My guru said oil would go to 89 next week and then 85 the week after the next. So I have initiated a short position at the price of 92.70.
Do I use a stop? No. If you look at the "CL redux" thread, there is a guy who shorted again and again at around 93 yesterday and today, kept getting stopped out. Those 20, 30, 50 cents losses on a large number of contracts are pretty big. While in here in my case, I didn't even bother with a stop. Let it fluctuate. Yes, the key word is fluctuate. You don't want to be stopped out in fluctuations. So I sleep well and let the position work out by itself. In one sentence, I don't intend to let stop cause losses.
something like that. I take care of the losses by taking away the loss-causing stops, the winners will naturally come back to me. If I let the stop take me out of the trade, the winner will not have any chance of coming back.
My guru also said the price won't go back to 97. He told me not to worry about a little backlash from the quick drop from 97 to 92 in two days. My guru told me a story of what happened in 2011. He said he was shorting oil at above 110 and was constantly stopped out by 20, 30, 40, 50 cents. Then one day, he got tired of stops, and he got rid of them. He let the short position sit there for a while and it eventually came down to 80. He emphasized Jesse Livermore's famous saying: it's the waiting that makes money. He added: In order to wait, you must not be stopped out. So he never used stops ever since.
Remember when oil dropped from 140 to 40, then it came back to 115?? Try not using stops then... Also a little political mess somewhere, or a tanker locking down Suez, and oil jumps 10-20 bucks...