And even with 20/20 hindsight;
many tops are multiple areas
many tops are multiple areas
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How about DR THARP
- Thread starter peterzhang
- Start date
Quote from OldTrader:
Actually I don't think that's his argument at all. Let's say you hold two contracts. You're saying sell one at a predetermined spot. That way if it goes back down you have something in your pocket. The problem comes in when it doesn't go back down. Instead, it goes way up. You're way you're making a profit on half the contracts. His way he's making money on all the contracts. And his point is simply that if you think about it logically, holding all the contracts will always be superior, eventhough sometimes the market turns back down and you didn't make the small profit that you might have made by selling half.
I've gone through my own trades where I've done considerable scaling out...it has worked against me over time.
You might want to read the thread...alot of good arguments there.
OldTrader
nope I am not necessarily sell one contract at a predetermined spot.
I am saying scaling is two separate trades.
while you can determine what your maximum favorable excursion is on backtests you never really know whats going to happen going forward. You do not know if future excursions are going to change somewhat.
If you have an entry that you know is a good spot you have a choice. Pick your size based on backtested results. Or go larger and scale out holding the position size your system requires.
The results will be a far smoother equity curve and more profits. Provided you have a better than than ramdom entry and you set your Rs up right.
We know what the expectancy was in the past. We do not know what it is going forward. With better than random entries scaling should be superior or at least the same.
Quote from OldTrader:
Actually I don't think that's his argument at all. Let's say you hold two contracts. You're saying sell one at a predetermined spot. That way if it goes back down you have something in your pocket. The problem comes in when it doesn't go back down. Instead, it goes way up. You're way you're making a profit on half the contracts. His way he's making money on all the contracts. And his point is simply that if you think about it logically, holding all the contracts will always be superior, eventhough sometimes the market turns back down and you didn't make the small profit that you might have made by selling half.
I've gone through my own trades where I've done considerable scaling out...it has worked against me over time.
OldTrader
Do you mean then, that it would be 'optimal' to leave the whole position on (2 lots) until the final target and eventually be stopped out (on 1 lot) as a trailing stop should the mkt retrace down ?
Quote from Bernard111:
Do you mean then, that it would be 'optimal' to leave the whole position on (2 lots) until the final target and eventually be stopped out (on 1 lot) as a trailing stop should the mkt retrace down ?
I'm saying that it would be optimal to leave the entire position on, as opposed to selling half at some pre-determined target.
OK, so if you have just sold half, and it goes back down, your performance on that particular trade relative to holding the position will be better.
On the other hand, if it goes on up, the obviously holding the entire position is better. And what may happen is that it may go way up, making holding the entire position considerably better.
A couple of cautions though. Trading with a pre-determined target is a great way to sell out of a winning position thereby cutting your gains short. So I'm not proposing to trade with a pre-determined target. I'm proposing to hold the position until something takes place to warrant closing the position.
Further, this technique of holding the entire position works better for swing trades than day trades. That's one of the problems with daytrading in general. That said, getting out at a target even intraday to take part of your profit is going to be less effective in my opinion than holding the position until you have a reason to get out. I'm basing this on my personal trading.
OldTrader
OldTrader,
Thanks for your post; again your post is another re-affirmation that the exits are clearly more important than exits (nothing new here..).
The issue - as you stated - is to find each time the reason why the trader should close his entire position instead of just scaling out... developing and being able to create such a scenario is not an easy task and it probably depends not only according to intraday or swing time frame but also on the type of the markets traded.
Bernard
Thanks for your post; again your post is another re-affirmation that the exits are clearly more important than exits (nothing new here..).
The issue - as you stated - is to find each time the reason why the trader should close his entire position instead of just scaling out... developing and being able to create such a scenario is not an easy task and it probably depends not only according to intraday or swing time frame but also on the type of the markets traded.
Bernard
The arguments:
- follow it don't target; and
- all out;
ignore the position sizing implications of the standard deviations of wins and losses.
If anyone reading this thread wants to look at it seriously look up books by Stridsmann. Its important to remember that Tharp is a psychologist, self-promoter, and course marketer not a mathematician.
- follow it don't target; and
- all out;
ignore the position sizing implications of the standard deviations of wins and losses.
If anyone reading this thread wants to look at it seriously look up books by Stridsmann. Its important to remember that Tharp is a psychologist, self-promoter, and course marketer not a mathematician.
Quote from jem:
first book was well worth the money. At the time it was truly cutting edge material.
Now much of the information is old hat. Everyone on the web and elitetrader pushes it like its their own stuff. Expectancy is now the orthodoxy. At the time he wrote the book it was a very rare guru who said you could be wrong more than you were right and still make money. Unfornately for Tharp I think he had too much integrity to call it "Tharp Expectancy" which an IP lawyer might have told him to do. By the way you can pick up a lot of good information at his trading website and from his newsletter.
Never really liked the second book because I never bought into the co-authors "talent". I spoke with him many times. Nice enough and smart enough guy, but he never once had his own unique trading insights. Plus he used to say scaling out throws off the r multiples and he did not seem to understand that what you lose on the big winners you save on the profits you got to book instead of taking a full loss.
If he'd called it Tharp Expectancy then he would have had a law suit ... against him. It wasn't his idea but he wrote about it like it was ... self-promotion is a talent.