Its simple math for trading given a couple of assumptions.. Performance is based on compounded return... You trade with a fixed reward to risk ratio , i.e 2-1 ,which translates to as small as 4%-2%, up to 100% vs 50%..In other words you may feel comfortable risking 2% to make 4%,or maybe risking 50% to make 100%.. Thats your call,but the important thing it you choose the ratio and stick with it. Marks main point is when Volatility increases,your hit rate will fall as well...Maybe in "normal" markets you believe your success rate is 50%..Mark believes in times of high volatility your success rate will drop.Could be 40%,30% or less.. Should you still maintain you 2 -1 reward to risk ratio,there is one optimal 2-1 reward to risk depending on your hit rate. At a 50% hit rate,the optimal risk reward per 10 compounded trades is 48% vs 24%..At a 40% hit rate,your sweet spot is 20% vs 10%... As you can see,the risk,i.e stop should be reduced significantly as your Hit rate drops and you keep your risk reward ratio the same.. Its spelled out on page 309 of his book,Trade like a Stock Market Wizard... Keep in mind he is assuming compounding,a fixed reward to risk ratio of 2-1 and your success rate dropping in volatile markets. You may not agree with his approach,but the math is "there" if you trade in a similar framework
Actually I'm a swing trader. Like BNF. I just made 42% return from my MSTU double down Thursday...would rather have held but I needed some beer money. How you punters missed that trade just proves how inept you are. Day traders day trade because they can't afford not to... They can't hold margin overnight. The amount me and @johnarb are currently down would probably give you guys nightmares lol So don't go throwing around these accusations. Most of you will never experience what it's like to go big.
Trader?? You are the classic retail investor, and that's not meant as an insult. The crazy part is you are most likely down on your position, despite the 42 percent return on the average down.. You are no John Arb and we both know you are most likely long less than 8000 notion..
I can honestly say I have never seen a trader take more 50 percent hickeys than WXY..Its impressive Why the guy doesn't close his eyes and buy vol is beyond me..
it’s less about the dollar risk and more about trade quality. Tighter stops mean you're only taking trades with tighter setups, potentially higher R:R. In choppy markets, giving less room can help cut losers quicker and avoid whipsaws. Have you tried backtesting tighter stops in volatile conditions?
None of you can read a chart/price action so how the heck are you going to make a trade? Lol. The way a swing trader should look at it is sizing down your risk is only taking away future profits. If anything a swing trader should be averaging down. If you're trading something you're not willing to hold or you place stops then it's basically gambling. I manage risk by size of position not by price.