Reducing Risk with a Bigger Stop Loss? Conservative or Aggressive Volatility Adjustments


We do a case study on how to adjust a strategy with a $300 stop loss on the e-mini Nasdaq. Is it better to use a volatility filter or is it better to increase the stop loss? For an individual strategy, the conservative approach is better. For a portfolio, the aggressive approach is better. If you just trade one strategy, you manage it differently than if you trade multiple diverse strategies in a portfolio. I have found that micro managing each strategy too much hurts the portfolio by "overfitting" on a strategy level. If you trade an individual strategy, you manage the risk of that strategy. If you trade a portfolio of strategies, you manage the risk of the combined setup.

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