"Scaling out" is inferior behavior

[Buy1Sell2]

Quote from ashcroftsinger:

iIf the answer is yes (which i believe it is), then scaling out is obviously needed.

Why

 

[Buy1Sell2]

Quote from AaronCapps:

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?

Exactly.

 

[AaronCapps]

so the saying," only losers average losers", you laugh in it's face.

Is your style of trading similar to the Turtles, of scaling in at the beginning of a large move as much as possible and holding on for as long as possible?

 

[illiquid]

Quote from Buy1Sell2:

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.

Right, so let's assume that scaling is a "fantastic strategy" for easing into a position at successively better prices. Now, do you think it really matters that you were long 10 contracts when you started initiating your short bias with partial sales, or if you were flat? Your assumption that reversals begin while prices still drift higher justifies scaling both entries and exits -- the market will act the same and present the same risks whether or not you were previously long. There is no justification for scaling one side and not the other.

 

[Buy1Sell2]

Quote from AaronCapps:

so the saying," only losers average losers", you laugh in it's face.

Is your style of trading similar to the Turtles, of scaling in at the beginning of a large move as much as possible and holding on for as long as possible?

Certainly. I never risk more than 2 percent of total liquid net worth on any trade/idea. The idea works in day trading as well. Losers averaging losers are people averaging into oblivion. Not me.

 

[AaronCapps]

and by 2% of total liquid net, you refer to unused margin in your account? So depending on how many other trades you have going on can affect how heavy you might get in your current trade?

 

[Buy1Sell2]

Quote from illiquid:

Right, so let's assume that scaling is a "fantastic strategy" for easing into a position at successively better prices. Now, do you think it really matters that you were long 10 contracts when you started initiating your short bias with partial sales, or if you were flat? Your assumption that reversals begin while prices still drift higher justifies scaling both entries and exits -- the market will act the same and present the same risks whether or not you were previously long. There is no justification for scaling one side and not the other.

No sir. You are assuming that there is no time span between the exit and the initiation within the same market. Even if there wasn't I would take the full position off and evaluate then start very very small on he initiation.

 

[jasonbraswell]

Thank you, illiquid. I just read this whole thread waiting for someone to make that point. You CANNOT rationally support scaling in and not support scaling out.

Now, as it happens, in my experience, I think most folks tend to scale out too aggressively. (Certainly, that has been my tendency.) However, from a theoretical standpoint, the thread starter's position is untenable.

 

[jasonbraswell]

Quote from Buy1Sell2:

No sir. You are assuming that there is no time span between the exit and the initiation within the same market. Even if there wasn't I would take the full position off and evaluate then start very very small on he initiation.

If there is a time/price span between optimal exit and optimal reverse entry, then you have not precisely pinpointed one or the other or both.

 

[volente_00]

Quote from illiquid:

There is no justification for scaling one side and not the other.

I disagree, if you scale in you are increasing your risk and are averaging into a losing trade because the fact is the only reason you would only buy partial is because you fear that you are not making a entry that will soon be profitable so you don't press full size. If you scale out your are decreasing your market risk, and since you scale out of winniong trades there is no chance that it is drawing down your initial capital, only your paper profits if you continue to hold some of the position and it reverses.