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One method that I favor is to adjust the AVERAGE size of your trade based on
your reading of current overall market strength. IF I have a strong timing
signal on the overall stock market, I normally put on a 4 unit trade.
Depending upon the ensuing price behavior and stop placement, I'll either
take off 2 units and allow 2 units a wider stop OR take the entire 4 units
off at once. IF I have an exit signal for the overall market, I generally
make no long-side stock trades. The tricker area is when I have a weak entry
signal to the overall market. This exact condition has held according to my
signals since 2nd week of February. During this period, regarding position
size: 1) My average trade has been 2 units in size (as opposed to 4), and my
expectations of profit are lower, and expectations of volatility are higher.
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