"Scaling out" is inferior behavior

[volente_00]

Quote from Buy1Sell2:

This refers to liquid assets in my trading account and other places.--Total liquid net worth.

So if you buy a cup of coffee, you have to take that off of your total liquid net worth and your stops get adjusted ?

 

[Buy1Sell2]

Quote from jasonbraswell:

Whatever, man. Think this if you wish, but your ignorance of the obvious flaw in your reasoning tells me your a poser.

Later, folks.

It's ok. I don't expect everyone to change their belief.

 

[volente_00]

Quote from Buy1Sell2:

No --I would allow 4 percent between the two trades. It's 2 percent per trade/idea.

I still am unclear, for simplicity lets say your net worth is 100k. So you are willing to lose 2k max on the es trade right ? But say your other trade is soybeans and you lose 2k and stop out. now your LNW is 98k so does your stop point on ES adjust to $1960 or still stay 2k ?

 

[Buy1Sell2]

Quote from volente_00:

So if you buy a cup of coffee, you have to take that off of your total liquid net worth and your stops get adjusted ?

Hey Vol. That was a good one. Don't drink coffee though.

 

[romik]

Quote from Buy1Sell2:

I generally would call what I do averaging down, but some call it scaling in. I don't believe that I have said that I don't scale in unless it was in some other context. Anyway, you are correct that what I do I call averaging down. I think when someone averages into losers, you must define what a loser is. A loser to me is a trade that goes beyond the 2 percent loss of total liquid net worth and the cat keeps averaging. There is a huge difference between that and what I do.

Am I mistaken in thinking that Scaling IN and averaging down are 2 different methods? Isn't scale in is adding size to a profitable position where averaging down is vice versa?

 

[illiquid]

Quote from volente_00:

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.

I am assuming one does not care about where his entry is -- that is, that you are always just long or short from the most recent price (something PTJ suggests, which I think is very good advice), so that there is in effect no such thing as "open" vs closed profit.

In any case, I agree with your statement in practice, but remember I am just making a point for theoretical justification. What seems to be continuing to happen on this thread is that

1. B1S2 makes blanket statement.
2. Others respond with theoretical refutations.
3. B1S2 refutes these responses with personal examples of his own individual trading methods, thereby somehow justifying the ubiquity of said statement.

Round and round we go.

 

[Buy1Sell2]

Quote from volente_00:

I still am unclear, for simplicity lets say your net worth is 100k. So you are willing to lose 2k max on the es trade right ? But say your other trade is soybeans and you lose 2k and stop out. now your LNW is 98k so does your stop point on ES adjust to $1960 or still stay 2k ?

I typically use the starting net worth amount and stay with it unless there is a larger group of losses across the markets I am in and then I reevaluate. I am generally in 5 or 6 markets at once, so I could potentially have a 10 or 12 percent drawdown. I would tell you that by diversifying though, I don't end with 6 losers at once and the account is growing through diversification and call selling continuously.

 

[Buy1Sell2]

Quote from romik:

Am I mistaken in thinking that Scaling IN and averaging down are 2 different methods? Isn't scale in is adding size to a profitable position where averaging down is vice versa?

It's a question of semantics. I consider them to be the same. I scale in --or average down at better prices not worse prices.

 

[volente_00]

Quote from Buy1Sell2:

I typically use the starting net worth amount and stay with it unless there is a larger group of losses across the markets I am in and then I reevaluate. I am generally in 5 or 6 markets at once, so I could potentially have a 10 or 12 percent drawdown. I would tell you that by diversifying though, I don't end with 6 losers at once and the account is growing through diversification and call selling continuously.

Gotcha, thanks for the explanation.

 

[volente_00]

Let's rename the thread to


"Arguing on ET" is inferior behavior