Expectancy higher or lower? Better for psychology? Thoughts?
Partial TPs/Scaling out/Exit half, your thoughts?
- Thread starter iamnewuser911
- Start date
Something you have to test (preferably backtest and forward-test) in various permutations and combinations, to know which methods are going to perform best, in terms of both overall profitability and risk management, for the type of trading you're doing.
(Of course, that's an easy thing to say, and isn't in itself particularly helpful toward determining what to test/compare).
Authors (such as Van Tharp and Tushar Chande, among others) frequently make the point that "all in, scale out" may in principle be a sub-optimal approach in that it tends, overall, to expose the maximum position-size to risk at the point of the trade when its overall success-chances are at their lowest. (I strongly suspect, myself, that this isn't an invariable truth and - like everything else - actually depends on many variables and parameters.)
My main point is that for any given method/system/approach, these are all issues with objective, verifiable, right answers and that the important thing is to learn how to work them out, rather than essentially "guessing". But that's often not what people want to hear, because it involves real study and education (and of generally counterintuitive subjects!) rather than trying to copy something that "just works".
For myself, I've generally found - as have others who work with me, and have taught me - that "scaling in" (by which I mean, of course, increasing the position-size of already winning positions, not "averaging down"!) can be a pretty beneficial approach, with my longer trades ... albeit that, the way I trade, I don't actually have very many of those as a proportion of my total trades. As Tomorton may explain in more detail, if/when he replies to the thread, this can be a comparatively reliable way of significantly increasing profits without increasing risk and is certainly not an idea to dismiss out of hand on any superficial or dogmatic grounds.
On that front, for myself, I've always found that whatever's statistically/probabilistically "best-performing" is also "best psychologically": there's no confidence like mathematical confidence. Just my Asperger-ish perspective.
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Lower. Scaling in or out will produce inferior results over the long haul. If it makes sense to take some of the trade off, then it makes sense to take all the position off. Scaling is a strategy normally employed by individuals who opened the trade wildly overextended and are scared to hold for maturity.
This is sub par. Trades need to be entered with full position at outset to reap full benefit. It makes no sense over the long haul to add to positions.
Good points by everyone. I am thinking of partial profits because most of my losers are stopped at break even. Which leads me to think that I can take some profits off before they are stopped, this however causes my winners to have less profit since I exit halfway. Of course I have to test it out with stats
Also it's psychologically easing as well, feels like I have made some money out of the trade already so BE/losing isn't as painful (I struggle a lot with profits vanishing) if anyone has anything that can help me with it, it would be awesome.
Also it's psychologically easing as well, feels like I have made some money out of the trade already so BE/losing isn't as painful (I struggle a lot with profits vanishing) if anyone has anything that can help me with it, it would be awesome.
Are you a day trader or a swing trader?
If you are a day trader, of course you already know you should think of partial profits along the day.
The problem is if you are a swing trader : you may want to follow the trend too long.
Best advice : be disciplined. When you are close to your targets (not a definitive number, but an area), take half, and observe.
Then take half again if you ride the trend and markets give you more than expected. Again another half... At the end, exit when this is toppish / bottomish.
Less emotions, more control.
CM
Speaking of "scaling in"... from Richard Dennis of Turtles fame....
He once said, "I scale in, but I do it so quickly as to be about the same as going all in at once".
IOW... there could be benefits to "scaling in", but not necessarily a correct play. However if the "scaling in" trade were to be correct, the 'all in initially' play would have been better".
Stated another way.... the correct analysis of the play is most crucial... how you play it is subjective.
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I'm a forex day trader. Often not ride trend, just one in one out, one "leg", thats what I target (i have a system for when the leg ends), however not all setup complete the leg/swing, most move but stop me at break even. (Not too bad,1-3 times my risk, because I often target a little higher) An idea came up to me about partial profits, which would greatly increase win rate but my winners would suffer since half is out already before TP. Looking into all my past recorded setups now
How about scaling out? Half out, hold other half. Your thoughts?
Not me. I have never "scaled in or out".
To make any REAL money in the markets, you have to make large, unhedged bets... and be correct about them (that's where TA comes in, if you didn't know)... with stops. Must use stops to control the downside when wrong. Rinse and repeat.
You can scale in/out, "pussy-foot" and hedge all you want. (Which includes "taking half off and let the rest ride, when your have a small profit") That will reduce your risk, of course. Will also reduce your gains. Pick your poison.
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