One of the biggest improvements I found in my own personal trading was when I made a shift from looking at trades as discreet big events to a sequence of smaller trades using position sizing. So I'd rather do a sequence of 10 50- share trades vs 1 500-share trade. Not only do you learn faster from your mistakes, but your stop loss costs are much much smaller upfront, which builds trading confidence. Make sense? My most profitable days in day trading this past year have used that strategy. Basically I will put on a sequence of 3 to 5 trades, like rungs in a ladder, to position size and scale-up for those that go my way. Same for legging out of exits. Do any of you use a similar strategy, whether for day or swing trading? Some may use 'starter' trades.
Yes. At several of the funds I worked at, I literally had to build into/out of positions because of the size wrt available liquidity throughout the day. Never heard of anyone on buy side going in/out in 1 shot
How about your least profitable days? I'm guessing you use the same strategy. Regardless of whether you scale in, scale out or enter and exit with a full position the important thing is to follow your plan. Keep small losses from turning into large losses.
I am a very shortterm scalper in futures, but I do pretty much the same, most of the time. Instead of just placing a 20 NQ order, I go in with a clip size of 1-3 contracts and scale into my position. Both in and out.
I for one have never "scaled in or out" as a strategy. I'm more of an "all in at once with tight stop" kind of guy. What's wrong with scaling in.... assuming your play is technically smart... only your 1st tranche has the best r/r. Later scales have less profit potential and greater risk as the correct technical stop on 2nd and later tranches is the same as the 1st tranche.. but later ones are farther away from the stop and therefore carry larger risk. That said, part of leaning to make money is adopting a "way to go about it"... a "style", if you will.... that sits well with your psyche. I remember one of the turtles who mentioned this. He basically said, "I scale in so quickly that it looks like one trade, all at once". Well if that's the case, why bother "scaling" at all? KISS, baby!
Adapting to the liquidity in the market. Not showing all your cards. And more. As an extreme example, why does a big fund not go all in when they buy 50,000 shares of BYND for example ? I know trading is different from investing, but there is a logic behind the execution that applies to both worlds.
Doesn't that have more to do with the handle? If one's play is big enough to move the market by more than __________, then one probably wants to scale in/out. As far as "showing all your cards, that should rarely be a material issue. If your trade is technically correct, your play is bigger than merely your fill execution.
Can you be more specific on how this has improved your trading? Do you have any data to show that scaling is superior to all in or is it just psychologically easier having small losses and taking quick profits? Any studies I have done with my own trading have shown that although my losses are smaller on the losing trades, my profits are also smaller because I scale in. Overall my equity curve suffers by scaling in and out. 80/20 rule: 80% of my profits come from 20% of my trades. The reason for this is that I stay in my trades until I get an exit signal and every so often a stock will take an unexpected run. Had I scaled in or out I wouldn't have those above average winners.
This post is not intended for those that trade size large enough to affect quotes in the market being traded. One problem with scaling is it involves at least 2 setups! If your setups are tested, it is almost certain one setup will be inferior to the other. For example, a simple BO trade... you enter half position at 2 ticks above or below the break. You then add the other half at 5 ticks in your favor. This is 2 different setups!! One setup, 2 ticks above/below, and one setup, 7 ticks above/below. One of those setups is almost certain to be inferior and should not be taken!! Scaling out is insurance against position risk... at a cost of reduced profit. Scaling in may or may not be insurance. But used as a potential corrective technique, position risk is increased! Neither reduced profits or increased risk is in the best interest of the trader.
%% Makes more sense/almost always, a ladder. And for an exception, a trader/investor, sometimes makes more sense just to get out, 1shot with liquid stuff like SPXL..........A turtle , wolverine or mongoose could exit SPXL like a pool of water that an elephant would never do. A WIDE bid/ ask on BYND could differ from SPY/SPXL liquidity, exits.