"Scaling out" is inferior behavior
- Thread starter Buy1Sell2
- Start date
You are making my case for me here by taking some off and letting the rest run. Letting the whole trade run is better than letting part of the trade run over the long haul. In a side by side example, you have to let the ultimate target be "letting the trade run" on both sides of the comparison. This is a thread not about proper price targets, but rather about once someone has set their system up, which way gives you more money. You are entering a different discussion when you said all at 2 pennies versus letting the trade run. That's not for this thread.
ES System with 5% winners and 20 trades. 9 point target 3 pt loss. 4 conracts
1st without scaling out
1 winner 9 X (4 contracts) = 36 pts($1800)
19 losers 3 X (4 contracts) = 228 pts ($-11,400)
Total Net Loss = -$9600
2nd with scaling out at half
1 winner 9 X (2 contracts)= 18 pts ($900)
1 winner 4.5 X (2 contracts)= 9 pts ($450)
19 loser 3 X (4 contracts) = 228 pts ($-11,400)
Total Net Loss = -$10050
Don't confuse my assertion with picking the optimal targets necessarily. That is part of my system, but the point is that no matter what target you use, stop loss, percentage of winners, the result is always the same--unless you have a zero percent system which I am sure exists.
Scaling out is inferior bevavior.
1st without scaling out
1 winner 9 X (4 contracts) = 36 pts($1800)
19 losers 3 X (4 contracts) = 228 pts ($-11,400)
Total Net Loss = -$9600
2nd with scaling out at half
1 winner 9 X (2 contracts)= 18 pts ($900)
1 winner 4.5 X (2 contracts)= 9 pts ($450)
19 loser 3 X (4 contracts) = 228 pts ($-11,400)
Total Net Loss = -$10050
Don't confuse my assertion with picking the optimal targets necessarily. That is part of my system, but the point is that no matter what target you use, stop loss, percentage of winners, the result is always the same--unless you have a zero percent system which I am sure exists.
Scaling out is inferior bevavior.
unprofitable traders don't scale out of a position, that is unless they play small where they can't scale out
I don't think this is quite right. The idea of scaling out is that the percentages will -- and do -- change by the act of scaling out.
In order to understand the potential benefits of scaling out for any given system you have to look at the max favorable excursion on losing trades and the amount of reversion you get on winning trades before the become winners. It's really best done with a backtesting program.
The idea is to optimize your trading to capture some percentage of the losers before they become losers at the expense of some percentage of the winners that might have been. Adding trailing and breakeven stops is another way to complicate matters as well.
Just my $.02
ES System with 5% winners and 20 trades. 9 point target 3 pt loss. 4 conracts
1st without scaling out
1 winner 9 X (4 contracts) = 36 pts($1800)
19 losers 3 X (4 contracts) = 228 pts ($-11,400)
Total Net Loss = -$9600
2nd with scaling out at half
1 winner 9 X (2 contracts)= 18 pts ($900)
1 winner 18 X (2 contracts)= 27 pts ($1800)
19 loser 3 X (4 contracts) = 228 pts ($-11,400)
Total Net Loss = -$8700
How can you argue this wouldn't have happened?
TNG
And when you pay 7.00 both ways in coms, it can really save some money, even though its maybe not the safest thing to do.