Risk Management & Position Sizing

Is a 5% Stop Too Tight in Today’s Market?

I got a great comment recently:

“It’s just that -5% is not much in today’s markets. Not enough not to get whipsawed. What’s your view?”

Here’s my answer.

I disagree.

There are still plenty of setups where you can risk 5 percent or less.

If that wasn’t the case, traders like Kristjan Kullamägi wouldn’t be as successful as they are.

Same with Mark Minervini. He won the U.S. Investing Championship in 2021. He’s still finding tight entries in today’s market.

It comes down to tactics and timing.

This TSLA example is a good illustration.

On the right side of the base, price was tightening and structure was clean. That created multiple opportunities where risk could be kept at 5 percent or less.

Recently (2025-2026), with many of the big winners already extended in Stage 2 uptrends, it’s a different environment.

If you’re only buying standard breakouts here, then yes, your stop likely needs to be 7 to 10 percent.

But that’s just one way to play it.

A lot of the big winners from 2025 to now in areas like computer data storage and telecom, names like LITE, SNDK, MU, CIEN, WDC, were harder to trade with tight risk using traditional breakout entries.

Their ADR% was higher, and there was less contraction into the pivot, so traders had to adapt.

Pullback entries. Low cheats. Intraday entries like ORB.

Those allow you to define risk much tighter and still participate without getting shaken out.

CIEN is another good example.

After an episodic pivot on earnings, price ran, then tightened sideways. That created a clean opportunity to enter with defined, tight risk.

This isn’t about forcing a fixed 5 percent stop on every trade.

It’s about finding entries with proven setups where tight risk actually makes sense.

Timeframe matters. Setup matters. Execution matters.

And just like Minervini, I’m not rigid with it.

Some trades might be 3 percent risk. Some 5 percent. Some 6 to 8 percent depending on the setup.

I’ll even go up to 10 percent and adjust position size, but I prefer tighter risk when the setup allows it.

Another good example is NVDA in 2024. I had about 6 percent risk. Someone else could have taken the same trade and used the breakout day opening range low as a stop and risked closer to 1.82 percent and likely wouldn’t have been stopped out.

Like David Ryan often emphasizes, the best trades tend to be hard to buy, work right away, and don’t look back.

The principle stays the same.

Keep losses small. Don’t let one trade do real damage.

And at the end of the day, we all trade differently and that’s ok.

That’s what makes a market.

Different styles can still make money.

The Art of Sleeping Well: Risk Management Like Bruce Kovner

“Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I’m getting out before I get in. The position size on a trade is determined by the stop, and the stop is determined on a technical basis. For example, if the market is in the midst of a trading range, it makes no sense to put your stop within that range, since you are likely to be taken out. I always place my stop beyond some technical barrier.” — Bruce Kovner, Market Wizards

The Lesson

This quote captures one of the most timeless principles in trading: control risk first, profit comes second. Kovner didn’t guess where the market might go; he defined exactly where he’d be wrong before entering the trade.

The Example: Translating the Quote Into Action

Let’s bring this to life with Micron (MU).

• Entry: $130.07

• Stop: $112.58

• Stop Loss %: 13.45%

• Account Size: $100,000

• Target Risk per Trade: 1% (or $1,000)

If we simply bought any random number of shares, a 13.45% stop could easily blow through our target risk. But instead, we let the chart dictate where the stop goes — just below a key technical level — and then we adjust our position size so that the dollar loss stays within 1% of the account.

That’s how we arrive at 50 shares, risking $874.72 total.

Why the 13.45% Stop Makes Sense

Looking at the chart, you can see how the stop sits below prior support and the breakout zone — a level where, if price falls back through, the trade idea is invalidated. That’s exactly what Kovner meant by placing your stop beyond a technical barrier.

Setting the stop inside the range would’ve exposed us to random volatility and a likely premature exit. By respecting market structure, we give the trade room to breathe — but by managing position size, we keep risk capped and consistent.

The Takeaway

The professional mindset isn’t about predicting the next big move — it’s about controlling the downside so you can stay in the game long enough to catch the upside.

Every trade starts with two questions:

1. Where am I wrong? → defines your stop.

2. How much am I willing to lose? → defines your position size.

When you combine those answers, you get clarity, consistency, and, as Kovner said, the ability to sleep at night.