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Al says that is we normally risk 20 pips, but a trades price action stop is 40 pips away from entry , we should lower our position size to half of what we normally trade
Yes!
what if a trades' price action stop loss is 10 pips away from entry, and we normally risk 20 pips, should we increase our position size, or keep it the same and just tighten stop loss to the proper price action stop loss?
The less moving parts the less mistakes so easier to stick with your normal position size most of the time. Regarding stop-loss placement, you can't tighten it if you use a PA stop and, if you use a money stop, by reducing it you are reducing your probability as well.
Al says that is we normally risk 20 pips, but a trades price action stop is 40 pips away from entry , we should lower our position size to half of what we normally trade
Yes!
what if a trades' price action stop loss is 10 pips away from entry, and we normally risk 20 pips, should we increase our position size, or keep it the same and just tighten stop loss to the proper price action stop loss?
The less moving parts the less mistakes so easier to stick with your normal position size most of the time. Regarding stop-loss placement, you can't tighten it if you use a PA stop and, if you use a money stop, by reducing it you are reducing your probability as well.
Sorry to awaken an old thread. I must have forgotten to press reply.
"Regarding stop-loss placement, you can't tighten it if you use a PA stop and, if you use a money stop, by reducing it you are reducing your probability as well."
From what I understood, Al says it's okay to open a trade in a bull where max loss would be when 20 pips is hit. So we always take that position size and our max loss is 20 pips. In a bull, if the proper price action stop is 12 pips away at a previous major higher low, however, we should open a trade with the same default position size, put stop there instead of waiting for it to travel 20 pips down and be hit. Is this correct?
Is this correct?
Yes!
Hi there! One question I have on the position size which was discussed in this thread...
Al mentions to only risk 1% of your account per trade, so for example I have $100k account I would be risking $1000 on any trade. Now my position size would then be determined by my stop placement would it not?
If my stop is $1 away my position size would be 1000 shares but if my stop was $2 away my position size would be 500 shares, however I would only ever be risking that 1% of my account.
Could you help clarify? Thanks!
Now my position size would then be determined by my stop placement would it not?
Yes!
If my stop is $1 away my position size would be 1000 shares but if my stop was $2 away my position size would be 500 shares, however I would only ever be risking that 1% of my account.
You are risking 1000 USD in both situations so you are ok with the 1% rule.
what if a trades' price action stop loss is 10 pips away from entry, and we normally risk 20 pips, should we increase our position size, or keep it the same and just tighten stop loss to the proper price action stop loss?
The less moving parts the less mistakes so easier to stick with your normal position size most of the time. Regarding stop-loss placement, you can't tighten it if you use a PA stop and, if you use a money stop, by reducing it you are reducing your probability as well.
Ok great but maybe this comment is where I get hung up on then. So in my original scenario where if you risk $2 it would be 500 shares and $1 would be 1000 shares, what if the risk was only $0.50 - it should be 2000 shares right, which would be $1000 risk still.
Perhaps I misread the response to this comment but it sounded like if the risk was tighter you did not increase your position size, only decrease if the risk was wider. If what is mentioned above is true I feel like you would increase your win rate but you would end up scalping out of your swing position too often because your stop is too wide
So in my original scenario where if you risk $2 it would be 500 shares and $1 would be 1000 shares, what if the risk was only $0.50 - it should be 2000 shares right, which would be $1000 risk still.
Yes, this is the correct theory.
he less moving parts the less mistakes so easier to stick with your normal position size most of the time. Regarding stop-loss placement, you can't tighten it if you use a PA stop and, if you use a money stop, by reducing it you are reducing your probability as well.
This was more about practice, departing from the theory and aimed only to reduce complexity. If you feel other practical approach is better for you, go for it!
Ok great!! Thank you so much for clearing that up it was definitely distracting me!
