The MUST-HAVE Trading Skill They Don't Teach You (Every pro does this)

[@smbapplicantross884]

Some key takeaways -Just because the win rate is higher waiting for confirmation, that does not mean the EV is higher. -Many factors can influence EV intra-trade like buyers/sellers in the tape, news, time of day, etc. Will need to rewatch this to comb back though. A lot of value here. Enjoyed this key knowledge from inside SMB, thanks Lance!

[@wizardsetups]

Yes makes total sense. I should also add when you get in at the beginning of Bar A sometimes you will be waiting for bullish or bearish activity to come in more prominently which can be very psychologically stressful for traders that typically want some kind of confirmation prior to entry. Getting in at bar A typically is the bottom of the reversal consolidation phase for me. It can be annoying but you learn to sit in trades better. You also learn to spot signs of weakness or strength during that phase which helps for early confirmation.

[@markettechniques]

Wise words my freind. Happy trading 👌

[@wandabrowne8313]

I love this post. Thanks.

[@museitian85]

When I first watched this video a month ago, the last part of the video was true for me - none of it made any sense to me. But a month later, after a lot of studying and sim trading, it makes a ton of sense. Thanks, Lance and SMB!

[@dhlml]

After two years of continuous learning, I would say this video is the closest thing to handing out cash in the street... superb ideas, well-explained Lance!!

[@Lugenfabrik]

I had the same thought. This video is kind of a winning blueprint for a new trader.

[@saneworld9418]

Anyone who is trying where Expected value(EV) value comes from it's a derivative 😅, here's the math: EV= (WinRate*Reward) + (WinRate*Risk) -Risk

[@gantz0949]

Thanks

[@timmurray396]

Re the SMB trader who asked about sourcing the probabilities, and back-testing. There can be an interesting dichotomy between traders who rely on data/models/algorithms etc (where a lot of the hard work is outside of trading hours, development and back-testing) and discretionary traders (where a lot of the hard work is in real-time trading). Algorithmic design is often based on a classification problem (true/false, buy sell etc, or even discrete position sizing). But that is typically ONLY getting at the 'probability' part of the EV logic you've highlighted (even if the outcome is based on a stop-loss/profit-take). Often these sorts of models will adjust their sizing BASED ON the probabilities (and definitionally, this might mean larger sizing on higher probability outcomes, which can be directly counterproductive as you highlighted in the video). The lesson (if that person is an algo developer) is to rethink from the ground-up the framework their models are built around (which is hard intellectual work, an investment in model development, and not necessarily immediately profitable). For more discretionary traders (who still, obviously, have systems and robust logic) the freedom can allow an easier and more intuitive adoption of the EV framework.

[@Maver1ck101]

Thanks for your comment. It's quite insightful.

[@44beebe]

I have extensively backtested/journaled close to 700 of my trades. I have backtested all of these trades with all or nothing strategies as well as scale out strategies and I've found that the all or nothing is both more consistently profitable and more net profitable than any scale-out strategies I have found.

[@SacredCASHcow]

have you changed your opinion on this?

[@44beebe]

It probably depends on your trading style. For my personal method of trading all or nothing is best, but I have backtested some strategies where scaling out is more consistently profitable. I think it is helpful to idenitify key levels of supply/demand including moving averages or bollinger bands where you should scale out. But my method of trading relies on trading large gaps to the next supply/demand, so it is a mistake to take profit before those levels are hit.

[@timothyaldous1200]

I prefer these specific lesson videos over the long trade reviews

[@patrickbyrne7599]

In my view, this is by far the best video you created so far! Nice one timeframing lower on the reversal example. The exactness in trading kills, that was my favorite topic of the video, hence trading can not be learned in a few weeks. The markets are constantly changing and even if the setup is nice and clean the trade can still be a loser. Now adding assessing as you showed from bar to bar is a huge leap forward. Understanding this takes years and executing it even longer. Thank you for sharing this great content!!!

