the stop loss should be the worst case scenario, like let's say you enter and then the market heads straight for the stop, case in which you can't react in any way but take your loss. however, the better you know your setup and what need to happen, the quicker you realize when the trade is not really working, the quicker you take your loss, which in most normal cases can even be 1/3 of your stop (risked amount), and only by doing that and having a reliable setup can put you in advantage (ie have an edge). the key in trading is recognizing when the trade is not working and taking the smallest possible loss.... there is no other secret... When you do that, you can risk more than the classical 2% of your account. You can risk 10% and go for a 1:1. If you take your loss on average about 1/3 of your stop, you actually lose 3%, maybe less, but still take 10% wins or maybe more, depending on your gut...
I don't care for options due to the large spreads. Most options have .05 spreads, whereas the underlying generally has a .01 spread.
Money management comes before good trading. It is the foundation. Without it you will fail regardless. Thinking your a good trader just ramps up your possibility for destruction. I have always been the most dangerous after long winning streak. I don't believe traders can make a binary decision better than a machine or with less emotion or with more discipline. A good trader is someone who is good at taking losses, not the other way around. A good trader behaves like a machine. No thrills, no fun, no ego, just executions.
I'm not sure what you're getting at here. I have a small account and I am doing very well. But the reason is this: I trade very few positions relative to the big boys. I can get in one, two or three positions that are high probability. I am sure the big johnsons have to fan out into dozens or even hundreds of positions generally. Furthermore, I can pick a (relatively) lower volume stock or two if I want, something else an institutional/hedge fund investor cannot do. This allows the small guy to whip up on the SnP, which is my benchmark, and leave virtually all the big boys back at the starting line holding their wanger. Imo: If you can't make money while you're small, You can't make money at all...