"Scaling out" is inferior behavior

[ashcroftsinger]

Quote from Buy1Sell2:

Why

The questions that I ask myself for addressing this issue are

What is my system for position sizing? Is it solely based on my risk tolerance? Is my system essentially around estimating optimal prices (and times?) - for both entry and exit?

If the edge that I have is primarily (or solely) based on predicting price levels, or identifying rules about changing price levels that enables me to enter and exit, then the system could have position sizing rules that can be independent of market conditions and dependent only on risk profiles. In such cases, entry and exit can be in binary levels.

However, if my system takes the market conditions and trade attractiveness into account when determining size of the position (eg - size based on relative win ratio of the trade, anticipated time in the trade, market volatility, changing market exposure at a portfolio level), as the trade develops and market characteristics change, the factor determining the size of position changes, and hence scaling out may be a superior.

 

[fearless9]

Quote from volente_00:

a Risk free trading is the best kind of trading. My argument is you have a higher % chance of catching just 2 points in an ES trade with 5 times as much size versus trying to capture 10 points over a longer time frame with 1/5 of the size. The monetary risk is exactly the same for both trades.

Volente
Good lord man, you must be a Trader and not just an armchair jock.
Otherwise it is a remarkable coincidence because you certainly sound like a Trader.

Where were you a little while back in this thread when I needed you with my 200 lot example?

 

[Buy1Sell2]

Quote from Cutten:

Ok, but if you are genuine, you're hurting your credibility a lot by making excuses to avoid an examination of your reasoning. It would be much better if you counter critiques by explaining *why* your approach is better, rather than by making obfuscations or saying "sorry, gotta go my plane is waiting". Surely you can see that?

Folks, I was joking about the plane-- I had to leave that day. There was no evasion. My point has already been proven beyond any doubt. The math that I have described says it all. This thread is not about what a person might do when the mood strikes them during a trade. This thread is about taking trades on your system from start to finish and what the expectancy of that is. Period. Each of your trade adjustments can be broken down into smaller and smaller time frames where the math would still have the same comparison against scaling out of those smaller trades. This is pretty simple stuff people. The math doesn't lie. When you scale out, you will make less/lose more when scaling out.

 

[Buy1Sell2]

Quote from ashcroftsinger:

The questions that I ask myself for addressing this issue are

What is my system for position sizing? Is it solely based on my risk tolerance? Is my system essentially around estimating optimal prices (and times?) - for both entry and exit?

If the edge that I have is primarily (or solely) based on predicting price levels, or identifying rules about changing price levels that enables me to enter and exit, then the system could have position sizing rules that can be independent of market conditions and dependent only on risk profiles. In such cases, entry and exit can be in binary levels.

However, if my system takes the market conditions and trade attractiveness into account when determining size of the position (eg - size based on relative win ratio of the trade, anticipated time in the trade, market volatility, changing market exposure at a portfolio level), as the trade develops and market characteristics change, the factor determining the size of position changes, and hence scaling out may be a superior.

This has nothing to do with you figuring out what is the best postion size. It assumes that you have already done your homework! Once you have your position size set and your system expectancy set, that's when my assertion kicks in. You trade whatever your position size is to it's maturity. You don't scale out unless you have defined a position size that is too large from the beginning and are afraid. That's it--don't make this too complicated.

 

[romik]

Quote from Buy1Sell2:

...When you scale out, you will make less/lose more when scaling out.

That depends on win/loss ratio, does it not?

 

[Buy1Sell2]

Quote from Hydroblunt:

The funny thing is that I actually tried B1S2's strategy today and ended up going from up 200net to down 250net. All from a string of losses that could have been small gains or much smaller losses due to scaling. After 10am, I just could not find the full moves correctly. Not to say I did not have profits I could have taken but I wanted to experience firsthand how the all or nothing would work out. Ironically, all my profitable trades from the first 30 min were scaled.

What was the percentage of winners that you would expect at the profit target that you defined? How many trades were put on? What was the stop loss? We'll need this info to determine if you tried the strategy correctly. Perhaps, your profit target was too large to have a positive expectation of being achieved. Perhaps, your profit target should be lower and then you could have sold all position at a lower level before the retracement. There is a good chance that your system is not sound unless it is taking smaller profits. That's ok-- The point is not whether the profit is smaller or not--the point is to let all of your positions run to that target whatever it may be.

 

[Buy1Sell2]

Quote from romik:

That depends on win/loss ratio, does it not?

The only time that scaling out will be equal to not scaling out is on a system of zero percentage winners. In that case, both behaviors will lose the same amount. This is inarguable.

 

[volente_00]

Quote from volente_00:

and what if your profit target is only 2 points with large size ? so you sell half at 2, move your stop to break even and then the move continues 8 more points in your favor or worst case you get stopped out break even all while enjoying the benefit of having a trade on that can no longer take away from your initial capital. Risk free trading is the best kind of trading. My argument is you have a higher % chance of catching just 2 points in an ES trade with 5 times as much size versus trying to capture 10 points over a longer time frame with 1/5 of the size. The monetary risk is exactly the same for both trades.

B1S2, do you see the other side of the fence ?

You can even change the point targets higher or lower but it is the same principle.

 

[volente_00]

Quote from fearless9:

Volente
Good lord man, you must be a Trader and not just an armchair jock.
Otherwise it is a remarkable coincidence because you certainly sound like a Trader.

Where were you a little while back in this thread when I needed you with my 200 lot example?

What was your example ?

 

[romik]

Quote from Buy1Sell2:

The only time that scaling out will be equal to not scaling out is on a system of zero percentage winners. In that case, both behaviors will lose the same amount. This is inarguable.

sorry, I wasn't referring to scale out vs all out, I have taken your comment as in using scaling out one will lose more than win, crossed wires.