scaling out depends on where the stock is, ur timeframe, your position size vs. liquidity of the stock. ultimately, size is the most important. if take 80,000 shares of xyz, it's far superior to scale out than dump all with 800 shares at the top. even if i caught 1/4 of the overall move, i'd still make more than riding whole move with 800 shares.
depends on size vs. liquidity. portfolio managers scale in and out cos it's simply too difficult to buy or sell 1 million shares of xyz at once.
From Lipschutz's MW interview: "I am definitely a scale-in type of trader. I do the same thing getting out of positions. I don't say, 'Fine, I've made enough money. This is it. I'm out.' Instead, I start to lighten up as I see the fundamentals or price action changing." Do you believe your scaling type of approach in entering and exiting positions is an essential element in your overall trading success? "I think it has enabled me to stay with long-term winners much longer than I've seen most traders stay with their positions. I don't have a problem letting my profits run, which many traders do. You have to be able to let your profits run. I don't think you can consistently be a winning trader if you're banking on being right more than 50% of the time. You have to figure out how to make money being right only 20 to 30 percent of the time." Just one (position, fundamental/discretionary) trader's attitude for scaling, but essentially for the same reasons that some on this thread have given against it.
Both my cousins have been using scaling both in/out for almost 10 years now, in various markets. They co-own a silver mine, a commercial bank, capital management firm, partners of various business ventures in Russia and USA. No doubt a person that scales out will make less on a large move as an "inferior" approach being used, but like in any other business, some business's gross profit is 90% when others generate 70% selling almost identical products/services. Looking at just GP it is obvious that the first business's operator is more successful, though it is quite possible for both to be profitable, just on a different scale. I am OK to be using an inferior method and by doing that being branded an 'inferior' trader as long as the method is profitable, so far it has been, both in theory and in practise. It's about making money, there is no 1 formula.
If you want to trade two different setups , they should be on two different time frames, but the total position does not exceed the maximum allowable size for your account. In that case you are not scaling out but taking entries and exits on two time frames--Nothing wrong with that, but it is not "scaling out". Now to your example: why trade the 70 percent trade? Lets say you make 10 trades with the 70 percent system and risk 10 dollars. 7 trades are winners for 140 dollars. 3 trades are losers for 30 dollars. The net is 110 dollars. Let's say you make 10 trades with the 45 percent system. 4.5 trades are winners for 180 dollars. 5.5 trades are losers for 55 dollars. The net is 125 dollars. Letting the trade run with full position is the better route. You are making my case FOR me.
No one is branding you an inferior trader. You are just using an inferior strategy. I didn't say money could not be made scaling out, I just said that you will make less of it.
No. I am in the latter camp and don't scale out. I let the market tell me when to get out, although I have a general idea of how far a market should run when I enter the trade. As the trade gets more long in the tooth, I pay more and more attention to market action for reversal.
No Sir. ---No matter what the position size is at the beginning, the trade should be allowed to mature fully. Why would you get out of a winner unless the initial position size was overextended?? Scaling out when overextended is the only time that scaling out should be used. And it is used then, because you have realized that a mistake was made on size initially and you are fortunate enough to escape with some profits. If the size is correct at the start, then scaling out is middle to lower rung behavior.