Still trying to square optimal position sizing with stop loss placement. If my stop is wide because I'm trading a higher timeframe, does that automatically mean my position size must be smaller, or is there a way to justify a larger size if the conviction is high?
A wider stop almost always means a smaller position size to maintain the same risk per trade. Conviction doesn't override basic risk management principles.
That's a classic dilemma. While conviction is good, standard risk management typically ties position size to stop-loss distance to maintain a consistent risk per trade. Deviating from that usually means either accepting higher risk per trade or re-evaluating the trade setup for a tighter stop.
That's a classic dilemma. While conviction is good, standard risk management typically ties position size to the stop loss distance to keep your dollar risk per trade consistent. A wider stop usually necessitates a smaller position if you're aiming for a fixed percentage risk per trade.
It's generally about risk per trade, not just conviction. A wider stop implies higher potential loss per share/unit, so to maintain your percentage risk, your position size needs to decrease proportionally. High conviction should translate to identifying high-probability setups, not necessarily bending risk management rules.