Partial TPs/Scaling out/Exit half, your thoughts?

spindr0 · Nov 11, 2017

I'm just a retired retail investor/trader who has acquired enough to provide for my remaining days (2008-2009 put me over the top). Making BIG money is no longer my goal. Keeping it is the priority. So I "play not to lose", trying to make "some" while "hedging every which way". As long as I pay my bills and I'm worth at least a $1 more than I was a year ago, I'm happy. So in that vein, scaling in and out works for me. I'll take the singles and let the big boys hit the home runs and deal with the strike outs.

Scataphagos · Nov 11, 2017

Xela said:
Commendable, naturally: there are few better ways to spend a little bonus than on a case of Puligny Montrachet and a new pair of Louboutins ...
More...

Puligny Montrachet? Geez... when you order "the best in the house", you really mean it!

LOL!

Scataphagos · Nov 11, 2017

spindr0 said:
I'm just a retired retail investor/trader who has acquired enough to provide for my remaining days (2008-2009 put me over the top). Making BIG money is no longer my goal. Keeping it is the priority. So I "play not to lose", trying to make "some" while "hedging every which way". As long as I pay my bills and I'm worth at least a $1 more than I was a year ago, I'm happy. So in that vein, scaling in and out works for me. I'll take the singles and let the big boys hit the home runs and deal with the strike outs.
More...

Same reason old people switch from equities to bonds in their later years.

Scataphagos · Nov 11, 2017

Xela said:
I agree. I've moved in the opposite direction, myself (i.e. from self-employed/independent to "institutional"), so I do now have someone looking over my shoulder, but I used to try to "look over my own shoulder" anyway, and I always showed my trading journal/record and account, in detail, to a very experienced trader even when I was self-employed.
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That's a great lesson. I imagine most ETers don't "hold themselves accountable"... mostly because they can get away with it.

spindr0 · Nov 11, 2017

Scataphagos said:
Same reason old people switch from equities to bonds in their later years.
More...

Pretty much the case but bonds don't pay enough.

Scataphagos · Nov 11, 2017

spindr0 said:
Pretty much the case but bonds don't pay enough.
More...

Used to be, they did. Now some may opt for more risk or just accept what they can get from bonds with their perceived capital risk.

spindr0 · Nov 11, 2017

Preferred stocks provide a much better yield but given that they've run up about 15% since last December's low, it's hard to find many of investment grade that are trading below par... or slightly above with a good call date.

qxr1011 · Nov 13, 2017

===Partial TPs/Scaling out/Exit half, your thoughts?==

negative

murray t turtle · Nov 21, 2017

iamnewuser911 said:
Good points by everyone. I am thinking of partial profits because most of my losers are stopped at break even. Which leads me to think that I can take some profits off before they are stopped, this however causes my winners to have less profit since I exit halfway. Of course I have to test it out with stats

Also it's psychologically easing as well, feels like I have made some money out of the trade already so BE/losing isn't as painful (I struggle a lot with profits vanishing) if anyone has anything that can help me with it, it would be awesome.
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%%
100%% sure i would rather have some profits-than none. By the way i seldom use 100% sure in a stock market context.LOL

I also agree with IB founder, bit coin has no fundamental value, but i will stop spelling it bit con. and ''never use an ordinary investment vehicle[ {he is on a horse, in an older data ad.......}

ElectricSavant · Sep 9, 2018

What happened to this poster? Why does he not post here in ET anymore? I have reviewed his posts and this poster had a lot of good things to share.

ES

Truth_ said:
@Xela once again nails a simple truthful statement that cuts to the core of the excessive losses in retail trading:

SOMETIMES I will scale in.
SOMETIMES I will scale out.
SOMETIMES I am all in.
SOMETIMES I am all out.
I do not like green eggs and ham.
I do not like them, Sam-I-am.

Now I am not an “elite” trader; I’m just some guy with a few bucks that has been trading for 50+ or so years, so you need to be cautious of everything I say. I could be wrong. I may change my mind and do something different next month.

I find this an interesting thread since I agree in part with just about all the posters. (Although some people are extraordinarily rude even when there is merit to what they write, how odd, how defective.) That caused me some pause. I had to ponder on this strange occurrence of broad agreement. I realized that not all scaling in is created equal.

I believe there are several forms of this supplemental entry. Four spring to mind.