[@alexanderthegreatxx1]

Thank you Lance. Your a stud! I watched this once yesterday and twice in a row today. I recommend everyone watch this video twice in a row if possible. This page is so strong and the content so good I feel like I’m cheating for getting this all for free. Thank you Bella. ❤️❤️😊

[@chr971]

I remember reading in The Playbook Shark mentioned related concept of piecing out your stops for individual entries instead of selling everything at single price.

[@zwarriortrades]

Excellent video. Especially handy in avoiding large losses (which always start off as shrunk gains or small losses and show telltale signs of decreasing EV)

[@purple_mang0]

thanks lance! - expected value seems to be negatively correlated with win rate. - look for break of prior bar low. trailing stop: high of prior bar - risk, reward relatioinship matters - risking previous bar high when shorting - you should include nuances and not have your system so binary unless your data supports it

[@tobiashernandez1515]

Not gunna lie, and I’ll only admit to watching this 10 times so far but as a determined newly addicted trader I’ve found a lot of value in this lesson which I was able to translate and compare this relatable style of trading to my own style I’ve been trying to develop . Just wanted to say thank you SMB for all you and your elite crew do !👍👍👍👍👍

[@mathewvelasquez6071]

This dude's brain thinks so fast, I watched it 20x, just so I can I soak it all in....

[@mathewvelasquez6071]

No break, no pause, no director's cut...just pure/unedited gold

[@tobiashernandez1515]

Video gets better every time 👍

[@oli4x]

There's a sweetspot of risk within each setup: Too early, and the probabilty of the trade not going into your intented direction is high. Too late, the risk/reward ratio is too bad. How to know where this sweetspot is: experience! And always manage your trades, every bar is new info (like in Poker).

[@JM-ky2nm]

This video is lovely Lance, and differs widely from other traders' views, even traders at SMB who have made videos wherin they said to not move your SL or wait for a share to stay above or below a certain level before entering.

[@bradley1682]

The intrinsic value of the trade is the same no matter weather you took it at bar A or bar B. There was just further confirmation and less stress at bar B. Ultimately if your strategy says take it at bar A and you’ve backtested that than you have no need to overthink like this.

[@KT-zx9jr]

As an expected return becomes a realized return the slope of the return flattens and hence the evolving expected return falls so you get out......

[@shriladebray2637]

Appreciate these topics which no one teaches

[@gomesdiogo]

if you look for what Al Brooks say about the "trader's equation" and the differences of what (his concepts of) swings and scalps are, you will find same/more of this topic

[@keokio7]

trading is as much art as it is science. Also, this concept of dynamic trading is a VERY advanced form of trading. Only for traders who are proven to be disciplined. It is hard enough to preplan your trade when you aren't emotional, and following through with it. But this form of trading is constantly reassessing your plan as new information is presented on the chart. It is the most efficient way to trade, but you are now changing plans in the MIDDLE of the trade, where emotions are involved and now its a matter of can you even trust your plan since you're already in the trade

[@x2ul725]

I agree a way of thinking about odds as a changing beast; bar by bar is perfect. And the clip of poker player playing AA to the river was also perfect. Great work !

[@mrNobody5638]

One of the best videos i've ever seen on trading!

[@gomesdiogo]

thanks to Al Brooks I knew this concept of risk x reward x probability, he talks a lot about it, I believe somehow this relates with personality, I'm more of the type that like to enter after confirmation even if the EV is not optimal, having a higher winrate and the wind on my back eases the mind and make me more likely to follow my strategy to the crisp, this also apply to having different ways to manage the trade, I tried to be maleable but found out that a fixed way to get out makes me more reliable, can be because I'm in the early years, can be personality, idk anyway great video as always, really food for thought, Lance is the man

[@44beebe]

I have a trading system that defines the entry stop and target before the market opens. As hard as I try to use my discretion to beat the system I find that I constantly do worse than the system. Lesson learned. I try not to use my discretion at all once the trade has been defined. This goes against what you teach here. I hope with time I can incorporate more discretion to try and improve my system. For now I just trade like a computer and track what I would have done if I were to use my discretion to manage the trade. Like getting out early because a long trade is looking bearish. I almost always end up getting out of the trade too early. I guess the robustness of my system overwhelms most of the factors that come in to play later like a big buyer on the tape or bearish correlations.

