I have backtested before, and again, it has consistently shown my trading to have benefitted from selling halves than getting out all at once. There were many, many trades where the wiggles would have stopped me out with break even had I held out the whole position for my target, whereas when selling halves my number of net profitable trades increased dramatically.
As for drawdown, I rarely worry about it, or "opportunity cost", since I rarely stay in a position if it initially goes against me. I'm more than happy to get out immediately and figure out later what went wrong, or re-enter again. And I don't view staying in a profitable position and allowing it to develop as any kind of opportunity cost.
Okay, so even though you don't trade bonds, you would have exited the entire position in one shot. Had I done that in this trade, I would have made no money, because my ultimate target was 113, but the price movement wiggled around to the point that I would have been stopped out completely. By selling halves and locking in certain profit levels, I was able to keep wider stops to allow more wiggle room, while being sure that the net trade would be a profitable one. As it turns out, this strategy worked out perfectly, and has tended to work much better than any other system I've tried. Again, to each his own.
As for drawdown, I rarely worry about it, or "opportunity cost", since I rarely stay in a position if it initially goes against me. I'm more than happy to get out immediately and figure out later what went wrong, or re-enter again. And I don't view staying in a profitable position and allowing it to develop as any kind of opportunity cost.
Okay, so even though you don't trade bonds, you would have exited the entire position in one shot. Had I done that in this trade, I would have made no money, because my ultimate target was 113, but the price movement wiggled around to the point that I would have been stopped out completely. By selling halves and locking in certain profit levels, I was able to keep wider stops to allow more wiggle room, while being sure that the net trade would be a profitable one. As it turns out, this strategy worked out perfectly, and has tended to work much better than any other system I've tried. Again, to each his own.
Quote from CaroKann:
Maybe we are just arguing semantics like you said.. I would say that the account suffered a small drawdown, and then went positive.
I view it as my total net worth at any given instant (mark-to-market down to the tick), as if I were to suddenly need to liquidate everything. Holding through a drawdown costs time/opportunity, and I find it difficult to feel the trade is not a loser.
I was incomplete in my argument. What I wanted to say is backtest scaling out vs not scaling out. What you have are two distinct targets. One will likely be superior. So, I would either exit all the position at what you call a "half," or exit all where you usually go completely flat.
I submit that the greater asset value portfolio is always superior, since you can enter the same positions as the first portfolio, except at a better price, and outperform indefinitely.
I can't comment on that, since I have never been a bond trader, and I wouldn't have taken a H&S trade. It would be too easy for me to look at it in hindsight and come up with an unrealistically optimistic strategy.
But I can say that with certainty that I would exit the whole position at once, rather than half out and let the rest ride