The first, just do not do it ever, it is all in at the original entry. They placed their bet and let the wheel spin. Some movement of the stop loss and take profit but no additional funds into the trade. The null case.

The second, seek to add to an existing profitable position, in a long term trend, in order to multiply the profits of the trade. Key to this strategy is moving the stop loss along with the trend (not a trailing stop) so that the amount at risk never exceeds the risk of the first entry. In other words the stop loss has to move beyond the break even of the previous entry, so it has zero risk, and then another risk can be added. Applied judiciously in a long term trend, this strategy produces overwhelming results. Best case I ever had was 9 trades, maintained the nominal risk of the first entry throughout. Approximately a five times better result compared to a single entry trade (8 of the entries are closer to the exit, so there is diminished effect). 500% increase in profit, with no additional risk.

WTI (/CL) is a good example of this for the last several months, not just the recent spike. But it is getting close to past peaks so caution. The action on tomorrow’s oil storage data release may prove interesting.

The third, look to add when there are pullbacks. To manage risk the initial trade should be of a smaller size and if a pullback occurs they add to their position at a discounted price. They maintain proper total risk through smaller than normal entries. I sometimes do this if my probability calculations are around 60%.

The fourth, seek a method of rescue from a bad trade. They cannot accept a loss, they will not cut, they add to a losing position. They will either change this behaviour or their account will be blown out.

At some time or another I have done all four. The fourth, the rescue trade is forever banished from my trading. If I am wrong, making it worse is never helpful. Novice traders must learn to cut losses.

For me, scaling in, or more simply, adding more money to a position (I love how every industry needs to develop its own jargon, or terms of art, to distinguish the great unwashed from those in the know, lawyers and doctors do it best with the use of latin, but the finance industry is hard on their heels) depends on a host of factors. Here are some, nowhere close to all:

Length of time owning a security:
I have positions in index etf’s that I have held for years. Every few months or so I have money that comes to me from other business endeavours and I add to my position in those etf’s. Sometimes I add to individual stocks where I have already owned them for months. This is the classic strategy done by millions of simple folks as part of a retirement plan.

Selling those positions, or “scaling out” depends on the context of the moment. If I need X dollars for some personal adventure, I will sell a portion and take the money, (and immediately set aside the taxes in a separate bank account). If I see the market has turned (in a true reversal, not simply a pull back) I will close out everything in a split second across the board without any hesitation. No staring at the chart and hoping it turns back, just OUT.

I realize that this long, slow, dull, approach is not what the high flyers here are wanting to read about.

Type of security:
Forex, with its daily buying and selling. That is the action people want to read about, that is what the OP is really asking about, that active trading on a 5 minute chart with lots of drama and emotion at every move.

Again I am boring. While I frequently trade from a 5 minute chart, the trade is completely planned in advance in accordance with my trading plan before I enter. There is zero emotion, I am content to completely lose any given trade, or win. It is only one in series of thousands. As long as it is within my plan it is nothing special.

The trades where I deviate from my plan, those are the special ones, win or lose, I autopsy my trades and chide myself for such deviations, and seek to understand why I played the fool.

“a most pitiful ambition in the fool that uses it”
Hamlet: Act 3 - Scene 2

There are a few assumptions in the above, such as having an overall trading plan, and having a plan for each trade.

For me, and me alone, not all the smart people here, risk management is the critical issue. I view risk of ruin as one of the key foundations of my trading and I cannot violate those rules. So if I calculate that for a SELL of USDJPY I can risk losing a maximum of $5,000, and I decide that I want to take an initial position and have the ability to add to it later, then I must risk only some fraction of the $5,000, say $3,000, with a single further entry of $2,000 when appropriate. The concept being that if my total risk for the trade is $5,000 than I cannot enter 3 times with $5,000, to do so is a guarantee of eventually destroying my entire account. I will have violated my risk of ruin parameters, and ruin will certainly follow in the long term.

Unfortunately it appears that many novice traders do precisely that. They enter a trade, it goes against them, they add more, it turns and goes their way, they got away with it. They get away with it a few times. They think they have cracked it, the secret. All they have done is blown their account, but they just do not yet know it.

Adding to a losing position has the risk of trading on the wrong side of a reversal. You could be adding to a position that is trapping you, and as the losses grow and grow, you keep adding to them. You will not cut. You will not learn. You are stuck on your knees like an altar boy praying and wondering how bad this will hurt.

