"Scaling out" is inferior behavior
- Thread starter Buy1Sell2
- Start date
Quote from Buy1Sell2:
you see--there will be numerous times when I do catch the top and I will have full position on for the big win. With averaging, I will not have full on. The math here is easy.
With the same reasoning, you could also make the statement that "Not leveraging your account to the hilt on every single trade is inferior behavior."
Maximizing one's profits on any given trade has fuck all to do with succesful trading.
maybe you are right,i found that if i went all in i would have to be stopped out,with a smaller acct,averaging allowed me to get a better price, ,i'm all about catching the move with the best price before it happens and catching tops or bottoms is tough,impossible,rare luck...in reality the extreme tops ,bottoms are rarely hit
Four ES Contracts 50% win ratio all in/all out 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 losers 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 Contracts) =120 pts (-$6000)
Net profit $7500
Money can be made scaling out, but it represents inferior behavior--Ishmael
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 losers 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 Contracts) =120 pts (-$6000)
Net profit $7500
Money can be made scaling out, but it represents inferior behavior--Ishmael
Emini TF Futures
Profit Target determine PRIOR to entry to be @ 680
Trader A enters with 6 contracts @ 670
Profit target reached and trader A exits all contracts @ 680 for profit of 10 points x 6 = $6,000
Trader A total profit @ $6,000 via all out
In contrast, Trader B enters with 6 contracts @ 670 with the same profit target @ 680
Profit target reached @ 680 and trader B determines the price action has become more favorable to the Long side when price action reached 680. Therefore, trader B scales out 4 contracts @ 680 for a profit of 10 points x 4 = $4,000
trail stop @ profit and above 680 for the remainders
Trader B sees price continue to 690 and then determines price action is no longer favorable and designates 690 as the new profit target for the remaining contracts...resulting in exiting the remaining 2 contracts @ 690 for a profit of 20 points x 2 = $4,000
Trader B total profit @ $8,000 via scaling out
As stated by others many times in this thread. There's a time to exit all and there's other times when you should scale out due to the fact the markets are always changing after entry.
Simply, if you don't have the ability to exploit those new changes after you open a trade position or you don't see favorable price action when your profit target has been reached...it's highly recommended that you close your entire position when the original (primary) profit target is reached. In contrast, if you have the ability to recognize and exploit markets that has changed after your entry...scale out at your original (primary) profit target and keep the remainders to let them ride to a secondary (bigger) profit target. Next, exit your remainders at their new profit target. If second profit target not reached...it retraces and hits your trailing stop at profit but still a better exit than Trader A.
Therefore, which trader showed inferior trading abilities ?
P.S. Never scale out of a losing position. Always have a several profit targets prior to entry of any trade position and trail stops at a price better than the original (primary) profit target to ensure that the profits of trader B are greater than the profits of trader A.
Mark
Profit Target determine PRIOR to entry to be @ 680
Trader A enters with 6 contracts @ 670
Profit target reached and trader A exits all contracts @ 680 for profit of 10 points x 6 = $6,000
Trader A total profit @ $6,000 via all out
In contrast, Trader B enters with 6 contracts @ 670 with the same profit target @ 680
Profit target reached @ 680 and trader B determines the price action has become more favorable to the Long side when price action reached 680. Therefore, trader B scales out 4 contracts @ 680 for a profit of 10 points x 4 = $4,000
trail stop @ profit and above 680 for the remainders
Trader B sees price continue to 690 and then determines price action is no longer favorable and designates 690 as the new profit target for the remaining contracts...resulting in exiting the remaining 2 contracts @ 690 for a profit of 20 points x 2 = $4,000
Trader B total profit @ $8,000 via scaling out
As stated by others many times in this thread. There's a time to exit all and there's other times when you should scale out due to the fact the markets are always changing after entry.
Simply, if you don't have the ability to exploit those new changes after you open a trade position or you don't see favorable price action when your profit target has been reached...it's highly recommended that you close your entire position when the original (primary) profit target is reached. In contrast, if you have the ability to recognize and exploit markets that has changed after your entry...scale out at your original (primary) profit target and keep the remainders to let them ride to a secondary (bigger) profit target. Next, exit your remainders at their new profit target. If second profit target not reached...it retraces and hits your trailing stop at profit but still a better exit than Trader A.
Therefore, which trader showed inferior trading abilities ?
P.S. Never scale out of a losing position. Always have a several profit targets prior to entry of any trade position and trail stops at a price better than the original (primary) profit target to ensure that the profits of trader B are greater than the profits of trader A.
Mark
(Still can't believe this question is still going on, LOL... )
FWIW, I tell my newer traders something that really seems to help them psychologically (a very big part of trading).... "when you're in a position, and you're not sure what to do..... do half.... that way, if it keeps going against you're happy you did at least half, and if it turns around and goes your way, you're happy you ONLY did half...either way you're happy... and happy traders are much more likely to make money than stressed out traders." This is example is for a losing trade, same thing for a winning trade. Much better than just doing nothing.
Another point that you guys may have already addressed in your posts is that most traders let the market tell them what to do... don't limit yourself to pre-determined profit targets when things are trending your way, and don't get stuck holding a bad trade when things are going against you..... "get out, if you think you can get back in at a better price" (when the market is rallying like crazy for example and your're short.
My honest feeling is that there is no "right or wrong" to scaling out of a position. Scaling "in" can be another story, but still not "wrong" in most cases.
In any event, each trader develops their own personal strategy and mind-set....and if you're making good money, that's your "proof" that you're "right" in your assumption.
Don't fret or worry about "what ifs" and other hypothetical scenarios.
Good Trading guys...
Don
FWIW, I tell my newer traders something that really seems to help them psychologically (a very big part of trading).... "when you're in a position, and you're not sure what to do..... do half.... that way, if it keeps going against you're happy you did at least half, and if it turns around and goes your way, you're happy you ONLY did half...either way you're happy... and happy traders are much more likely to make money than stressed out traders." This is example is for a losing trade, same thing for a winning trade. Much better than just doing nothing.
Another point that you guys may have already addressed in your posts is that most traders let the market tell them what to do... don't limit yourself to pre-determined profit targets when things are trending your way, and don't get stuck holding a bad trade when things are going against you..... "get out, if you think you can get back in at a better price" (when the market is rallying like crazy for example and your're short.
My honest feeling is that there is no "right or wrong" to scaling out of a position. Scaling "in" can be another story, but still not "wrong" in most cases.
In any event, each trader develops their own personal strategy and mind-set....and if you're making good money, that's your "proof" that you're "right" in your assumption.
Don't fret or worry about "what ifs" and other hypothetical scenarios.
Good Trading guys...
Don