Do you scale out of your trades?

[AnonymousTrader]

Quote from Quah:

Do you "scale out" at your stop loss too?

If not, why not?

There are two strategies,

For active trading, some "scale out losses" work, when you combine them with offsetting and praying.

With my style of trading, I dont scale out of losses because my exit procedure is fundamentally different from entry.

When scaling out of profits - thats a way of not cutting them too short. When you simply scale out of losses you are guaranteeing to not cut them short.

 

[Error 404]

Quote from bobcathy1:

No scaling at all?

It takes a lot of balls to scale in as the trade goes slightly against you......but oh the profits are SO MUCH SWEETER......
AND BIGGER

This equates to bad money and risk management.

Averaging down (up in shorts) has it's place. But if it causes the trade to yeild gains that are (in all CAPS) "SO MUCH BIGGER" than it's a lucky trade.

Anyway, you say "slightly against", so how can that really make a big difference? Are you adding more shares/contracts than you had to start with? If so, then I would consider the original position just a "feeler", which is fine....no one has perfect timing.

So if you add to a "feeler" position, then it's a position you had intended to add to when you initiated it. If that's the case, it doesn't take "a lot of balls"....all you are doing is sticking to the original plan. If you are "doubling down" on a bad position that you did not intend to add to at all, that's a different deal. Yeah, it takes "balls"...but then you are just gambling. Nothing wrong with that either. Unless you take trading seriously.


Peace,
RS

 

[OddTrader]

What actually is scale-in/-out anyway?!

I would think that usually an always-in-the-market SAR system (based on EOD data) would require to Exit all existing position(s) while the old trend finishes in order to Enter new position(s) while a new trend starts to develop.

1. According to Perry Kaufman (Trading Systems and Methods, page 617), the building up (or adding) of positions to a trade (at pre-set intervals for the effect of a single poor entry point is reduced and a better average entry price is created) is called Scaled-down buying (for normal profits) while a trend starting.

2. According to Larry William (Long-term Secrets to Short-term Trading, page 183), we need to first determine the (constantly updated) Number of contracts to trade: which is equal to (Account balance which is gradually increased when a trend is favourbly developed)* (Risk percent pre-defined, say average 5%) / (Largest loss willing to take when executing the system). This could be called Scaled-up buying (for additional profits) while riding a trend.

3. However, separately to the above, extra trades for pullback/ retracement can be optionally established, these individually buying/selling position(s) due to pullback/ retracement while riding a trend could be called Load-the-boat buying (for extra profits), through taking extra risk (say, maximum another 5%).

4. Personally I would believe that whether to scale in (within the same bar or across multiple bars) or not (using single order or multiple smaller orders) for building up the position(s) equating to the said 5% risk twice (or more) separately and independently in all three situations for normal/ additional/ extra profits would be simply a personal preference, imo, as long as the market allows (which would be completely another issue!).

 

[bobcathy1]

Quote from Error 404:




This equates to bad money and risk management.

Averaging down (up in shorts) has it's place. But if it causes the trade to yeild gains that are (in all CAPS) "SO MUCH BIGGER" than it's a lucky trade.

Anyway, you say "slightly against", so how can that really make a big difference? Are you adding more shares/contracts than you had to start with? If so, then I would consider the original position just a "feeler", which is fine....no one has perfect timing.

So if you add to a "feeler" position, then it's a position you had intended to add to when you initiated it. If that's the case, it doesn't take "a lot of balls"....all you are doing is sticking to the original plan. If you are "doubling down" on a bad position that you did not intend to add to at all, that's a different deal. Yeah, it takes "balls"...but then you are just gambling. Nothing wrong with that either. Unless you take trading seriously.


Peace,
RS

OK....this may make more sense if you know I daytrade YM...it is a very wiggly future to trade. And I would consider these "feeler" posititons with the signals not changing at all. Once my signal changes I do get out.
I trade to a very specific set of rules and chart patterns. As long as my premise is not broken, no problems adding.

Since you own a set of balls, you probably do not know how important they are in trading.
Did you get up on the wrong side of the bed yesterday?

 

[oten]

Recently I have gone to testing the use of "paired" contracts. That is I trade in an equal # and as pairs. My 1ST one in the pair has 3 pt emini target and the 2Nd has a 5 pt target. Once the 3 pt is hit I adjust the stop on the 2ND to break even.

I have found this works best in the opening and closing 90 minutes.

The rest of the day has been to narrow most often of late.

 

[cknucks]

This was an interesting thread. I'm trying to learn more about scaling positions to see if it can improve my equity curve.

Some of my best trades have actually come from scaling "the wrong way", as the stock was approaching my stop loss. However, if you get a new signal that says buy/sell more, why not average down, keeping your stop loss constant on your whole position?

Scaling in, however, has ALWAYS been unprofitable for me. Need to figure this out.

 

[cknucks]

meant to say that scaling into a profitable trade has always been problematic.

 

[SandStorm]

HI, I am new to this site but I think I am gonna love it.

Here is my 2-cent on scaling. Doesn't everyone already practice some form of scaling whether they know it or not? I mean don't we all allocate our trading capital into several stocks and entering and exiting them at different intervals? This I consider as scaling.

 

[Dar Spring]

Sandstormer



The subject was about the same security involving a particular market direction.

If you thing buying other assets is scaling then yes...your toaster you purchased at WalMart is also a form of scaling, with a garage sale in the year 2015 being the sell date.

DAR