I believe the core reason for this occurrence is the inability to distinguish between a trend and a range. A novice trader sees a strong move UP, all the indicators hiding the price action are flashing green, BUY BUY BUY. They enter the trade. The price promptly plummets. They were smart and used a stop, they are stopped out.

They now reverse and SELL. The price promptly rockets to the upside.

Anyone who has ever been whipsawed recognizes and can feel that complete WTF IS GOING ON moment. They turn to interwebs for solutions. Use a wider stop, use no stop, add to the position. All the while the fundamental error has not been recognized. You are in a range not a trend.

The one who adds to the position then thinks he is a hero. He bought at the top of a range, price went down, he added more at the bottom of the range, price moved back above break even and he exits with a small profit. He is king of the world, in his own mind, (he must be a member here with a high post count).

Until one day … price breaks down out of the range and keeps going down. Roughly a 20% occurrence. He then keeps adding as price plummets. There is no more rational thought, there is only prayer as the loss grows.

I can speak authoritatively on this through my own failures some years ago. But with all failures in trading the key is not to find a gimmick to get around it (move the stop, buy more); the key is to find what is the fundamental error that was leading you to be in such a bad position to begin with.

Traders want to see a trend. Traders believe a trend is a path of gold. But like a dying man in the desert, it is often a mirage not an oasis. I like to start at a monthly time frame, look for what is going on, move down to the weekly, daily, H4 and H1 to get an idea of trend or range. I then trade from M5 once I have context of the playing field I am about to enter. Price ranges much more then it trends. Trading a range is one of the simplest and easiest ways to trade, no huge wins, but steady repeatable profits; once you are sure it is a range.

Another caution. There are some ranges you just cannot trade. Walk away. But I am already being too long winded yet again.

Once a novice learns to trade, with a complete and thorough methodology, then they can evaluate each situation as it presents itself. The choice of multiple entries or exits, or a single, will be obvious as the price presents itself to an informed, educated mind, acting rationally.

As I said this is what I do. I advocate it for no one else. I am not looking for the opinion of the great wise ones. I am not trading your money so no need to worry about my choices. The venomous posters merely expose their defects. Why on earth is there a need to argue with an anonymous person on the internet. All I am to you is some dots on a screen. You want to argue with dots and convince the dots that you are superior, that is behaviour that can politely be described as suspect.

= = =
DISCLAIMER

This post only relates to the following: ADDING TO EXISTING POSITIONS IN STOCKS, SPOT FOREX, COMMODITY CFD's

I apologize in advance if this post has hurt your feelings. It is simply a brief review of my thoughts on the topic; based on what I actually do, not discuss in the abstract on the interwebs. I do not advocate it for anyone else, it is simply presented as an alternative view to having some jack-off stealing your money. You should in all probability do something else and completely ignore everything I have said. All other views are considered superior and no doubt the possessors of those alternate views have larger genitalia and should be proud of their natural endowments.

For those with an absolutely fixed mindset that I am wrong. Congratulations, well done, you win. I try to keep a flexible thought process and if you have data and references to support your position I will look them over at some point. Please provide an exact reference rather telling me to do a search. Do not expect a reply or a rebuttal, since you are so clearly correct, you have no need to hear from me further. But just in case I will utter those words rarely seen on the internet,”Yes, you are right, your brilliant comment has caused me to change my mind.” After all, that is what you are really seeking, so there it is, I truly hope it has brought you joy and contentment.

In case there are concerns that I am in a conflict of interest; I do not mentor, I do not want to mentor, I am not remotely qualified to mentor, I sell nothing regarding trading, I do not recommend any specific trade. In real life I am far too abrasive and short tempered to be a mentor. I have PTSD and there is a significant chance I would harm you.

= = =

p.s. Quite happy I could quote Dr. Seuss and Shakespeare in the same post and maintain relevance.

More...

Truth_ said:
@Xela once again nails a simple truthful statement that cuts to the core of the excessive losses in retail trading:

SOMETIMES I will scale in.
SOMETIMES I will scale out.
SOMETIMES I am all in.
SOMETIMES I am all out.
I do not like green eggs and ham.
I do not like them, Sam-I-am.

Now I am not an “elite” trader; I’m just some guy with a few bucks that has been trading for 50+ or so years, so you need to be cautious of everything I say. I could be wrong. I may change my mind and do something different next month.

