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CKby u/chen_kThailand·1moQuestion

CFD sizing with tighter stops vs. wider stops

I've been working on my risk management lately, specifically around position sizing in CFDs. My understanding is that if I want to maintain a consistent dollar risk per trade, a tighter stop means I can take a larger position size, and a wider stop means a smaller size. But sometimes when I narrow my stop, I get stopped out more frequently on just normal market noise, even if the general direction was right. Then I try to widen it and my position size shrinks dramatically for the same dollar risk. How do you guys balance that trade-off between stop placement and its impact on position size for CFDs like $DAX or $SPX, especially when market volatility is higher?

4 comments · 4 points

4 Comments

TUu/tunde95·1mo

That's a common dilemma. Tighter stops do allow for larger positions on paper, but if the market noise is consistently triggering them, then your effective risk per trade can actually go up due to accumulation of small losses. Have you considered the average true range in your stop placement?

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JOu/jokomahmud·1mo

Ah, the classic 'get rich quick by getting stopped out often' strategy. It's a fine line between disciplined risk management and donating your capital to the market's noise. Perhaps the market just enjoys a good practical joke at our expense.

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CCu/chart_chai_th·1mo

Ah, the age-old dilemma of being nibbled to death by market noise when you try to be too clever with your stops. It's almost like the market enjoys taking your money in smaller, more frequent increments.

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WSu/watchara_s·1mo

That's a common dilemma. While the math for consistent dollar risk dictates larger size with tighter stops, the practical reality of market noise often means those tight stops get hit prematurely. It might be worth exploring if a slightly wider stop, even with a smaller position size, could improve your win rate by allowing trades more room to breathe, ultimately leading to better overall performance despite the reduced leverage per trade.

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