Discussion in 'Strategy Development' started by OddTrader, Oct 29, 2006.
Here is a poll:
Saying that "Scaling out is inferior behavior" is inferior behavior?
First, We need to define what's Scaling out, and what's not.
Second, What are the Pros and Cons of them.
Finally you can vote (twice of the original vote) again later after changing your minds.
When trading the same or several highly correlated instruments, with trades/ signals from multiple timeframes, technically and practically the trades of every smaller timeframe are actually equivalent of scaling out (and re-entering) against the largest timeframe.
imo, it would be not entirely correct to say no scaling out is used for each individual trade in this appraoch.
For some markets such as FX in particular, we would want to avoid "Letting a profitable trade becoming a loser", so we logically would consider scaling out by taking partial profits. Shouldn't we?
not if you know for certain in advance where the top of a move will be.
We were often told that "Don't try to pick tops or bottoms, as nearly nobody can."
How many of us can exit every trade at the top or bottom of each trend? How many of us would know for certain there is no another higher top upcoming next.
Besides, nobody can ensure his only one single order for exit will be on the topmost priority above all other orders (that are placed by various traders accidently for entry or exit). A bad slippage for closing out trades without scaling would often make the exit order usually produce the worst profits relative to scaling out approach.
Probably non-scaling-out combining trailing stops for exits would possibly produce the worst profits among all approaches, I would guess.
There are those who can. There are traders among us for whom the optimal exit point is not only identifiable, it is obvious. These traders get out at the top of a move, with their trailing stops rarely being hit. They look at the price action and they know when the top of the move has occurred, and they get out. It is that simple.
These traders are so good, they can post here 3600 times in a few months. Because they have nothing else to do but watch the money rolling in. They have been doing this for 26 years.
The ones who can do the above probably don't know how to count how many pips profits they can surely produce on daily basis trading FX. LOL.
Each one of them can easily own this financial world in no time.
btw, Why wasting money for options to use at tops for protecting profits if anyone knows all the tops for certain?
No interest in argueing or anything. Just wanted to explain why I asked the question as I see it was quoted here.
B1S2's stop loss I think is on the larger side as he placed it below the last reaction low (which most likely will be daily/weekly). That's why I asked him the question where he gets out. Not saying or implying that he gets out at the absolute top all the time. However, if he usually gets stopped out at the reaction low, I believe there will be too much profits given away due to the large stop loss.
For the traders who use scaling in for entries, not scaling out would be basically illogical and sub-optimal.
This is simply because when trading with highly uncorrelated instruments, once identifying a new trend of another instrument would have just began and wanting to scale in for entries, they would be better to release some funds from part of the existing trades by scaling out.
That is done in order to keep their maximum explosure of risks within a limt, because the timing of reaching tops for all open trades could be unknown at the time.
Otherwise, it would be possible that the maximum explosure of risks for scaling in more and more open trades on top of the existing trades could be unlimted.
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