I find this an interesting thread since I agree in part with just about all the posters. (Although some people are extraordinarily rude even when there is merit to what they write, how odd, how defective.) That caused me some pause. I had to ponder on this strange occurrence of broad agreement. I realized that not all scaling in is created equal.

I believe there are several forms of this supplemental entry. Four spring to mind.

The first, just do not do it ever, it is all in at the original entry. They placed their bet and let the wheel spin. Some movement of the stop loss and take profit but no additional funds into the trade. The null case.

The second, seek to add to an existing profitable position, in a long term trend, in order to multiply the profits of the trade. Key to this strategy is moving the stop loss along with the trend (not a trailing stop) so that the amount at risk never exceeds the risk of the first entry. In other words the stop loss has to move beyond the break even of the previous entry, so it has zero risk, and then another risk can be added. Applied judiciously in a long term trend, this strategy produces overwhelming results. Best case I ever had was 9 trades, maintained the nominal risk of the first entry throughout. Approximately a five times better result compared to a single entry trade (8 of the entries are closer to the exit, so there is diminished effect). 500% increase in profit, with no additional risk.

WTI (/CL) is a good example of this for the last several months, not just the recent spike. But it is getting close to past peaks so caution. The action on tomorrow’s oil storage data release may prove interesting.

The third, look to add when there are pullbacks. To manage risk the initial trade should be of a smaller size and if a pullback occurs they add to their position at a discounted price. They maintain proper total risk through smaller than normal entries. I sometimes do this if my probability calculations are around 60%.

The fourth, seek a method of rescue from a bad trade. They cannot accept a loss, they will not cut, they add to a losing position. They will either change this behaviour or their account will be blown out.

At some time or another I have done all four. The fourth, the rescue trade is forever banished from my trading. If I am wrong, making it worse is never helpful. Novice traders must learn to cut losses.

For me, scaling in, or more simply, adding more money to a position (I love how every industry needs to develop its own jargon, or terms of art, to distinguish the great unwashed from those in the know, lawyers and doctors do it best with the use of latin, but the finance industry is hard on their heels) depends on a host of factors. Here are some, nowhere close to all:

Length of time owning a security:
I have positions in index etf’s that I have held for years. Every few months or so I have money that comes to me from other business endeavours and I add to my position in those etf’s. Sometimes I add to individual stocks where I have already owned them for months. This is the classic strategy done by millions of simple folks as part of a retirement plan.

Selling those positions, or “scaling out” depends on the context of the moment. If I need X dollars for some personal adventure, I will sell a portion and take the money, (and immediately set aside the taxes in a separate bank account). If I see the market has turned (in a true reversal, not simply a pull back) I will close out everything in a split second across the board without any hesitation. No staring at the chart and hoping it turns back, just OUT.

I realize that this long, slow, dull, approach is not what the high flyers here are wanting to read about.

Type of security:
Forex, with its daily buying and selling. That is the action people want to read about, that is what the OP is really asking about, that active trading on a 5 minute chart with lots of drama and emotion at every move.

Again I am boring. While I frequently trade from a 5 minute chart, the trade is completely planned in advance in accordance with my trading plan before I enter. There is zero emotion, I am content to completely lose any given trade, or win. It is only one in series of thousands. As long as it is within my plan it is nothing special.

The trades where I deviate from my plan, those are the special ones, win or lose, I autopsy my trades and chide myself for such deviations, and seek to understand why I played the fool.

“a most pitiful ambition in the fool that uses it”
Hamlet: Act 3 - Scene 2

There are a few assumptions in the above, such as having an overall trading plan, and having a plan for each trade.

For me, and me alone, not all the smart people here, risk management is the critical issue. I view risk of ruin as one of the key foundations of my trading and I cannot violate those rules. So if I calculate that for a SELL of USDJPY I can risk losing a maximum of $5,000, and I decide that I want to take an initial position and have the ability to add to it later, then I must risk only some fraction of the $5,000, say $3,000, with a single further entry of $2,000 when appropriate. The concept being that if my total risk for the trade is $5,000 than I cannot enter 3 times with $5,000, to do so is a guarantee of eventually destroying my entire account. I will have violated my risk of ruin parameters, and ruin will certainly follow in the long term.