[@markettechniques]

Thus is true for me also. I have set chart setups that must be found but once found and correct offer the sane odds each time. For me I changed my mindset to rather than tying to avoid risk with knowing I have great strategy so shouldn't worry, I changed it too sitting on the side in my mind where i allow slightly more risk ie sitting in trade past the impulse price action to get out. Working well so I'd say do it like this as you are rather than discretion... if the system is good enough to not worry about tick by tick and just expect the target area.

[@ToonKrooswijk]

This makes a lot of sense to me. If the price is a random walk, then no matter how smart you are you cannot have an edge. By definition. So our job as traders is to identify when we think price will not be a random walk for the near term. But it is not enough to make this assessment only prior to the trade. You have to keep making this assessment while you are in the trade and get out once you think the price has returned to a random walk or worse. So entry with an attached bracket order to take profits or losses is sub-optimal.

[@victornyamu2547]

very well put. You cannot have an edge in a random walk.

[@ItzGanked]

"The worst hand in poker is the second best hand"

[@antoniovalentin4913]

Now finally someone that has his A+++ game on... Without the inteructions ... Thank You So Much...

[@michaelprosperity3420]

Lance is my new go to for learning. I used to watch Tim Bohen not any more.

[@ElvisRosario00]

Good hand or bad =The variables news, volume etc Dealer lays down better odds= market heading your direction Flow lays down a 7= reversal you out the trade move stop with the flow. Unlike poker we can get in and out at any tick!

[@adrien3501]

Brillant skill building. I wish I would have watched this video way earlier and avoid pain due to poor execution by entering trades too close to target for example. Risk management and execution are key to success. .

[@thefinger1665]

Only difference between poker and trading, you never wanna bluff in trading 🤣

[@rolfo728]

Haha, you have a point there.

[@MetaGuideMedia]

😂

[@arttorrez5548]

Not unless you're the whale.

[@dramatispersonae1315]

😂😂

[@Shreendg]

HFTs do that all the time.

[@k.mcquistanpop6341]

Good explanation of a topic. I have not seen better. The 'setup' is then dynamic, a function of time which alters the initial probability. Such as, the initial mean reversal shown could transform into a flag, given the right conditions.

[@Bayconic]

One of ur best vids. Top 3 if not my personal fav overall

[@HamsterHearthstone]

8:46 if you ride the trade all the way to bar C and your risk is still 20 bucks down, you better have your head checked, lol.

[@razzy1476]

In Depth video wilth a lot of good information.. must watch again !!

[@yohaneskassu9671]

The problem with this is that you can't know the probability because you don't know the outcome of chaos. You can only make decisions based truth at every interval, and that's trading. the better the decisions you make the more profitable you get. and your decisions get better by having the experience of navigating and coping with chaos.

[@BagHolder323]

Very well and honestly described. I like the nuanced approach, a mix of science and art. Poker is a excellent analogy.

[@newinvestor4717]

Great view point, I loved the pocket aces to the flop explanation, and how crazy it would be to run them to the river if the flop delivers a pocket aces killer. I've always loved poker, and those percentages are always on the mind in any game, however I've never implemented this into any of my trades. Many thanks 👌 envious of all the guys at SMB, such amazing coaches and mentors and traders 👏

[@stephenfoster9009]

Sounds great, never looked at trades that way before - thanks!!!

[@davidcruz766]

Omg, this is way over my skill level, but the main concept makes so much sense to me. I have struggles with turning a winning trade into a big looser and this lesson puts some of my mistakes in those trades into very clear perspective. Thanks so much for a great nugget of info that I know will help me a bunch now and more as I develop as a trader.

[@shayneduncan6600]

Blackjack would be a better analogy than poker. In BJ 67% of the hands are losing hands, so you bet minimum amounts on those hands. When the odds of winning hands come, bet size goes up. In BJ it's easier to learn what the good hands are than it is in trading.

