So if you buy a cup of coffee, you have to take that off of your total liquid net worth and your stops get adjusted ?
I still am unclear, for simplicity lets say your net worth is 100k. So you are willing to lose 2k max on the es trade right ? But say your other trade is soybeans and you lose 2k and stop out. now your LNW is 98k so does your stop point on ES adjust to $1960 or still stay 2k ?
Am I mistaken in thinking that Scaling IN and averaging down are 2 different methods? Isn't scale in is adding size to a profitable position where averaging down is vice versa?
I am assuming one does not care about where his entry is -- that is, that you are always just long or short from the most recent price (something PTJ suggests, which I think is very good advice), so that there is in effect no such thing as "open" vs closed profit. In any case, I agree with your statement in practice, but remember I am just making a point for theoretical justification. What seems to be continuing to happen on this thread is that 1. B1S2 makes blanket statement. 2. Others respond with theoretical refutations. 3. B1S2 refutes these responses with personal examples of his own individual trading methods, thereby somehow justifying the ubiquity of said statement. Round and round we go.
I typically use the starting net worth amount and stay with it unless there is a larger group of losses across the markets I am in and then I reevaluate. I am generally in 5 or 6 markets at once, so I could potentially have a 10 or 12 percent drawdown. I would tell you that by diversifying though, I don't end with 6 losers at once and the account is growing through diversification and call selling continuously.
It's a question of semantics. I consider them to be the same. I scale in --or average down at better prices not worse prices.