Maybe this is correct for how you trade in your particular market, but it's obvious you don't trade equities against the hft programs out there. Exiting a profitable position all at once is highly inferior vs scaling out here.
Any position that cannot be removed all at once is a position that is too large for a trader. The math is simple and direct---over the long haul it makes better sense to enter all at once and exit all at once.
Scaling in and Scaling out are successful strategies for long term 401k'ers due to the fact that the money being scaled in is from future paychecks and the money being scaled out is for future income. But for trading, anyone who scales in or out is taking a position that is emotionally too large for their account.
You're still wrong and making generalist statements no matter how you change the story. Scaling works in some specific "trading" situations and does not work in other specific "trading" situations. Other's have already stated particular situations in this thread a long time ago where scaling works very nicely. Mark
You may want to re-read your own thread and prior discussions (replies) to them...there have been detailed explanations by others about the suitability of scaling out or scaling in along with you replying to such explanations. Also, I do remember you once stated that scaling out/in wasn't suitable for any situations. Now you've seem to change on that via saying it may be suitable for Long term investments involving 401k. I'll check back in a few years from now to see if you've changed your mind again via adding other situations that scaling out/in is suitable. Simply, markets do change...adapt or get left behind. scale...use it when you should and don't do it when you should not. Mark
401k is investing, not trading and the participants are not in possession of monies yet, so averaging/scaling is a necessity in that case. Scaling in/Scaling out is inferior when it comes to trading and monies already accumulated.
Something to think about: We advise our traders to put on 2 "layers" of any purchase or short sale of a pair of stocks. For instance, if their pre-determined layer size is 200 x200, the first layer should be 400 x 400. Why? Well, the reason we buy the pair in the first place is because the price differential has gotten a long ways "out of line." When we buy a pair, and it goes the wrong way, it actually becomes a "better" buy, based on our analysis....so, if were to buy a spread for $4.00 (expecting it go back to $8.00 for example), if it went to $3.00, we would buy another layer. Not so much "averaging down" but merely taking the opportunity. But, we added a layer nonetheless that was going against us. This, by definition added to the risk, although a risk we are happy to take. We usually limit our layers, based on certain info, to about 4 layers. And have no problem getting the total position to a size we can still handle, and trade from. Buy at $4.00, buy at $3.00, buy at $2.00.. sell at $.4.00, sell at $5.00, and sell at $6.00 vs. waiting to get all the way to $6.00. My main point, the reason to buy 2 layers to begin with, is..... if we are adding when it goes against us to maximize profit potential, what happens if we merely buy 1 layer and then take it off for a $1.00 profit, when the spread may "trend" up another $5.00. So, we buy two layers, take one off at the pre-determined $1.00 profit, and let the other one ride. So, perhaps, this might be an example of scaling out..... FWIW. I haven't posted to this thread in a long time... kinda surprised that it is still so active.... IMHO, there really is no "right" answer to the question since we base our entries an exits on so much outside criteria that we take partials off as part of our overall plan. Anyway, something to think about guys... all the best, Don
if you know exactly where the top is and sold the whole position,and you knew where the exact bottom was and exited the whole position,then this would be the most profitable way to trade,but for the few of us that didn't get the memo,scaling in as don's example explained would be the better way to trade,and if his spread got to 8,his likely top,and was still advancing strongly,scale out on partial and let the rest ride with a stop