Stop Loss percentage for intraday banknifty short straddle

Usually people recommend a stop loss of 30% when trading the intraday bank nifty short straddle. But I did some backtesting (for the past 5 years) on stockmock with a 30% SL and a 20% SL and found that 20% SL gives a much better return though the win % days is slightly less.

Last October I traded with a 30% SL and made a decent return. However Nov '21 volatility caused a big drawdown. But based on backtesting, a 20% SL seems like a sweet spot.

What are your suggestions?

SL is a very personal thing for me. It usually depends on two things.

  1. Your Account size
  2. The volatility of the underlying.

Banknifty being high vol does require tighter SL if your account size is small.

But whatever be the case its great you’re tuning your SL as per your preference and experimenting. Try it with even more numbers and check.

It is impossible to answer this given that there are so many other variables that you have not taken into account in your question. You will have to look at the setup in its entirety giving due importance to all the moving aspects before you can narrow down to any specific parameter. Also, going by the economist style ‘keeping all other factors constant’ will not usually work out favourably. You have rightly pointed out an issue that you made decent return in October but not as much in November. Question is, was it just the SL % to be blamed or just volatility or a confluence of several other factors that you may be ignoring. There is a lot to unpack in your question. May be additional details will help community members to help you better.