The Issue of Large Stop Loss and Small Stop Loss

The advantage of a large stop loss is a high margin of error. The downside is a large loss in a single instance.

The disadvantage of a small stop loss is a high trigger frequency and a low win rate. The advantage is a small loss per instance, which is psychologically easier to accept.

Some friends say they want a small stop loss and a large profit. Well, in this world, there are indeed miracles. Those who buy a two-dollar lottery ticket hoping to win a five-million-dollar prize are thinking about small investments yielding large returns.

Taking an example with a total stop loss amount of 1 million: (assuming the margin for both positions is the same)

1. Set a single stop loss at 1 million. Then your win rate will be incredibly high. For example, 9 wins and 1 loss.

2. Set a stop loss of 100,000 each time. Then your win rate is generally 6 wins and 4 losses.

Similarly, if you trade ten times with a stop loss amount of 1 million each time, which is better?

The conclusion is: you must choose your preferred stop loss amount based on your personality, strategy, and countless experiments. I have proven through years of practice that a small stop loss suits me, but it may not suit you.