Volente, your posts go way off topic. This is not a discussion of who is using the larger stop etc. This is a discussion of the math involved when using the same stop and also trailing the stops on winners. Somewhere along the line, you have gone into a totally different area. --Ishmael
You are the one who brought up overleveraged in the first place. To be correct, you just need to change your statement to " It is always more profitable to not scale out when you have a predefined target that is met"
B1S2 is probably right in that you are off his topic. He is talking from a mathematical laboratory (theory only) pov and you are coming from your trading experience, particularly managing trades to best advantage. Because B1S2 has no idea of what you are talking about he must seek refuge in his mathematical model. Were he to return to this thread after six months continuously in the market, his remarks would be more tempered by experience. Right now this thread is pure classroom stuff. sossueme
In defense of B1S2, if he is able to predetermine the ideal exit point with a fair degree of certainty, then who are we to question his prescience? On the other hand, if B1S2 lacks this supernatural precognitive capability, then perhaps his argument is a tad goofy.
B1S2 is showing that under laboratory conditions no scaling is superior to scaling. This is where the confusion arises. B1S2 argues in favour of the lab, whilst traders with actual market experience are running ahead of his theoretical purity. It is the typical ET confusion arising when those with a little book knowledge and no market experience go head to head with real traders. sosueme
An article in this month's Futures Mag studied the entry exit styles and concluded that all in the scale out gave better edge than all in/ all out or scale in / all out.
But that is a study based on actual trading results. B1S2 doesn't have access to such experience and so he is arguing from the pure theoretical point of view. sosueme
The problem with this is that the math disproves this. It is always better over the long haul to trade all in, all out. In addition, my numerous years of actual real time, real money trading experience have also taught me that the all in, all out strategy is the most profitable. ---Ishmael (by the way, earlier in this thread I linked a Futures mag article that said the opposite of what you are pointing to-)
The OP's contention that scaling out is inferior behaviour is based on the mistaken assumption that 'the optimal exit point for any trade can be determined at the time the trade is initiated'. If you don't believe he said this, go ahead and read through the first pages of the thread - it's all in there. It was pointed out to him that it's ridiculous to state that the optimal exit point can be predetermined, but he didn't seem to understand that idea. Of course, scaling out is sometimes optimal and sometimes not. It all depends on the system being used, and the character of the entries. When multiple entries are used, the situation is complicated. The hallmark of a good trader is the ability to understand that each situation is different and that to say 'I know everything about how to trade and anyone who doesn't trade like I do doesn't know what he's doing' is misguided at best. The inescapable conclusion is that the OP does not actually trade. He may be a university economics student or just someone with a mathematical bent who enjoys studying the markets.
Bottom line--It is possible to determine the optimal exit on trades using volatility, average true range and backtesting. The optimal exit is calculated and used on a group of trades--sometimes the trade goes farther, sometimes not as far, but it is the optimal exit over the long run for the type of trade you are taking and it most certainly can be calculated. --I must point out again though, that I use trailing stops at all times and let my trades run--I do not use profit targets. Either way though, it's always better over the long run to not scale in or out. Very very easy concept to grasp and the math cannot be argued. Keep in mind, it doesn't matter to me whether or not anyone agrees with the tenet, but it's important to have out there so that it can be incorporated if someone feels it has merit after very careful consideration--Ishmael ---Never ever risk more than 2 percent of Total Liquid Net Worth on any one trade/idea---