"Scaling out" is inferior behavior

Do you scale out of positions?

  • I always scale out

    Votes: 113 14.1%

  • I scale out most of the time

    Votes: 228 28.5%

  • Most of the time, I do not scale out

    Votes: 189 23.6%

  • I never scale out

    Votes: 270 33.8%
  • Total voters
    800
My scaling out is usually 50% at initial target, and the rest with a trailing stop that I move up below resistance. Seems to work for me.

Steady and consistent is my goal.
 
Quote from Cutten:

I think all traders would agree that one's position size shoud reflect two things - the amount of risk one is prepared to tolerate, and the opportunity presented by the market in question. Let's assume we have decided our level of risk tolerance - the only thing then left to do is to evaluate the current risk/reward available in the trade.

If the trade is presenting a great risk reward, you should have a larger position. If the trade is good but not great, you would have an average size position. If the trade is acceptable but has some flaws (e.g. higher than normal uncertainty), then you would have a small position.

So, if we accept that position size should vary according to opportunity, "scaling out" not only makes sense, but is a requirement, in certain situations. If you have a position that started out great, but has now degraded somewhat, then you should reduce your position size. You may have started out long 20 lots, but now the risk has increased, the volatility is expanding, so the appropriate position size may only be 10 lots or even 5 lots. The expectation is still positive, but the risk is higher and/or the probability of success is lower and/or the reward has decreased.

Anyone who says position sizes should remain fixed is basically saying that all market opportunities have identical risk/reward profiles, and furthermore, that the risk/reward of a position does not change over its lifetime. I certainly don't agree with that. Look at any market and volatility fluctuates over time. If volatility increases, then other things being equal, you should reduce your position.

Thus - scaling out makes perfect sense in some cases.
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i thought this should have closed this thread. i guess as a noob i have lots to learn.

IMO the question to ask is whether one's position size is determined partly also by market conditions? Or, are there trades that are superior to others and hence we commit more capital (similar to card counting in blackjack). If the answer is yes (which i believe it is), then scaling out is obviously needed.
 
I don't see what the fuss is all about. The people on here that do make a profit from their trading do it using a lot of different methods including scaling in and out it doesn't matter. Keep doing what you are doing. It is you who pulls the trigger on each trade. It is you who either wins or loses a trade. You know what makes you money so don't change a thing. Personally I don't scale in or out but since I don't fund your account or manage your trades it should not matter to me how you do things.
 
Quote from illiquid:

For someone who advocates reversing positions upon fulfilled objectives, scaling into a position is the same as scaling out of a position -- it's just a matter of bookkeeping. Does it really matter whether you were long or short before the reversal signal was received, to determine whether or not you should sell/buy a whole position or just a partial? It doesn't add up.

Sigh . . . must . . . stop . . . posting . . . on . . . this . . . thread . . .
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Clearly you are confused, did you understand my question?

Do you actually make any money trading, you seem to lose more than you make according to the PnL thread. So tell me why should I/we listen to what you have to say?
 
Quote from romik:

Clearly you are confused, did you understand my question?

Do you actually make any money trading, you seem to lose more than you make according to the PnL thread. So tell me why should I/we listen to what you have to say?
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I think you misunderstood my sarcasm about posting here again, it has nothing to do with your question, which was a very good one. I quoted what you wrote but was not really responding to you -- I guess that was my bad. You don't have to listen to what anyone says, even if they make money, it's what will be useful for you. You need to figure out how someone who trades technically on weekly/monthly charts will help you on your intraday trades, or if what he writes just fits his own way of trading.

To get back to your question, you must consider the asymmetry of your entry vs exit. Do you attempt to catch every single near-term reversal in your market? Of course you don't, because at times significant turns occur that are not preceded by whatever entry signals you use. Now, if the market doesn't know/care whether you are in a trade or not, then you must assume that there will be turns that you cannot anticipate, that happen to occur while you are already in a trade. This explains why you can have near "perfect" (in regards to your trade methodology) entries, as you've waited patiently for all your ducks to line up, but afterwards likely have no such luxury in dealing with your exit -- the added uncertainty is a justification for scaling your exits.

Getting back to what I wrote earlier -- by your previous post you assume that b1s2 often attempts to reverse his profitable positions: if you assume this then you must resolve the contradiction of how he advocates scaling one's entry but not the exit, when in a reversal situation they are one and the same. Whether you have a converse position you need to liquidate first before you take that next signal should have no bearing on whether or not you should sell whole or partial, the trade should be the same.
 
Quote from illiquid:


Getting back to what I wrote earlier -- by your previous post you assume that b1s2 often attempts to reverse his profitable positions: if you assume this then you must resolve the contradiction of how he advocates scaling one's entry but not the exit, when in a reversal situation they are one and the same. Whether you have a converse position you need to liquidate first before you take that next signal should have no bearing on whether or not you should sell whole or partial, the trade should be the same.
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Reversals begin happening and prices still drift higher. Scaling in is a fantastic strategy to get the short position on at better prices. I don't necessarily reverse when I get out at full position. I may be on the sidelines looking for a good signal to get in while I am in another market or two.
 
Quote from volente_00:

So you are still currently long right now ? If so when will you think about selling calls ?
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A few calls have been sold, but it's very few at this point. I will be gradually scaling them in well out of the money and I will let you know when I am full bore. In the meantime, while I hold my position, expirations come and go and the process is reevaluated.
 
i've missed alot of pages on this thread, but it sounds like you are in favor of scaling into a position and against scaling out.


Do i understand correctly?
 
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