Larry's Market Comments at Critical Points

[exp]

my best answer is this: you have to adjust your trade position size so that

max trade loss=(max stop loss %)x(position size as % of acct)

is acceptably small...for example if your
max stop loss %= 80% of position
position size= 50% of acct

then you are facing a potential loss of 40% of acct on a single trade...if that's too high then either you adjust stop loss or you adjust position size (or both)...otherwise you face a near wipeout if you get three bad trades in a row...
an exaggerated example perhaps?...well, it has happened to many traders unfortunately...