"Scaling out" is inferior behavior

[Moneyball]

Quote from Buy1Sell2:

It's really just a simple math premise that I talk about here. The following is an example of the equation. Notice how the trader who scales may actually be able to boast that his win percentage is 66.67% as opposed to the non-scaler who has a 50% win percentage but makes more money. Simple math folks, but many want to throw irrelevant information into it--





Four ES Contracts 50% win ratio versus Four ES Contracts 50% win ratio scaling out at half target.

9 pt target 3 pt initial stop loss

1st example with 20 trades
10 winners for 9 X (4 conracts) = 360 pts ($18000)
10 loser for 3 X (4 contracts) = 120 pts (-$6000)
Net profit $12000


2nd example with 20 trades
10 winners for 9 X(2 Contracts)=180 pts ($9000)
10 winners for 4.5 X(2 Contracts)=90 pts ($4500)
10 Losers for 3 X(4 Contracta) =120 pts (-$6000)
Net profit $7500

Money can be made scaling out, but it is inferior behavior.

You say you're not dealing with hypotheticals, but that's exactly what you're doing. How did you pick these arbitrary numbers? Math is very simple, try changing some of the variables in your example and you can easily come up with scenarios where scaling in and/or out would've outperformed all in/out. I won't bother with coming up with a hypothetical to support this, but surely you see that, don't you?

The bottom line is, there is no "one size fits all" here- in some situations, it's better to scale, and in others, you're better off not scaling.

 

[FanOfFridays]

Quote from Moneyball:

How did you pick these arbitrary numbers?

It's simple. As B1S2 has stated numerous times in this thread, he has advance knowledge of the optimal exit point for every trade before the trade is placed.

If this is the case, he obviously has access to other data which the rest of us do not have. The numbers he is picking are not arbitrary. They support his hypothesis, therefore they are based in reality. Whatever supports his hypothesis is based in reality.

Numerous people have shown him examples where scaling out is not optimal behaviour. His response is always the same. There is no need to provide any independently verifiable numbers to show that scaling out is sub-optimal in every conceivable trading situation. It is enough for him to say:

"Yes, it is".

 

[Buy1Sell2]

Quote from Moneyball:

You say you're not dealing with hypotheticals, but that's exactly what you're doing. How did you pick these arbitrary numbers? Math is very simple, try changing some of the variables in your example and you can easily come up with scenarios where scaling in and/or out would've outperformed all in/out. I won't bother with coming up with a hypothetical to support this, but surely you see that, don't you?

The bottom line is, there is no "one size fits all" here- in some situations, it's better to scale, and in others, you're better off not scaling.

If a person scales out and the portion left on continues to make money, the it did not make sense to scale out. If a person scales out and the portion left on loses money, then it did not make sense to scale out. It is always better over the long haul to discard scaling.

 

[Buy1Sell2]

Quote from traderNik:

Unfortunately for you, you did, when pushed into a corner, claim that you knew the optimal exit point for every trade before it appeared.

False.

I said that anyone, not just myself, can calculate an optimal target for a particular type of trade (set up). In other words, anyone can define a setup and then determine how many times it goes 80 ticks, 70 ticks etc and then figure out what the optimal target over the sample is. Sometimes it would go farther, sometimes not as far and sometimes get stopped out. Anyone can do this.

 

[volente_00]

Quote from smilingsynic:

Hindsight is 20/20.

If it had gone to 1150 and then B1S2 got out at 1200, then covering at 1255 would have appeared unwise.

Shoulda, woulda, coulda.

But if one had scaled out half at 1255, how much more profit would the trade produced ?


Show me 1 time period on the S & P chart where it has went down 300 points without having a 100 point bounce in between.

 

[volente_00]

Quote from Buy1Sell2:

This was a very profitable trade for me with 140 ES points per contract realized with full position.

Again the discussion is about what works over the long haul, not on one individual trade.

Yes but you still gave up 88 points of extra potential profit by not scaling out.

 

[Buy1Sell2]

Quote from taowave:

You are missing the whole point.I chose a breakout system and a reversal system to be thorough in ones testing.It is not a comparison of one vs the other.

The math doesn't care what type of system is used. Scaling will always provide an inferior result over the long haul due to the simple fact that when the full target is hit, the full position is not on to reap the full benefit. It just doesn't matter what the system is. Reminder: There are many profitable strategies, but only one proper way to trade and that is to have the full position on without scaling , cutting losers short and letting the winners reap the full maturity benefit.

 

[Buy1Sell2]

Quote from volente_00:

Yes but you still gave up 88 points of extra potential profit by not scaling out.

No. If I would have decided to get out at the point you are mentioning, I would have exited the full position and not scaled out and that would have reaped a larger reward than your suggestion of scaling. You're missing the crux of the discussion.

 

[volente_00]

Quote from Buy1Sell2:

It's really just a simple math premise that I talk about here. The following is an example of the equation. Notice how the trader who scales may actually be able to boast that his win percentage is 66.67% as opposed to the non-scaler who has a 50% win percentage but makes more money. Simple math folks, but many want to throw irrelevant information into it--





Four ES Contracts 50% win ratio versus Four ES Contracts 50% win ratio scaling out at half target.

9 pt target 3 pt initial stop loss

1st example with 20 trades
10 winners for 9 X (4 conracts) = 360 pts ($18000)
10 loser for 3 X (4 contracts) = 120 pts (-$6000)
Net profit $12000


2nd example with 20 trades
10 winners for 9 X(2 Contracts)=180 pts ($9000)
10 winners for 4.5 X(2 Contracts)=90 pts ($4500)
10 Losers for 3 X(4 Contracta) =120 pts (-$6000)
Net profit $7500

Money can be made scaling out, but it is inferior behavior.

Your example is flawed because you use 100 + point stops and try to capture 200 + moves. You will get hundreds of 9 point moves over the same time period that only 1 200 point move happens.

 

[Buy1Sell2]

Quote from romik:

That is exactly why B1S2 is right in his statement.

You just provided 90% win rate not just of scaled out trades, but of trades that went to 9 point gain, now please recalculate same 2nd example of 90% without scaling out

Thanks Romik. That is exactly right. Parameter change on one side has to be duplicated on the other side. That is reality. If the signal is 90 percent, then the non scaler would have a fantastic benefit. Again thanks for pointing this out!