Unfortunately it appears that many novice traders do precisely that. They enter a trade, it goes against them, they add more, it turns and goes their way, they got away with it. They get away with it a few times. They think they have cracked it, the secret. All they have done is blown their account, but they just do not yet know it.

Adding to a losing position has the risk of trading on the wrong side of a reversal. You could be adding to a position that is trapping you, and as the losses grow and grow, you keep adding to them. You will not cut. You will not learn. You are stuck on your knees like an altar boy praying and wondering how bad this will hurt.

I believe the core reason for this occurrence is the inability to distinguish between a trend and a range. A novice trader sees a strong move UP, all the indicators hiding the price action are flashing green, BUY BUY BUY. They enter the trade. The price promptly plummets. They were smart and used a stop, they are stopped out.

They now reverse and SELL. The price promptly rockets to the upside.

Anyone who has ever been whipsawed recognizes and can feel that complete WTF IS GOING ON moment. They turn to interwebs for solutions. Use a wider stop, use no stop, add to the position. All the while the fundamental error has not been recognized. You are in a range not a trend.

The one who adds to the position then thinks he is a hero. He bought at the top of a range, price went down, he added more at the bottom of the range, price moved back above break even and he exits with a small profit. He is king of the world, in his own mind, (he must be a member here with a high post count).

Until one day … price breaks down out of the range and keeps going down. Roughly a 20% occurrence. He then keeps adding as price plummets. There is no more rational thought, there is only prayer as the loss grows.

I can speak authoritatively on this through my own failures some years ago. But with all failures in trading the key is not to find a gimmick to get around it (move the stop, buy more); the key is to find what is the fundamental error that was leading you to be in such a bad position to begin with.

Traders want to see a trend. Traders believe a trend is a path of gold. But like a dying man in the desert, it is often a mirage not an oasis. I like to start at a monthly time frame, look for what is going on, move down to the weekly, daily, H4 and H1 to get an idea of trend or range. I then trade from M5 once I have context of the playing field I am about to enter. Price ranges much more then it trends. Trading a range is one of the simplest and easiest ways to trade, no huge wins, but steady repeatable profits; once you are sure it is a range.

Another caution. There are some ranges you just cannot trade. Walk away. But I am already being too long winded yet again.

Once a novice learns to trade, with a complete and thorough methodology, then they can evaluate each situation as it presents itself. The choice of multiple entries or exits, or a single, will be obvious as the price presents itself to an informed, educated mind, acting rationally.

As I said this is what I do. I advocate it for no one else. I am not looking for the opinion of the great wise ones. I am not trading your money so no need to worry about my choices. The venomous posters merely expose their defects. Why on earth is there a need to argue with an anonymous person on the internet. All I am to you is some dots on a screen. You want to argue with dots and convince the dots that you are superior, that is behaviour that can politely be described as suspect.

= = =
DISCLAIMER

This post only relates to the following: ADDING TO EXISTING POSITIONS IN STOCKS, SPOT FOREX, COMMODITY CFD's

I apologize in advance if this post has hurt your feelings. It is simply a brief review of my thoughts on the topic; based on what I actually do, not discuss in the abstract on the interwebs. I do not advocate it for anyone else, it is simply presented as an alternative view to having some jack-off stealing your money. You should in all probability do something else and completely ignore everything I have said. All other views are considered superior and no doubt the possessors of those alternate views have larger genitalia and should be proud of their natural endowments.

For those with an absolutely fixed mindset that I am wrong. Congratulations, well done, you win. I try to keep a flexible thought process and if you have data and references to support your position I will look them over at some point. Please provide an exact reference rather telling me to do a search. Do not expect a reply or a rebuttal, since you are so clearly correct, you have no need to hear from me further. But just in case I will utter those words rarely seen on the internet,”Yes, you are right, your brilliant comment has caused me to change my mind.” After all, that is what you are really seeking, so there it is, I truly hope it has brought you joy and contentment.

In case there are concerns that I am in a conflict of interest; I do not mentor, I do not want to mentor, I am not remotely qualified to mentor, I sell nothing regarding trading, I do not recommend any specific trade. In real life I am far too abrasive and short tempered to be a mentor. I have PTSD and there is a significant chance I would harm you.

= = =

p.s. Quite happy I could quote Dr. Seuss and Shakespeare in the same post and maintain relevance.

More...