"Scaling out" is inferior behavior

I hope there is no confusion between Scaling In and Averaging Down. B1 I know that you average down, I remember you mentioning that you do not scale IN. Does my memory serve me correctly?

 

Four ES Contracts 50% win ratio versus Four ES Contracts 50% win ratio scaling out at half target.

9 pt target 3 pt initial stop loss

1st example with 20 trades
10 winners for 9 X (4 conracts) = 360 pts ($18000)
10 loser for 3 X (4 contracts) = 120 pts (-$6000)
Net profit $12000


2nd example with 20 trades
10 winners for 9 X(2 Contracts)=180 pts ($9000)
10 winners for 4.5 X(2 Contracts)=90 pts ($4500)
10 Losers for 3 X(4 Contracta) =120 pts (-$6000)
Net profit $7500

Money can be made scaling out, but it is inferior bevior.

 

Individual examples are meaningless. A statistically significant number of examples are needed to determine expectancy. Inherently, then, your example misses the fact that on many occasions the market reaches the lower target not the higher target.

 

I generally would call what I do averaging down, but some call it scaling in. I don't believe that I have said that I don't scale in unless it was in some other context. Anyway, you are correct that what I do I call averaging down. I think when someone averages into losers, you must define what a loser is. A loser to me is a trade that goes beyond the 2 percent loss of total liquid net worth and the cat keeps averaging. There is a huge difference between that and what I do.

 

No sir. It's basic math. One can quantify how accurate their system is in terms of percentages and the calculation can then be made. Put any number in there-- 70% winner, 30% winner, 2 pts profit--1 to 1 risk/reward-- scale out 75% at 8 pts. etc etc etc. ---It will always be the same. --Scaling out will be inferior.

 

Yes but I can make the same arguement with scaling in versus putting on the whole position at once.

 

It would affect it perhaps because I would not want to get overleveraged as a whole, but the main idea is to keep my losses limited to 2 percent of total liquid net worth on any one trade/idea. This refers to liquid assets in my trading account and other places.--Total liquid net worth.

 

This is the part that is unclear to me still because the dollar amount that the 2% equals is constantly changing, so if you have a losing trade going on in soybeans, it affects your stop out point in ES even though the 2 are not related.

 

Whatever, man. Think this if you wish, but your ignorance of the obvious flaw in your reasoning tells me your a poser.

Later, folks.

 

No --I would allow 4 percent between the two trades. It's 2 percent per trade/idea.