""To accomodate the risk, he lowers the amount of capital invested.""
I used to do that, and still do on occasion, but have found lately, especially with the wildely volatile "penny stocks" that it is more lucrative for me to set a "relatively" tight stop, and then buy in lower if the momentum looks good. It is a major conundrum where to set your stops, but imo its crazy sitting on a 30% loss in the hope that a stock comes back. Sometimes one gets lucky and it does come back, but more often than not it doesn't. I prefer smaller stops as my win lose ratio plus the size of my wins more than makes up for the smaller losses on the stops. Having said that, I do lower my investment from my normal trading parcel size when trading the penny stocks, and I also limit the number of trades I make on the penny stocks, but geeze its difficult not to be tempted to make more trades when a 1 pip move can give you a 10% return (or loss)
