huios, great ! 2-3 days like this a month and you have made it i was trying to get long somewhere around 10:30 / 918...stupid i think you have read van tharps book where he said, that scaling out is nonsense. what did you think ? good luck
Huios.. beware the blind leading the blind.. alot of people in anon chat rooms post only their winners.. and then when they get hit for a few stops they suddenly lose the urge to share their experiences.. remember that your goal is to create a positive expectancy.. the problem with scaling out is that it ruins your risk/reward because every trade that goes the wrong way immediately will cost you on the full lot.. then whenever you get a nice winner, you only have half a position on.. ive been through the same question of scaling a zillion times and honestly for me it had more to do with not wanting to accept the possibility of a loss, something that isnt possible or realistic in this profession.. we want losses and stops in this business, as long as they are part of a positive expectancy.. fear and greed are very subtle.. sometimes they manifest themselves in creative "adjustments" to our methods.. personally im trading the nq.. and i generally use a 4pt stop and a 10pt target.. thats 2.5 r/r.. if i get creative and scale half my position at +4 then my r/r drops to 1.75.. a nice 30% haircut on my positive trades.. that means in order for scaling to be a positive change, i need to dramatically increase my win%.. Futuresnut.. i just use dialup AOL.. alot of the nicer truck stops have restaraunts with phones at the tables.. makes a nice trading desk =).. although the waitress can get a little testy after a while.. but a nice tip usually calms her down.. -qwik
Qwiktrade Do you keep a hard stop or do you tighten it as a trade goes in your favor, eg bring stop to b/e at 1R or trail a stop. I use a similar R:R strategy but my R:R is 2:1. I normally bring my stop to b/e at 1R. For a while I thought that I was giving up some profit by bringing the stop to b/e and missing the opportunity for the full 2R but after some testing I found that only 10% of my trades would have hit 2R before hitting my original stop without a b/e stop.
That is the same conversation I have had with myself for the last 18 hours. And this is not the first time I've had it. Basic Premise: With scalping or other short term positions, you need to have your full position on right away, because you don't have the luxury of adding to positions like the longer term swing, or position trader has. I'm thinking of taking half the position off after 1.5 to 2.0 point move, and then letting the rest ride. Either I hit my first target and get out, or hit my first target and move my stop to protect profits,and wait for the second target (usually pretty generous)... or I get stopped out at breakeven on the second contract. The trick is to take only the low risk moves, where the stop can be tight, 1-2 points based on the price action, not just money as previously discussed. I'm finding trading is like climbing a mountain, except instead of just barging straight up, you walk around it in ever decreasing circles. The big ravine you fall into (insert your common problem here), and claw your way out of, is not as deep and difficult after you circled the mountain once. You are further up the slope, but you can still see where you stumbled into it as you look down. And you still fall into it. On a subsequant circle, all of sudden you see that that ravine is not as wide, and you can, with alot of effort, just jump across, and continue your journey. The next trip around, you are stepping across it without giving it any thought. Once you reach the top, you see you just scaled (pun intended)the foothills. I don't have the answer to the scaling out thing. Hey... you old wise traders... care to share your wisdom on the wisdom of scaling out of a short term trade (1-10 minutes). Thanks in advance.
qwik, I agree with your take on scaling out. It can make sense with stocks if there are liquidity issues. That's not likely to be a problem for small size e-mini traders. I did a lot of backtesting that substantiated your point, namely that it is important to have the full boat on your winners. My general observation is that many newbies underestimate the importance of hitting your share of huge winners. In this market it is tough because we have not had too many big trend days, but they are crucial to your profitability. Also, I agree with going to B/E after 1R, although my R is probably larger than many here would use. There is a difficult balance between holding for the big winner and not letting too many decent trades turn into pushes.
Sorry to interject a scaling question - but does the idea of not scaling hold true if you have a system that is 75%? That is based on scaling - taking 3 (nq) and stop to b/e is a winner. Thanks, make 'em pretty, Chris
First of all...a good trader has a trading plan for each and every trade...prior to the trade. Such a plan includes stop/loss protection, profit-target(s) and such. If your a scalper...I do not recommend scaling out of positions. It would seem self-defeating. I know a few scalpers and none of them scale out of positions. They go in with full burners and exit with full burners. Me...my trade setups are specifically designed for scaling out of profitable positions. Thus, it's part of the trading plan prior to entry. Therefore...if I was a discipline trader...which I think I am...then I must scale out of my positions at their designated price targets (if reached) or else I'm defeating the purpose of having a trading plan. The Eminis has beautiful intraday trends every single trading day and I want to capture as much as I possibly can via my trade setups. I'm use to seeing them (NQ and ES) move a few points into the direction of my trade and then counter-thrust a point or worst...before reversing and continuing in the trend. All my trades have two designated profit-targets. Profit-targets I go into the trade with some confidence that at least the first one can be reached. If the first profit-target is reached...I will quickly gauge the price pattern to see if there could be some more follow-thru... if I think there will be some more follow-thru...I exit most of the position and keep some on the table. Now...why would I exit most if I thought there would be some follow-thru? To bank some profits just in case I'm wrong. If I'm right...I still have some contracts on the table to bank some more profits. With that said...if I exited the entire position at my first profit-target...what's the purpose of having a second profit-target?... knowing the trading plan prior to the trade. Remember this...if you've been trading the Eminis...you know very well all about their counter-thrusts. The same counter-thrusts that plays havoc on most beginners in the Eminis. Simply...if your trading plan requires you to exit a profitable position all at once (full burners on)...do it. If your trading plan requires you to keep some on the table...do it. P.S. I did an analysis of 3 months of trading last year to see if I would have made more money exiting all contacts at once in a profitable position... Results: NO via the all method and Yes via the two seperate profit-targets based on my trade setups. It just bothers me sometimes when traders groups all traders into a particular situation based on their own trading style or habits. Remember this...you and I can be looking at the same cloud in the ski...you see a lion and I may see a elephant. Thus, our application of a particular strategy based on the same price pattern may produce different results via how we interpret the situation. NihabaAshi
DblArrow, If your system tests out using that approach, then I don't see a problem, particularly in this choppy market. Have you tried it w/o scaling to see how the p/l varies? How does it look when run against data from '95-'00, when we had a very different market? All my testing basically showed that scaling out and taking quick winners produced better win/loss percentages but diminished overall profitability. A lot of it depends on the market environment obviously and your entry criteria. Let's say you're playing weekly break-outs. Then taking quick profits is foolish because that's a homerun type entry. If your entries are based on some intraday oscillator crap, then you're probably better getting out whenever you have any profit. Joe Ross is a big advocate of trading with 3 lots, taking profits on one quickly to "cover costs", another at soem point I have forgotten and another let it ride. This approach has a lot of intuitive appeal but I could not make it work in backtesting. The flaw is the one qwik detailed--you're usually taking losses on the full position but taking profits on a reduced position.
qwiktrade, How's it possible to only post winners in live-realtime trading chat rooms? Are you talking about snail-mail message boards? Note: I personally stay away from rooms that has traders that post more than 15 seconds after the fact. Good posts today in Huios thread and welcome back. I had started getting use to reading your posts then you were gone a few months. NihabaAshi