ALL In,Out Vs. AVERAGE In,Out

Quote from aeliodon:

Averaging out is not inferior. If you have that much confidence that the trend has ended then you should not only go ALL OUT but also REVERSE position. If you don't have the confidence to reverse the you're better off averaging out.
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(1) The thread I referred you to is not mine, I was simply trying to save you from rehasing the same arguments again.

(2) Averaging out is inferior - its a mathemtical certainty. Some people may need the psychological crutch that scaling out provides (and in that sense it is not inferior for them because they need that higher win ratio to feel good about themselves) however that's an emotional issue, from a strictly mathematical point of view scaling out by definition is sub-optimal.

(3) I disagree with your assertion that someone that does not scale out should always be long or short, never flat.
 
I don't scale in, but since started to scale out (inferior or not) win/loss is a lot better. Many times in the past a position in profit became a net loss.
 
Let's be honest here - the #1 reason for the failure of market timers is that they don't hold their winners long enough to profit from those monster trends that present themselves every now and then like clockwork. These monster trends are the ones that make your career. And if you're going all in the odds are you either: don't catch the begining of the trend and so avoid the entire trend all together, or try to pick a begining and get stopped out, or predict the end of the trend and take profits too soon.

Going all-in only makes sense in the following context:
Trading a portfolio of assets like an insitutional fund. Then you may go all-in on one position when in fact you're averaging in and out of your whole portfolio (ie increasing long exposure, increasing short exposure, increasing cash, etc.).

But for most traders that trade one or just a couple of markets like ES - its better to average in and not bet the farm on one market and one trade.
 
I think you are discounting scalps, daytrades or whatever terminology you want to use. No need to wait for any monster moves, identify a high probability set up with an exit target. Also have a plan if you are wrong, how long will you hold until the trade earns a profit vs closing it the same day regardless and just move on to the next trade?

Sometimes a quick trade turns into a swing trade because market factors change during the trade, I like to mainly trade oil stocks so obviously there are often factors that make me hold longer or dump quick.

I just don't see any single method as being correct, it depends on your goals and how comfortable you are with risk.
 
I've just quit trading ES, it certainly hasn't worked out for my type of trading. DAX on the other hand is perfect, all in in morning, scale out a couple of lots within 10 minutes at 2 levels and keep 3rd lot on for possible intraday trend day till MOC :)
 
Quote from GTS:



(2) Averaging out is inferior - its a mathemtical certainty. Some people may need the psychological crutch that scaling out provides (and in that sense it is not inferior for them because they need that higher win ratio to feel good about themselves) however that's an emotional issue, from a strictly mathematical point of view scaling out by definition is sub-optimal.
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Would you please elaborate on how it is mathematically more superior. I am very interested in that. Can you please prove that rather than just say it is that. I am not debating your statement, because I do not know nothing about. Although some people state the opposite. Can you please prove your theory.
 
Diversification is key to good trading or investing.

You can diversify by trading many different uncorrelated markets. Trade a portfolio of assets by averaging in or going all in.

Or you can diversify by trading one market at many different prices - exploiting panic buying/selling rather than falling victim to the panics and complacencies. I know this isn't an academic definition of diversification like the previous one. But at least you're not betting the farm on one market, on one position, at one price.



Now there are exceptions to the diversification rule. Diversification is clearly not required for the Jack Hershey and Prologic approaches to trading. Since both approachs never produce a losing trade ever - so in those two case it makes sense to bet the farm on one market, one position, at one price. Those two methods are divinely inspired and correct 100% of the time and soon those that practice those two methods will amass the entire wealth of the world of speculation.
 
Quote from rateesquad:

Would you please elaborate on how it is mathematically more superior. I am very interested in that. Can you please prove that rather than just say it is that. I am not debating your statement, because I do not know nothing about. Although some people state the opposite. Can you please prove your theory.
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In the end of the day the only thing that matters is what method makes you money. I personally do not care whether it is more profitable not to scale out, I only care for what I CAN actually make, not theoretically, but practically.
 
Quote from rateesquad:

Would you please elaborate on how it is mathematically more superior. I am very interested in that. Can you please prove that rather than just say it is that. I am not debating your statement, because I do not know nothing about. Although some people state the opposite. Can you please prove your theory.
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I'm going to make up a fictious example - I understand that the numbers I use are not how everyone trades. The basic premise should be applicable to anyone who isnt trading by random entries/exits.

You are in a trade.

A. You can sell everything after a one point gain
B. You can sell everything after a two point gain
C. You can sell half at 1pt and half at 2 points (scale out)

Over the long-term always doing A or B is going to yield a better result then C. Said another way, using exit strategy C will produce results thare are going to fall between A and B since it is an average of the two.

Now of course the common response is - how can you know which target is optimal before the trade is over? You can't on any given trade (nor do you need to).

It is the traders job to determine the optimal exit target for their particular trading style/system/setup over the long-term.
 
A) Optimal exit +10 points all out;
B) Out at 1 +2, out 2 +4, out 3 +40

I am certain that most don't know where optimal exit is.
 
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