[@sabahtaha1746]

Absolutely Lance, better enter the trade at first then average up. target do not work go with the flow

[@tradergman6761]

The problem with a lot of independent traders is they do not have a setup that has a positive EV (statistical edge). It only takes one setup to make money. Master it!

[@davidedmundson8402]

When you are up to bat, do you decide whether or not and how you are going to swing before the ball is pitched? Or do you wait until is it thrown and take that new info into consideration before making your swing (or not and how) decision?

[@markettechniques]

I'd say before it is thrown you should have a 90% idea of what you are going to do. The last 10% is watching and aiming to this particular pitch. How I treat it personally

[@BretWickstrom]

Great comparison to betting the same with pockets aces vs any other hand. So many people just don't do the work to really figure a system that allows them to CLEARLY identify pockets aces type edge. They often just believe it or it looks like or feels like an A+ play and when they lose they either have zero confidence and stop and not allow the edge to work or they keep their size big not realizing they don't have an edge or worse revenge trade without doing more work to first understand what happened.

[@TheMellett]

Great content, don't see many covering this kind high level trading skill, also seems very similar to Tom Dante's Evolving 'R' theory.

[@LearnMore288]

Great one as always. Please keep these Pearls of wisdom coming. It’s something I noticed today trading. Couldn’t be better timing. Thx!

[@ssrwarrior7978]

Inn Options trading the reward/risk is pretty large so you can nail very good trades with Binay outcome .. thanks for the video.. I have lot of respect for you ..

[@shaunsprogress]

When he's talking about the trade moving towards target the risk gets higher, why not set up a moving stop loss so the risk stays proportional to the gains. Why is the risk at the breakout value?

[@searchingwithclay1301]

I was wondering the same thing.

[@ccmtrading9914]

Hi Lance... Is there a book or site you recommend for a better understanding of EV? I have tradervue... Does it have a setting for EV? Thx

[@ntbohl]

Awesome, awesome, awesome video. Win-rate does not always mean profitability. I will be doing a ton of research on EV and how it marries to R/R for my future plays. I am considering adding ES scalps to my strategy, extremely tight stops. It would be impractical to attempt to calculate this in real time, but as back-test I can identify the nuance in real time and use that for entry/exit on these scalps, and ensure that I'm minimizing my risk. Again, amazing video. So many new traders have taken this "diamond hand" approach, and it's honestly decreasing their leverage on a trade by such a high degree.

[@NoobNinja-p7w]

OMG> he revolutionized my thinking with this!

[@redbull19733]

Excellent video! Love both trading and poker

[@PortCapital]

I like the topic but dont like how the risk is being left the same from the initial idea. In all examples after first column ev id never use the original stop loss for those entries instead lower it substantially. If the trade is going to target its going to go to target and if not then i wanna get out quick and not lose more than needed waiting for the original stop loss.

[@thrls]

But then you have three different trades altogether and the thesis is different for each one. Your initial thesis is “this won’t break above/below that swing high/low” but by the third trade it’s something along the lines of “this won’t retrace to the lower timeframe pivot”, which is not a good trade considering there’s a huge chance it does indeed even wick beneath the pivot.

[@PortCapital]

@@thrls No the thesis is the same you have a expected move to a target. Why put such a huge stop if your waiting for later confirmation of this trade move?

[@ntomic1]

Great video. I'd love to hear your thoughs on why market dynamics are so that great entries usually don't last more than a few minutes or seconds and why retest on great entries are unlikely.

[@Dreamers12]

really valuable video. I got a lot of out from this video. thank for such a great video and I think the poker game example is very accurate. I think when the data is changing we have to make the decision accordingly. btw, I downloaded it already, so whatever it happenned to youtube, this channel or simple you just don't wanna share it anymore. I have it on my laptop. :)

[@FatCatsOfWallStreet]

What does he mean when he refers to the “box”???

[@JW-gw5ec]

The bid ask

[@leonw6463]

I love this video. I've been working on this recently as far as my starter position then adding as the position starts to work for me and getting full size if I get a pullback close to my entry with the stop above my starter entry candle.

