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EURUSD Scapling

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monpere View Post
You are trading your equity curve not the market. You should not be placing stops based on the amount of money you are comfortable to lose, you should place stops where it technically makes sense in the market, whether that is 10 ticks away or 100 ticks away. You should not arbitrarily say, I can afford to lose 40 ticks, so that is where I will put my stop. The market does not care how many ticks you can afford to lose.

This is where position sizing comes in. You should be placing your stop according to market analysis, then size your position accordingly to achieve or maintain the desired dollar risk. The formula is: PositionSize = DesiredDollarRisk / StopSize. (Search for Van Tharp's R-Multiples to learn more)

I also covered at length here:
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