Hey guys. Rudimentary question that Im trying to wrap my head around. You will often hear swing traders like Mark Minervini say in rough times like this to not only reduce position size down from risking 1% of acct but also to chock up on the stop loss and instead of giving it 8% say to give it only 3% to lose less money. I cant wrap my head around how this will make you lose less money. Say you risk 25% of what you normally do in markets like this (so 0.25% of your account) it shouldnt matter where youre placing your stop. It's still only gonna stop you at .25% of your account. So I dont get how chocking up on stops decreases the amount you lose. Thanks
I can understand risking less on overall account but reducing risk on every trade don't make sense to me. If risk per trade been working well, don't change it. Only way to reduce risk is to enter on deeper retracement. You can always hedge.
Reduce risk by sizing down to realize a loss? I just doubled down on MTSU and lowered my break even by half. If dude is a swing trader then he should understand downturns such as this are a gift...they are an opportunity to improve your position and increase future profits.
Risk should be viewed from the context of the trading strategy. Mark's trading strategy uses a method developed by him called 'Specific Entry Point Analysis' (SEPA}. This approach gives importance to timing of the entry into the position. So, I think his statements on current risk situation is related to his approach. Unless this is discussed as per the parameters of this approach, it does not make any sense on this forum.
What you refer to as being a "trader', it is just a rudimentary, inefficient, ineffective form of swing trading adopted by punters who are under funded. I swing trade for maximum options premium, not only capital gains.
"rough time like this"? For long/bull only traders, yes, it's a rough time, but usually, swing (and day) traders trade on both sides of the market, and market like the one we have now is what every trader wish for. Market is rough when the volatility is low.