[@manphoto1972]

Poker is really more complex than trading in my opinion because you had to bluff and beat opponents ( I was poker player not bad ...and now I really confortable to trade and estimate winrate and money management too) ...so play poker is a very good start.

[@lexrexrob]

thank you for making these videos...very helpful

[@georgemcduffey2622]

This reminds me of something I heard Tom Dante say, that Reward/Risk is bs. Not that you shouldn't have it in your plan, but after you've entered the initial R/R goes right out the window. I.e. Enter w/a 3/1 R/R, it goes up an R and now you have 2/2; Goes up another R and you're now risking 3 looking for 1. It's why I reduce the position (take some profit) on the way up on scalps and gradually raise stops on swings; Trying to keep the R/R in my favor (especially in 2022). As always, thanks for the video.

[@thrls]

Rolling R:R is goat

[@jarrell4878]

Dante the ledge

[@DavidSkerritt]

Good video. It would make sense if someone were to hold the correct price action stop on all the entries. I scalp and ES and use a fixed number of ticks stop depending on the volatility. Its just another way of thinking of visualizing the risk vs. reward on each entry.

[@jaymoneytrader]

Yeah I do the same thing. Whenever I add on if I can't take an equal amount of risk OFF my last contract I'm not adding another one. The problem know when the trade works they should be adding, but then if it starts to turn around, they ride all their add-ons back down to the original entry and of course, now Youve taken 2,3 times your loss and your afraid to add on cuz it doesn't work. But you just did it wrong

[@SF-fb6lv]

Thanks so much, Lance and SMB.

[@streetsharkz]

Great video. What is "The Box" though?

[@gomesdiogo]

I guess it is the tape but would be better if SMB/Lance came up to clarify

[@tuckebarry]

I think level 2

[@chigenerator]

Who would take a continuation setup and set the SL so far below? Obviously that completely kills the RR. The stop should be much closer to the continuation setup price, making for often even higher RR than the original setup, however, since we would be late into the trade, it's nearer to the TP, which obviously reduces RR and also reduces winrate. It's a complex issue.

[@SacredCASHcow]

high RR is overrated by gurus who like to cherry pick successful trades

[@lucapappalardo5574]

In the first example if I scale 1/3 of the whole position in bar B taking the first 10$ of profit and adjusting the SL at 2$ less (more or less the previous bar low) the new EV would be: (60%*5$)-2$ = 1$ so I'll keep running the 2/3 left of my size. Then at bar C, assuming a trailing stop at 2$ below and scaling another 1/3 of the position I might still have odds in favour to let run the remaining position untill stopped EV= (75%*5$)-2$= 1,75$. And the same would apply if using trailing SL wijtout scaling. Is that correct? Thanks in advance

[@rinkukhamari]

thank you for this ground breaking tutorial. 🇮🇳

[@r1xTer]

that was gold, thank you for sharing!

[@jerryc7303]

Big fan of you, hope I could be one of SMB traders one day

[@ko2089]

Great video chief!!🔥🔥🔥

[@caw5v]

I understand that the value is to reassess your probability throughout the trade, however it would be hard to stick to these calculations when they’re all arbitrary. It’s not really that different than making sure you have a good risk/reward ratio and using intuition to close or keep the position open. After all the initial probabilities are intuitive.

[@leowang8008]

Tanks a lot Lance!🙏

[@FoursideAssetManagement]

Great explanation and framework, thank you lance/smb!

[@nc1975]

PLEASE PLEASE PLEASE ask Lance to make a video of his setups. So he told us about his Mean Reversion setup. And I also saw reference to a Channel Trade setup. Please ask him to grade the setup as well. And tell us his A+ setups.

[@adampage8508]

So dca into a position will increase ev.

[@douglasvouchell3565]

I have been subscriber for a couple years. I know the different traders use different indicators and would really like to know what the consensus with the traders as to specifically why that use the indicators and why. Thank you for intertaining my question, Best Doug

[@Lugenfabrik]

This video was outstanding.

[@kuwrom]

Amazing content, I like how this technique can remind you to think in levels and where the market could be going and to have a clear mind of what’s going on now.

