If a trader is showing better gains by taking partial profits, it is most likely a function of inability to define trend and reaction highs/lows that is causing the trader to feel they do better just getting in and getting out. It is irrefutable that holding your trades to maturity will always bear more fruit over the long haul.
Thank you for your input. This is a reinforcement of my point about the psychological "feel good" of scaling as opposed to the correct method of letting the profits run to maturity. ie You don't feel comfortable athis point to hold your ground because enough research has not been done yet-- Very good discussion.
exactly--it "feels" better to bank partial profits and have the curve go up steadily. This is not the way to milk the market movements for what they are worth, but borkers absolutely love it.
I think that we have reached the point in this thread whereby continued participation qualifies as inferior behavior. (Present post excluded, of course. )
it not only feels better but it is more profitable and it minimizes risk of ruin. How many 40% drawdowns does it take before you can't come back again.
How would you rate Apex's performance in relation to yours then? He seems to generate a lot more than you by taking long and short trades and scaling out while doing so, no matter what the trend is. I am certain that in the last 6 months he managed to bank more than you holding your position/s till an optimal exit point. I don't really care for the theory behind your statement. We can all be paper millionaires. I don't mean it to undermine you, I just don't rate theory over practicality.
Your statement above is completely false. At least your now stating that's its possible for a trader to show better gains via taking partial profits when profit targets are reached. Guess what, its also substainable for some traders!!!!! However, as I stated before, most traders that do scale out also don't scale out of some trades for the following reasons: * Initial stop/loss protection is hit that takes them completely out of the trade (no scale out) * Profitable trailing stop is hit that takes them completely out of the trade (no scale out). * They get a trade signal for the opposite direction that requires them to close the position or reverse the position (no scale out). * They realized their entry was flawed and there's no support for the trade (no scale out). * Market conditions dramatically change for the worst against their position (no scale out). The above are realities in which you had prior said isn't really part of this discussion. My point is that for some odd reason you continue making the assumption that traders that do use scaling out as part of an exit strategy are doing it 100% of the time. This is another false assumption and I've listed some very common reasons when scaling out isn't appropriate or will not occur. Further, as I pointed out before in this thread that you also quickly said wasn't part of this discussion... Traders that exit all their contracts/shares at the same time when the trade reaches its profit target (reaches maturity) will rarely make adjustments to stay in the trade even if market conditions support such an adaption. For example, if you have a 10 point target on your Long position and something extremely bullish happens when the position reaches 7 points in the profit... Those (a majority) that always exit their entire position will do so when 10 points is reach. No adapting. That's reality and not theory. However, those that scale out in the above example will exit partial at 10 point profit and try to catch more profits on their remainders because they tend to exploit new market information...allowing them to adapt the position while its still open. Simply, they've adapted their trade because they've recognized the price movement has become stronger and not as you said because they have the inablility to define a trend. That's reality and not theory along with old ET journals to support the above statement I've made. With all that said above and as I stated before a few times in this thread... Your theory is good but isn't reality of what's actually occuring for traders that scale out. Therefore, in theory, scaling out is inferior to an exit strategy that involves exiting the entire position at once. Heck, just a few weeks ago I was trading with someone that always exit all at once and we both had a 10 tick target on a ER2 trade but I stayed in the trade after it reached 10 ticks because of a sudden change in supply/demand (more demand). My first 1/3 got the 10 ticks while my remainders got almost 3x more. What was the other guy doing? He got his 10 ticks and was very happy but he didn't get a re-entry signal into the stronger price movement and sat there watching as the bigger profit train left the station. Continuing, just like a majority of the traders that do scale out...there are times when it merits I exit all at once when the profit target reaches its goal. Once again, most traders that do scale out will also use the exit all at once strategy when market conditions merits for such. In comparison, those that tends to walk along your path... Rarely will they exploit supply/demand when it changes in their favor via staying in the position beyond their initial profit target. It's just obvious that you can't understand that sometimes market conditions change after entry that gives traders an opportunity to stay in the position beyond its maturity. Don't misunderstand...both types of traders can be very profitable. I've just seen some traders that were more profitable when they scaled out of some trades that merit such in comparison to when they use to always exit all the contracts/shares at the same time when the profit target is hit. Theory is good discussion and if your stats show that your actual trading is more profitable via the exit all at the same in comparison had you been scaling out after profit targets have been reached... More power to you and I won't argue with anyone via saying its not substainable. Just the same, I'm one of those traders that's more profitable when I scale out in comparison to not scaling out because I do both depending upon the market conditions. So far (knock on wood) after over a decade of trading...its substainable. P.S. The long winded message above is saying to use two exit strategies instead of one because market conditions will always change. Mark
Mark, your points are interesting and you took quite a while to put together the reply. Thank you very much for the efforts. They don't really pertain to this discussion however because this is a simple math problem. --It goes without saying that if I hold all of my winning positions to maturity as opposed to taking partial profits, I will be more successful over the long haul than I would otherwise be. This holds true over any time frame and it makes no difference whether my method is profit targets or trailing stops.
I have no idea whether Apex is more profitable than me. We use differing timeframes and we are in different markets. I am not watching the ES all the time as you know and that gives me the opportunity to trade other markets as well. I don't know if Apex does that--he may though. But the real question is whether or not Apex would beat his OWN returns if he didn't scale out. I maintain that he would. He has a strong ability to pick levels and so in his case especially, it would make sense to not scale out and let the whole position run to target 3 etc. There are numerous times when his trades run all the way to his last target.
I am not certain where I have advocated taking 40 percent drawdowns, but if you can point me to that post, I will reword it. If you mean 40 percent of a current unrealized profit, then yes, but not 40 percent of total liquid net worth etc. I will advocate here and now though, accepting 40 percent drawups.