Actually. the system I developed which does not incorporate scaling out, is deisgned to capture the big winners. There is no need to adjust the strategy. Your first sentence here was very correct though.
Good post, but I scale out even if my position is 5% of my portfolio, and I am 95% cash. If you do not scale out, you are letting your position become a binary event, loss or profit.
scaling in is as inferior as scaling out - seriously..........nail the entry and nail the exit i'm saying go all in on the position without investing all your capital into it........leave plenty of capital for other positions.......leave 90% for other positions the only smart reason to scale in/out is due to liquidity/slippage issues guys that like to scale like to increase their win rate instead of the amount of money won.......its an ego thing
i scale in because i counter trade and when its nearing a line for a bounce it doesnt always get there,, by scaling in im sure to get partially short/long if it doesnt reach the level i foresee
similar to having an extra gun in a cop movie when they take your first one,you still have powder,to reenter or add size if the mrkt surprises you,you're short a 10 lot of spus,at 1330, you have buy stops in2@32 ,2@ 34 , 2@ 36. 4@40,mrkt takes 32 ,34, trades to 37 and you sell 6 back out ,spus dropp to 1320 and you cover,you protected your losses and increased your profits,didnt take a ton of pain so that you werent shaken out of the trade
Scaling out is absolutely not an inferior way of trading. For 2 reasons. 1. There is no inferior way in trading, do what makes money FOR YOU. 2. Scaling out of positions takes advantage of probabilities. I always take profits in that way. -First 1/4 is taken at the profit level of 2x my stop. This allows me to give the market room and takes advantage of the fact that I may still be wrong but get some arbitrary move. BUT now I only have the loss of half of my position. -The rest, if successful, is ridden to my target. Trading this way allows me to have very very very few red days. Thus smoothing out my profit curve immensely. I believe in going into every trade with a tight stop, and a price target that is usually 8-20x the potential loss. I may only have 1 right trade a day, but chances are that I still made money.
when u go for 8-20xyour potential loss,u have a small stop or a very large move in the mrkt,which is it?
I have no idea what you are asking. I have both a tight stop and a decent sized move anticipated. It makes it very clear cut when I am wrong.
A bird in the hand is worth two in the bush. As long as adequate risk control is practiced for the downside- scaling out produces a REALIZED profit vs a mere THEORETICAL or POTENTIAL profit. As it was stated earlier, scaling out is taking advantage of probabilities. Either one can work just fine for a trader, but it needs to fit their method and personal appetite for risk. The downside to it all is that you must be relentless with your downside protection, or maybe even scale out losses. The danger is that you are taking a FULL LOSS at a stop out, whereas only PARTIAL PROFITS are being realized in a scale out basis. You must ensure that you are not causing downside imbalances in your risk/reward ration by scaling out. No one way to trade properly. It's a very dynamic situation.