The principles of trading are exactly the same, no matter what time frame. Let winners run, cut losers short, trade with the trend. If maturity for you on an ES 1 minute chart is 3 ticks, then exit all positions at 3 ticks. Don't exit 1 at 1,. 1 at 2 ,and 1 at 3. That's scaredy cat trading.
My point is misconstrued by readers to mean that I am talking about holding through long periods. What am I saying is that no matter what your time period, whether it's a 1 minute chart or a 1 year chart--you do not scale out profits. It's a deficient notion to choke out profits.
Few notes * "Scaling out is inferior behavior" is a statement without support evidence. If we ignore information leakage (i.e big size traders) then scaling out versus taking a profit at a set point should result in NO edge difference based on the efficient market of price. In most cases, you are looking at the possibility of a trend versus a measured move. Trend strategies DO tend to optimize toward the highest NET PROFIT while target strategies tend to optimize toward risk/adjusted profit per trade. Most likely if you scale out you are taking some difference between the strategies which could result in a worthwhile SMOOTHING function between net profit and risk/adjusted profit per trade (i.e win ratio). Think about it, how many trends go straight up? They move up in legs. To take a profit without risk (drawdown) then you can't take out more then one leg. It is impossible!!! You must experience drawdown. Likewise failing to capture the whole trend (i.e over any 2 points) will result in less net profit. * I tend to enter on market. I will add to my position if it goes against me because I'm not perfect -- if I feel I'm still right. This can work well. One might view this as scaling in. A good example, I think the market will go down. This is time sensitive information so I prefer market. However I may also know prices where the market may bounce -- that's price sensitive which tells me to use limit. * When I exit then I tend to exit all at once but not always. A good example would be to reduce size to reduce risk. Let's say I was up a large % then I might reduce my size (scale out) to reduce my net value at risk. * I rarely scale out as a strategy except for risk reduction because it is a form of not taking responsibility. I will only do this if I'm unsure of the 2 possibilities for an exit or as a test to see how things "would have turned out'. * I do not believe there is any benefit in scaling in/out. really if you're information is not time sensitive then scaling is most likely to produce a profit.. Think about the largest traders they are probably scaling all the time. * There are actually many opportunities for scaling in/out via scalping. That's basically what scalping is. I suspect it could be quite profitable. * A market PEAK is not a TOP. A market top is undefined unless and until defined. A market top can only defined within a given previous set. Taking profits at peaks and adding at trough, sounds like an interesting strategy.
B2S you certainly are one stubborn simplistic mule aren't you...sticking to your shallow way of thinking despite the fact that your ignoramus theory can only be true with 100% certainty under unrealistic assumptions. You really need to step outside the box..why is it so difficult for you to do so? "because it will have them in a winner for full position and help offset their losses"???? LOL!!!! There are so many scenarios to disprove your naivete that it it is both mind boggling and pathetic at the same time... Here you go Einstein... let's here your rebuttal to this: The trader with poor timing takes on 20 "all in" full position size trades (intraday, swing overnite...feel free to decide...I don't care one iota...). He gets out of 10 of them "all out" with profit...having never come close to being stopped out. But wait... upon further review of the trades after the fact-- we find that price proceeded to continue in his desired direction on 8 of the 10 trades... of which half of those trended with 200% more profit. Now on the 10 losing trades....well you see here...here we have something even more enlightening. On 6 of the 10 trades that were stopped for a loss- price actually was initially traveling in the trader's desired direction and made it at least halfway to the projected target (hey B2S- u like choices right? Go ahead and decide what the target was...again I don't care... maybe a reversion to the mean return to the 20ema on a bollinger band entry pierce? How about a support/resistance line? A moving average cross? A specific $ amount goal? You decide. Fate is in your hands to tweak to your best outcome if your heart desires.).... but unfortunately price reversed and never recovered and ultimately a full stop loss was absorbed. Now B2S-- it is your turn under this very random...but very realistic... single example scenario-- that I would like your full white paper disclosure for all the elite world to see on exactly how your theory optimizes this traders profitability... vs. a mechanical scale out approach. I know the answer... do you?
Yoooohooo... B2S....? How's the white paper coming? I've got another scenario for u... U ready? B2S...? Bueeller?
The trader with poor timing who scales would have taken profit on some of the positions earlier than the point that he removed all of them totally. This is one of the reasons all in all out benefits every system. It's not whose system is better at entries and exits. It's how the all in all out benefits a trade unto himself.
Most folks who make an attempt at refuting the obvious never want to allow a trader to take all off at an optimum time occasionally. Even the poor timer does this from time to time and this is where the real profits lie. The scaler will never do that because even if they take profits at the optimum time, they will have "runners" that will give back profits. The scaler will never reap full reward. It's common sense.
You keep supporting your thesis with a philosophical argument when it is a math problem. You need to supply the math to support your argument.
08-13-11 10:17 PM Now, the example of the trader who is using a losing system: Four ES Contracts 90% win ratio all in/all out versus Four ES Contracts 90% win ratio scaling out at half target. 1 pt target 10 pt initial stop loss 1st example with 20 trades 18 winners for 1 X (4 contracts) = 72 pts ($3600) 2 losers for 10 X (4 contracts) = -80 pts (-$4000) Net loss $-400 2nd example with 20 trades 18 winners for 1 X(2 Contracts)=36 pts ($1800) 18 winners for .5 X(2 Contracts)=18 pts ($900) 2 Losers for 10 X(4 Contracts) =-80 pts (-$4000) Net loss $-1300 As you can see, even the trader who employs a losing system will lose less by not scaling out. --Ishmael