Common Understanding
I hope I'm not too rude in interrupting the diswasher thread with my first post, but back to the prior discussion.
Soc, let me say that I have enjoyed your posts and am grateful that you are willing to share. I believe your insights on right on the mark, since I have traded long enough not to be a newbie but have not become experienced enough to be profitable. Your points are very well taken and remind me much of what Mark Douglas points out in his books. However, I did not appreciate that subject or even want to hear it until I spent enough time in the valley of despair to know that something ain't working right. If Kunal is somewhat new to trading, he might have not yet gotten to the point of appreciating the truth of your insights. Therefore, keep posting. It is not falling on all deaf ears. Some of us, perhaps many, are very receptive.
Regarding your statement about "tight stops", in order to better understand your points, I would like to come to a common understanding about what you mean. For example, would you say that a person who had a $100,000 USD account, who was trading 1 contract of cotton and planned to position trade - holding his position over many days, would have a tight stop if it was placed 200 points away? That would amount to a $1000 USD risk but yet only be 1% of his account at risk. For a person with a $10,000 dollar account, that would be 10% risk. In other words, is your definition of a "tight stop" subjective or is it an objective standard.
Exploring further, should the person with the $100,000 account use a 50 point stop, for a loss of $250, as a tight stop, or something even closer? Also, what about the concept of volatility. If the 10 day ATR of cotton is 100 points, would a 50 point stop be too tight?
I have always wondered if your position about tight stops works best. However, there are so many experts who say that amateurs use "tight stops" and suffer big draw downs because of getting stopped out so much. For example, Chuck LeBeau, fairly well known at least in the States, advocates stops based on ATR, which tend to be wide. Likewise, Chick Goslin uses very wide stops. However, I understand that Paul Tudor Jones tends to have 70 - 80% losses, so he must be using very tight stops.
I like your concept of better timing and entry with tighter stops since it would keep losses down. But, in order to understand each other, we need a definition of what tight is - objective or subjective depending on account size, etc.
Mike
