"Scaling out" is inferior behavior

Discussion in 'Strategy Building' started by Buy1Sell2, Oct 18, 2006.

Do you scale out of positions?

  1. I always scale out

    113 vote(s)
    14.1%
  2. I scale out most of the time

    228 vote(s)
    28.5%
  3. Most of the time, I do not scale out

    189 vote(s)
    23.6%
  4. I never scale out

    270 vote(s)
    33.8%
  1. Buy1Sell2

    Buy1Sell2

    I have addressed this numerous times. You do your homework and come up with a system that has decent expectancy and then you let the trade run to that target . Whether or not I as a trader can pick optimal targets is not the question. Whether or not a trader can pick the exact top is not the question. The question is whether or not after defining your profit target that you have set for yourself, it makes sense to get out of some of the position prior to maturity. Over time, the answer is no.
     
    #391     Oct 27, 2006
  2. Buy1Sell2

    Buy1Sell2

    That is the part of the definition of scaling out unless you are short.
     
    #392     Oct 27, 2006
  3. volente_00

    volente_00


    you are assuming to many variables. First off the guy having 50% win using scale outs is going to have a higher winning ratios than the one who does not scale out. When the one who does scale out gets stopped out after scaling out, he will only be losing half where as the other guy will lose double on every stop out. The 2 traders can not have the same exact stop out loss total if one is scaling out.
     
    #393     Oct 27, 2006
  4. Exactly, we are talking about what happens AFTER maturity.

    TNG
     
    #394     Oct 27, 2006
  5. This is the entire problem. You are talking about selling part of the position on the way up, we are talking about exiting part of it when you feel the move is over and leaving some on in case the trend continues in the direction of your trade.

    TNG
     
    #395     Oct 27, 2006
  6. Buy1Sell2

    Buy1Sell2

    Vol, you are getting dangerously close to making my argument for me here. :)
     
    #396     Oct 27, 2006
  7. volente_00

    volente_00

    Just explain how the two have the same exact stop out loss $ if the one who scales out only has half the position left to lose on.
     
    #397     Oct 27, 2006
  8. Buy1Sell2

    Buy1Sell2

    After maturity is a new trade setup with entirely different percentage expectancies. Let's be honest, when you define a system you are calculating the probabilities of a trade reaching maturity. If the trade after maturity still had a high expectancy why would you take any of it off. Better homework would define a better maturity "area". In any case, the trade after maturity would follow the same guidelines--it would be better to not scale out of the trade that you left on.
     
    #398     Oct 27, 2006
  9. volente_00

    volente_00

    B1S2, run the same example for 2 point target and 2 point stop between the 2.
     
    #399     Oct 27, 2006
  10. Buy1Sell2

    Buy1Sell2

    Of course they don't have the same stop loss once you scale out and move the stop up. They also don't have the same ability for profit. Let your trades run to your target whatever that may be. Over time you will be much better off. The strategy of scaling out and moving stop to breakeven is a strategy to keep from losing anything. It is not a strategy designed to win big.
     
    #400     Oct 27, 2006