if you reduce your bet size and have a tighter stop you lose less on each losing bet. but if your strategy is volatile you might lose more over all due to the tighter stops
Apparently Minervini thinks when the VIX goes up you should tighten your stops? Not sure I can get on board with that idea. Maybe if you're trading the indexes themselves,SPY,QQQ,futures etc. but individual stocks I dont think it makes much difference.
Because not one single person is addressing the actual question. It's all meta market related knowledge because people on the internet can't help but spew any little bit of knowledge they do have all over someone else' screen. I figured the question was fairly simple and could be answered in one sentence.
Yes you still lose .25% of your account, however you now only need price to increase .5% to realize a 2 to 1 risk/reward. The percentage of winning trades might increase. You have to adjust your strategy to what the market is doing. As a swing trader I'm sitting mainly in cash right now waiting for a change in trend. In trading doing nothing is doing something!
Tighter stops will increase trade frequency and the failure rate of a trade (ceteris paribus). In general, a tighter stop can reduce success rate and require bigger profits, so the advice to reduce the magnitude of your stop is like general trading advice. As market conditions become less certain, the magnitude (and uncertainty) of price swings increases. In other words the realized risk is up (market conditions), so you should trade the less volatile stocks. You can't (its difficult) trade the riskiest stocks with super tight stops. [Disclaimer: All above points assuming D1 risk!] Smaller stops let you trade smaller moves, because (assuming R:R is unchanged) a closer stop means a closer take profit. The opposite advice is to widen out stops and keep trading the riskiest stuff... What does THAT do to your pnl?