with his normal $200. Sam doesn't like the wideness of the range.
The same stock, graded twice
B−
The first try: less risk
The range was wide. It tried to break, then paused.
The consolidation before was choppy: it already failed once, rolled over and rebid. The time of day was a little weird.
It just wasn't trading in a fluid way. Same stop, but Sam risked $150 instead of $200.
Both lose a full stop. Jack is down $200, Sam is down $150.
A
The second try: more risk
Then it sets up as a very nice big dog consolidation: the price action wedges and gets tight.
The clear high where they bought before becomes the new entry, on a break above it with volume.
Tighter, cleaner, a better time of day, a significant volume increase. It's the exact same trade, just better than before.
So why would you risk the exact same amount? Jack: $200. Sam: $300.
Trade 3, twice, side by side
First try: $241.75, stopped at $238.80. Second try: $241.50 to $253.00, stop $240.70.
First try · Jack 67 sh · Sam 50 sh−$200 · −$150
Second try · Jack 249 sh · Sam 374 sh+$2,864 · +$4,301
Trade 3 total, Jack+$2,664
Trade 3 total, Sam+$4,151
This is where the biggest gap occurs$1,487
How much more do you like it now?
Ask it every time a setup improves in front of you.
first tryB or B−
Wide range, choppy, failed once, odd time of day, not fluid.
second tryB+ or A
Tight wedge, a clear high to break, better time, big volume.
The day, added up
Three different trades: a true momentum trade, a trend continuation and a trending trade, with three different exits. But this isn't about those trades. It's about the risk on each one.
Same trades, very different day
Σ
Sam didn't just risk more
Over the day Sam risked $1,000 in total against Jack's $800: 25% more.
He made $7,065 against Jack's $4,797: 47% more, $2,268 on the same trades.
He took risk off the trade he liked least and put it on the ones he liked most.
Not a massive shift. Subtle shifts, magnified over the course of even a single day.
The whole day
The numbers from the table in the video. Same entries, stops and exits for both.
Trade
Grade
R
Jack
Sam
Premarket high break
A
+5R
+$1,002
+$1,503
Second chance short
B+
+5.7R
+$1,131
+$1,411
Range break
B−
−1R
−$200
−$150
Big dog break
A
+14.4R
+$2,864
+$4,301
Day
+$4,797
+$7,065
The risk tiering model
Sam doesn't size randomly. He follows a simple risk tiering model: your A+ setups get the most risk, your A setups get really good risk, your B setups are your baseline, and your C setups you size really, really small.
Four grades, four sizes
A+
the most risk · e.g. $400
Everything lines up
The rare, best version of the trade: the favorite. Catalyst, level, volume, tight structure, good time of day.
A
really good risk · e.g. $300
The clean version
A clear trigger with the variables you've seen in your best examples. Press the gas.
B
baseline risk · e.g. $200
Your standard trade
A normal, playable version of a trade in your playbook. Your usual risk.
C
really small · e.g. $100
Coast
Choppy, late, wide, already failed once: the ones you take but aren't confident in.
What moves a trade up or down a grade
These are the variables the traders used in the three trades. Your own list comes from your own examples.
↑
Toward an A
A positive (or, for a short, very negative) catalyst.
A key level on a higher time frame.
Volume coming in on the break.
A clear trigger: a premarket high break, a clear high to break.
A tight, clean consolidation that trades fluidly.
A good time of day.
These variables define why you want to increase the risk.
↓
Toward a C
A wide range.
A choppy consolidation that already failed once and rolled over.
A breakout in the middle of a midday chopfest.
A strange time of day.
A trade you're taking but aren't confident in.
When it isn't really trading in a fluid way, sit back and coast.
Grades can change in front of you
Trade 3 was the same stock and the same entry level, twice.
first lookB− · $150
Wide and choppy. Stopped out.
it tightensB → B+
A wedge forms under the same high.
the breakA · $300
Tight, better time, big volume.
Sizing is one pillar
For position sizing as part of a whole framework, with levels, context and discipline:
People overthink this and assume being dynamic means risking either $100 or $1,000. No. It's small steps sized to the grade, and over a month they add up.
Same trades, two equity curves
Build your own tiers
The best way to do this is very simple. Go and study 20 examples of each trade in your playbook. Just by those 20 examples, you'll understand the difference between A+, A, B and C. Then start adjusting your risk, in a subtle way.
1
Collect 20 examples
Pick one trade in your playbook: a premarket high break, a second chance, a big dog consolidation.
Find 20 examples of it, in your own trades, in replay or in charts after the close.
Screenshot each one and save the context: catalyst, level, volume, time of day.
Twenty examples of one trade beat a few examples of twenty.
2
Grade every one
Sort them into A+, A, B and C by how clean they were.
Most will be B's. The A+ ones are rare; that's why they're the favorite.
Be honest about the C's: the chop you took anyway.
You'll see the difference just from the 20 examples.
3
Write down what separates them
What did the A's have that the C's didn't? Catalyst, a higher-time-frame level, volume, a clear trigger, a tight base, the time of day.
What did the C's share? Wide ranges, chop, a failed first try, a midday breakout.
That list is your grading checklist.
These variables are why you size up, or down.
4
Give each grade a risk
B is your baseline: your normal risk.
A gets a little more, A+ the most, C really small.
Start subtle: if your baseline is $200, think $300 on an A, not $2,000.
Small at first. The shifts get magnified over time, not overnight.
5
Grade it before the entry
In premarket planning, write down what the A version of today's trade would look like.
When it sets up, grade it before you enter and size it to the grade.
If it improves in front of you, like trade 3 did, re-grade it. Then review whether your grades held up.
That's how you become the trader you want to be: same edge, sized to the grade.
Watch the video
Mike Bellafiore, co-founder of SMB Capital, on the sizing mistake newer traders make every day.
0:00The mistake that drains your P&L
0:56Same trades, wildly different outcomes
1:30Static sizing vs dynamic sizing
2:29Sam and Jack
3:13Trade 1: the premarket high break
6:30Trade 2: the second chance scalp
9:04Trade 3: a range break, then a big dog consolidation
Press the gas when the edge is real. Coast when it isn't.
Same tickers, same setups, same entries, stops and exits. The trader who sizes each trade to its grade walks away with more,
not by risking ten times more, but by moving a little risk from the weak trades to the strong ones, every day.
B is your baseline. A gets more, A+ the most, C really small.
Grade the trade before the entry, from variables you wrote down.
Re-grade when a setup improves or gets worse in front of you.
Start with subtle shifts: 25 to 50% more, not ten times.
Study 20 examples of each trade to learn what an A looks like.
Built from a trading-education video by SMB Capital's Mike Bellafiore on static vs dynamic risk sizing: two traders, three trades, and the A+, A, B, C risk tiering model. The traders' names were changed in the video. It's shared for education; it's not advice and not a promise of profit. The entries, stops, exits, share counts and P&L for the three trades come from the table shown in the video; the price bars drawn around them, the 60-trade comparison and the tier dollar amounts are made up for illustration. Watch the reference video →