[@Vemrah]

amazing video - perfect teaching style!

[@ROMAN-oy5ju]

This is an awesome Vid. Thank you guys.

[@matthewvalencia3186]

Lance, what do you mean by “the box” in the “relating it back to trading” slide?

[@RossenPinkas-y3q]

How do you calculate The EV on compounded account?

[@jayhayden9838]

TY for the video! i am not sure of what your definition of EV is here and how to calculate. If you have time would you be able to explain and how to calculate?

[@stupidmg]

Expected Value = (Reward * Probability of the trade hit) - (Risk * Probability if the trade fails) For instance : @ 8:00 Bar A, the probability of the trade hit = 30%, Potential reward = $25. the probability of the trade fails = 70%, Risk = $2. EV = 30% * $25 - 70% * $2 = $6.1

[@searchingwithclay1301]

@@stupidmg where is he getting the 30% win rate from? Or more importantly, how does one calculate this rate for themselves? Obviously, if we where to have a trailing stop loss the EV would go up, unless the win % is negatively correlated to the stop loss. So, why not have a trailing stop loss and enter at point a and b and also possibly at point c?

[@stupidmg]

@@searchingwithclay1301 I think he just made up the win% for the argument sake. Based on my experience, the win% is negatively correlated to the target you set, the further away the target is from your entry, the harder to hit. When it comes to lance's videos, it's all about learning the concept, Obviously you could apply trailing stop in said example, the win% and the EV would change, but his point would still stand. Different entry points would yield different EVs, higher win% does not necessarily mean higher EV.

[@searchingwithclay1301]

@@stupidmg Right on. Thanks. That's what I took from the video. I guess you just need a lot of trade history to get a ballpark on your win % for any trade/entry. That seems to be where the poker analogy breaks down. While the win probability constantly changes in poker, it is always a known/exact number.

[@t_doc]

So basically assigning an expected value is relative to the cost and perceived benefit of a trading position and made by the trader on perceived probability in the given direction and predetermined target.

[@dennislindblom1383]

what do you mean when you say "Box"

[@ajk892]

In the breakout example, couldn't you just raise your stop (reduce risk) after bar B to increase your EV for bar C?

[@PortugueseKnight]

Just love this content maybe one day Im trading with you guys!

[@johna2323]

How do you get the ev calculation? What formula are you using to get eg $6.10?

[@Itradeglobal]

Another great video from Lance 👍

[@josephnardino193]

some people do not even know how to trade but they have to study & pass the Trading Exam and then HOPE they will become traders.......... crazy aint it

[@t.j.mueller--artfromabove1837]

I would love to watch Lance break down a few of his A+ setups/trades. That would be monumental.

[@tshaolin971]

The loss trades are more informative.

[@andrewk3634]

How do you calculate the win% on these charts?

[@mac582]

Thank you Lance.

[@Nepyragas]

MORE SUCH VIDEOS, PLEASE! :)

[@lukelozano4870]

Really loved this. Thank you!

[@tylertrovato386]

Thanks for the video. I do have a recommendation for a new video topic. It would probably be pretty difficult. Can you do one of when to cut your loss or how to go about it for specific set ups. Ex cutting as soon as it test risk vs letting it test a few times vs letting it break and seeing if it reclaims. Just a thought. Thanks!

[@jayalan9348]

Definitely difficult since their risk will be different from yours. Your best bet is to stick to a plan based off your port size. Then review your trades after and see how you can do better next time. I personally let the chart stop me out instead of the amount or %.

[@RandyJohnson777]

Making it real this is gold

[@billmetzger8414]

I would like to see a video on the best strategy for passing a Prop Firm?

[@michaelwalstedt]

man that poker vid in the beginning is amazing haha

[@jamesschro8485]

Lance, If you're currently trader B who waits for confirmation but you're working on trying to become trader A are you saying to keep your max risk the same even though you are getting in before confirmation so your EV is higher? Or are you saying lower your max risk when getting in before confirmation but shooting for the same EV as you typically would as trader B?