e mini average up/down system

Originally posted by Aaron


The same goes for exits. I don't understand taking half the position off after x points of profit and letting the rest of the position run. Backtest which exit is more profitable and take the entire position off at that point.
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I have to disagree with this. Maybe in back testing your idea might be right. Try the back test and move stop to b/e after X points, then check results.

In real trading, exiting half and moving stop to b/e, if only half of the trades continue on then you are much more ahead in the long run.

Make 'em pretty, Chris
 
And basically, at its core, this debate is discretionary vs systematic trading...Who is right, who is wrong...no one...but for some reason the second you mention you scale into a trade, it is like a pack of wild dogs going after raw meat, they all start barking at the same time...so, might as well, just say do what you want to do, but don't make this out to seem that you can "quantify" the better of the two techniques...Because this is not about buy at x and sell at y with a stop at z...It is trade management, not system trading...
 
DblArrow,

All I can tell you is I have backtested exactly that approach and found it gave poorer results than just hanging on to the full position. I am not saying every trade works out that way, and my testing was limited to a few systems on the big S&P contracts. Perhaps in stocks, where there are execution issues, your approach is better. I do advocate moving your stop to b/e after a favorable move, but I want to be carrying the full load if the trade turns into a big winner.
 
There are a couple variables at issue:

1. Whether you're scaling out at a fixed point level or based on key support/resistance areas. If the former, then depending on what you set X at will affect the overall net performance vis a vis full position exits. However, strategically taking profits near key support/resistance areas is tough to impossible to build into an ordinary backtest but should nevertheless provide better performance than simple +X profit taking.

2. The other variable is whether you're in a choppy or trendy market. If trendy, then clearly taking full positions to closure will typically deliver better results. But if choppy, then strategic profit taking at key support/resistance is an advisable technique.
 
Originally posted by AAAintheBeltway
DblArrow,

All I can tell you is I have backtested exactly that approach and found it gave poorer results than just hanging on to the full position. I am not saying every trade works out that way, and my testing was limited to a few systems on the big S&P contracts. Perhaps in stocks, where there are execution issues, your approach is better. I do advocate moving your stop to b/e after a favorable move, but I want to be carrying the full load if the trade turns into a big winner.
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Yes my tests confirm this also. However, this proves the point that you can have a system that has poorer performance, yet is a better system for a certain trader because it fits his psychology better. Whether a trader can actually follow a system is at least as important as overall system profitability. If you can't trade a system then it isn't any good for you. The flip side is that taking partial profits will increase win % and thus smooth the equity/drawdown curve (lower highs but higher lows).
 
Originally posted by TriPack


Yes my tests confirm this also. However, this proves the point that you can have a system that has poorer performance, yet is a better system for a certain trader because it fits his psychology better. Whether a trader can actually follow a system is at least as important as overall system profitability. If you can't trade a system then it isn't any good for you. The flip side is that taking partial profits will increase win % and thus smooth the equity/drawdown curve (lower highs but higher lows).
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Ultimately this is the truth.

Perhaps looking for the larger wins it is best to hold the full position. But I must say I much prefer the larger win percentage of taking some off and letting the rest run. I believe that this is fully psychological, and I also believe that this, and trade management within that psycology is what will either make or break the trader.

For the record, I trade bonds, notes, es and nq.
 
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