Hmmm...what measure of common sense is reflected by these comments?
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Is Scaling Out a Fallacy?
- Thread starter cashonly
- Start date
http://www.elitetrader.com/vb/showthread.php?s=&postid=2456161#post2456161
Quote from OddTrader:
If you don't mind, I would vote for one of our great ET traders mentioned her:
http://www.elitetrader.com/vb/showthread.php?s=&postid=2455367#post2455367
" Quote from Buy1Sell2: Daytrading is an inferior strategy
Quote from Buy1Sell2:Trading from both sides [i.e. trading both long and short] is a losing strategy
Quote from Buy1Sell2:I am able to determine the extent of future market moves by backtesting
Quote from Buy1Sell2:A method that is used by the majority of traders here and fund managers all over the planet is 'sub-optimal' because I said it is "
Quote from cashonly:
I was considering some of my strategies this evening and was wondering about the wisdom or lack thereof of scaling out of positions.
Let's take the simplest example. When it reaches a certain target profit, we take half the position off the table, looking to take the other half off later.
On the one hand, if the trading strategy was solid, why not just wait until you get to the point where you'd close the second half and have that much more profit?
On the other hand, if you need to unload half, maybe you should be closing the whole position.
From a dollars and cents standpoint, is this really the best approach. The more I think about it, the more it seems like a psycological panacea. We feel good that we took a profit, and then if we make even more of a profit on the 2nd half, we feel better (maybe not as good as if we had not scaled out). Or if the stock starts retracing, and we close at a lesser profit or even a loss, we feel good that we got some profit out of the trade rather than a much lower profit or even a loss.
But, it would seem that one or the other is more optimal, and I question whether I should really be scaling out or if I should try to nail down which is the truly better approach.
Any thoughts?
Cash
Two Zurich Axioms:
If the ships STARTS to sink, don't pray, JUMP.
Always take ur profit too soon
Speed kills, they say.
Greed rhymes with speed, I say.