If you’ve been following our podcast for a while now, or have gone through and listened to every episode, you know that Brian Lee was on a few months ago. However, we decided to ask him to come back on a second time as his trading is better and more consistent than ever before. There is no doubt that Brian Lee has the potential to be a top trader in the day-trading community with the steps he is implementing as it stands. If you have now yet had time to listen to this episode, please make sure to free up some time as this episode has the potential to really give you some insight as to what risk management is and how to implement it into your trading.
Before getting too far into this blog, thank you all for the love and support you all have shown our podcast. We love getting to talk to these traders and be able to share what we have heard with all of you. If you have any friends or know of anyone who is looking to gain an edge in their trading game, be sure to share our podcast with them! Our goal is to help everyone to one day make it Beyond the PDT.
Who is Brian Lee, Again?
Because we have already interviewed Brian once before, we’re going to keep this short and sweet. If you want to look a bit more into the last chat we had with him, you can find that here. Essentially, Brian used to be a professional video game player who played primarily DOTA 2 competitively for money. He was told this was something that he could not do, and while they did not come in first in the world championship the year they made it there, he still made it to the competition and was proving people wrong. However, he finally came to the point where he was ready to do something else with his life, and it was around this time that he discovered trading.
It is not to say that his discovery of trading came without some downfalls. While he has only been trading full-time for about 2 years, his real consistency has come in the past few months as he learned to incorporate risk management into his trading in a way that he has never seen before.
What Changed From the Last Talk?
Back when we last talked to Brian, his goal was to have a roughly 3:1 risk-reward return per trade. While a lot of traders like to flash numbers around for their P/L, we rarely know what they were risking per trade. Ultimately, those who are able to risk a very minimal amount of their account per trade and make a much larger gain are going to be the ones who come out on top. We have said it multiple times before as well as we’ve heard it ourselves – anyone can find a pattern that works for them, but that does not mean everyone can make money. Being able to make money consistently does not come from just finding a pattern – it comes from understanding how to manage your risk effectively and efficiently in every trade.
Going back to what has changed in Brian’s trading since the last time we talked to him, he now has a much better understanding of how to get more reward out of every trade. As opposed to the 3:1 return he used to look for, he now looks for returns that are upwards of 10 on some trades when he can find them. In fact, just a month or two ago, he had a 40:1 risk/reward month – a very impressive feat. Want to know what is more impressive though? A 40:1 risk/reward week that he had following the end of that month. That is nothing short of amazing – congratulations, Brian!
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How Has He Learned to Get Significantly More Reward?
At the end of the day, the stock is going to move in whatever direction it wants. Before Brian found a way to increase his risk, he was not scalping at all either – he was capturing meats of moves. However, he realized that by increasing size and effectively adding/selling, he would be able to change and manipulate the entire structure of his trades for the better. Because Brian is primarily a short-biased trader, it is evident that the best way for him to go about adding is to add on a pop, which is exactly what he is working on doing to give him these better returns. What he will do is formulate the size and the price of which he wants to add size on to in a calculator that he made, and it will tell him how much more he should risk and his projected return if it hits his price target.
Essentially, the point here is that he is able to shoot for the same price target, but by adding size in ideal spots, he is able to increase the reward significantly without needing to increase the risk of his trade.
How Much Does Brian Risk Per Trade?
When talking to Brian about his risk structure, he mentioned that he likes to keep it very simple. For the most part, he likes to risk between 1-2% of his account per trade, though, there are times when he looks to risk 3% if the setup presents itself. Now, take that in really quick. Go back to where I mentioned that he made 40:1 R in 1 week now. Assume he risked only 1% of his account for every position he took that week and realize that he nearly grew his account by half in one single week, which may be a conservative number. He did not change the setups he was playing at all (well, he refined them a little bit, but that is not the reason for the change in his consistency.)
The point I am trying to get across here is that when you have a strategy that works for you, the possibilities for growth are endless. However, it all comes down to understanding how to properly manage your risk. If you are able to do this with a winning strategy, there is no reason you will not be able to find consistency in your trading.
This episode with Brian Lee was one of the most insightful episodes that we have ever released when it comes to risk management. Matt and I personally were in awe after getting off the call with him, and we hope that after listening to this episode that you feel the same way.
Make sure to let us know what you think by shooting us a message over one of our social media or by going to the contact us page! We are very appreciative of the support and cannot thank you enough for listening to our podcast.