Q: If a stock is a real winner, and if it was purchased using a 1% risk with a 25% stop, as it rises in value the risk will increase beyond 1% if a 25% stop is adhered to or the stop will get tighter if the 1% risk is adhered to. This assumes the whole portfolio is not growing by a similar amount. Example: I bought a gold position at $4800 with $1200 risk and a 25% stop. That position is now worth $12,000 and my 1% risk is now $1280. If I manage to the risk (never wanting to risk more than 1% on any one position) I will get stopped at a 10.7% trailing stop. If I manage to the 25% stop then my risk or loss will be $3000 or 2.3% of my total portfolio.

My objective is to get a 10-12% return using a newsletter strategy and being as conservative as possible. Thus, I manage to the 1% risk and let the stop tighten as a stock strengthens. I'm wondering if this is a prudent strategy or if it's best to always stick with the 25% no matter what.

A: You are misunderstanding the 1% position sizing. If you have $100K and you risk 1%, you are risking $1000.
But since your stop is only 25% of the value of the stop, your total investment is $4000.

What's important is that you keep a 25% trailing stop. Let's say you started with a $20 stock with a stop
at $15. The stock now goes to $60 with a stop at $45. Let's say it is your only investment.

You have $96K in cash. You position is now worth $12K so your total equity is $108K. Your stop is
now at $45, so you have $3K worth of risk-- which is nearly 3% not the original 1%. I've never said
anything about scaling out to keep the total risk at 1% -- just the initial risk.