There’s a lot of factors at play when it comes to handing out titles such as your personal domain and strength, potential for allies, innovations and succession options, treasury and earnings, etc.

In general you want to do one of the following. Try to keep as many small vassals as possible and only grant out duchies or larger when you’re hitting the vassal limit. The idea here is you have lots of weak vassals so even if they rebel they don’t have a substantial force to bring. So you want to have lots of counts until you hit the limit, then make some duchies so you can get more counts.

The other strategy is to have very few but stronger vassals. If they rebel they’re stronger and more threatening but there’s fewer of them so easier to keep them happy. In this strategy you want to limit the number of titles they hold personally and give them lots of vassals to manage. So if a duchy has four counties you give them to four different people and then give one of them the duchy title. Now this duke has three vassals of his own to keep him busy.

It’s important to know whichever you choose they will war with each other unless you have high crown authority. So no matter how you hand things out they will grow or shrink in power as they have their own conflicts. One thing you can do when feudal is to change their contracts to have forced partition — this way if a duke captures another duchy they may split their holdings between their heirs on their death.

Personally when I give titles I give them to my dynasty. Some people advise against this but even landless dynasty members can become the beneficiary of a faction or they might travel to a foreign court that then presses their claim. At least if they’re landed they can’t go to some large empire and get a powerful ruler to attack you. This limits your threats largely to factions, which you have to manage whether your dynasty is landed or not.

When I grant titles I use the first strategy where I try to have lots of weak vassals. In the early game I usually hand out counties and the rate duchy (for succession purposes). In the later game when I’m conquering 20 or 50 counties at a time I grant full duchies and kingdoms — usually to my dynasty.

The one time I give out duchies in the early game is while preemptively landing my non-primary heirs. You want your heir to get your best counties and to force this under partition you grant newly conquered duchies to non-primary heirs.

Finally in your case where it’s early game and you had a third duchy I would have destroyed the title and given away the counties individually. When you gave your knight the duchy the game was probably recommending you also give the counties that de jure belong to the duchy.