Mathematically proven????Surely you jest.... Once again,scaling out is not inferior behavior.It is only inferior for you,and that is because you actually believe you can find the optimal profit target and can predict reversals with a high degree of accuracy.... To be honest,I am clueless as to why you bother with optimal profit targets and trailing stops when you possess the unique ability to call reversals with a high degree of accuracy..
Because that accuracy is not 100%. The degree is high, but trailing stops are always deferred to first before reversal analysis. It's just common sense. Bottom line--I let trades run. This is where the money is. I do not scale out. Scaling out is done by traders who are anxious to lock in a partial profit in order to maintain a psychological benefit when trading. However, they are not in with the full position EVER when the trade runs all the way. They are always attempting to tinker and reivent the wheel. Trading is very very simple--let the winners run fully, --cut the losses short fully. Pretty simple stuff this trading.
If he is recalculating expectancy before the trade has run to the target, then he is tinkering with any research that he has done in the past and that research becomes null and void. When a target for a particular time frame and signal has been established, then the trade should be let run to that maturity even if it means giving back the profits on this ONE trade. Over the long haul, the signal on the particular time frame will yield the desired result the optimal percentage of the time or else the research hasn't been done properly. I would also tell you at this juncture, that profit targets are more desirable on intraday charts and not on daily charts etc. Daily, weekly and monthly charts have the potential to run a long way whereas intraday charts have a more definable range. I prefer the Daily, Weekly Monthly charts as my 3 screen method, because it allows me to use trailing stops and let trades run a long way. My approach is turtlesque with one exception: They bought and sold breakouts and breakdowns where I buy and sell divergence . Their losing trades many times are actually small winners for me. I like my strategy very much.
Well, don't you think that the fund with that strategy could have a a good 'knowledge of the opposing program' since they could access with a bit of communication to the clearers books of the retails traders losing during the day or (having margin calls) or simply with the limit orders used to scale out their positions?...
Wow, you must have missed out on some huge moves when your trailing stop was hit after a decent up move, and you liquidated your entire position instead of scaling out, only to see the stock go to the moon. One of the biggest mistakes made by beginners is to miss out on the few big trades that can make your week/month - that is, to fail to capitalize on your winners. Hopefully you'll have the flexibility to adjust your strategy to take advantage of those big moves.
Big moves are exactly what I obtain. My stops are outside the noise and are very seldom hit. When they are, there is generally a good reason for it and that is that the market is out of gas in the direction of my trade. More often than not, I am already reversed prior to where a stop would be taken out. The wealth in this business is in the big moves with large reward versus risk. These are the trades that I am interested in and that my system captures.
In addition, the scale out trader will from time to time have a full position on when the trade is a loser. It doesn't make any sense--Never having full position on when the trade is a big winner, but sometimes having full position on when it's a loser. --Where is the sense in that? Once again though I say to you- -Can you be successful scaling out? Yes you can-- Is scaling out inferior to not scaling out ? Absolutely.
Lastly for today anyway-- There are many gurus and investment books that tout scaling out. Why would that be? It is because brokers and industry professionals love the scale out trader. It requires more transactions to make money. This results in higher commission revenues and more liquidity in the markets. This is one of the reasons that you can always buy the first break. God Bless the scale out trader.