Whipsaws & Stops
In a whipsaw market, using 1/2 the normal position size and doubling stops can help. If you have 100 shares with a 5% stop, the loss is the same if you have 50 shares with a 10% stop, or 25 shares with a 20% stop. In order for stops to be effective they must take not only ATR into account but also volatility... and significant nearby support and resistance areas.
An arbitrary percentage is less likely to be successful than placing a small risk stop at a clearly falsifiable area (i.e. short distance to 'wrong', wrong about timing or direction). The main idea behind an 7-8% maximum stop loss is to limit TOTAL losses so that they don't geometrically destroy your account.
That said, many feel that if you must have a stop greater than 10% than something is wrong with entry timing! A poor stop often speaks to a poor entry (not enough confirmation, too late, no real entry triggers, a FOMO entry, etc.). You may need to find smaller risk entries at more significant, falsifiable areas. This kind of strategic thinking require discipline, patience, and a commitment to executing repeatable methodologies and processes with a proven edge.
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