"Scaling out" is inferior behavior

[Buy1Sell2]

Quote from illiquid:

As long as you keep posting the above, I will continue to post the below, so address this issue directly for once please.

I have addressed this numerous times. You do your homework and come up with a system that has decent expectancy and then you let the trade run to that target . Whether or not I as a trader can pick optimal targets is not the question. Whether or not a trader can pick the exact top is not the question. The question is whether or not after defining your profit target that you have set for yourself, it makes sense to get out of some of the position prior to maturity. Over time, the answer is no.

 

[Buy1Sell2]

Quote from thenewguy:

Why are your scale out prices always less than the profit target price?

TNG

That is the part of the definition of scaling out unless you are short.

 

[volente_00]

Quote from Buy1Sell2:

Done and Done


Four ES Contracts 50% win ratio versus Four ES Contracts 50% win ratio scaling out at half target.

9 pt target 3 pt initial stop loss

1st example with 20 trades
10 winners for 9 X (4 conracts) = 360 pts ($18000)
10 loser for 3 X (4 contracts) = 120 pts (-$6000)
Net profit $12000


2nd example with 20 trades
10 winners for 9 X(2 Contracts)=180 pts ($9000)
10 winners for 4.5 X(2 Contracts)=90 pts ($4500)
10 Losers for 3 X(4 Contracta) =120 pts (-$6000)
Net profit $7500

Money can be made scaling out, but it is inferior behavior.

you are assuming to many variables. First off the guy having 50% win using scale outs is going to have a higher winning ratios than the one who does not scale out. When the one who does scale out gets stopped out after scaling out, he will only be losing half where as the other guy will lose double on every stop out. The 2 traders can not have the same exact stop out loss total if one is scaling out.

 

[thenewguy]

Quote from Buy1Sell2:

I have addressed this numerous times. You do your homework and come up with a system that has decent expectancy and then you let the trade run to that target . Whether or not I as a trader can pick optimal targets is not the question. Whether or not a trader can pick the exact top is not the question. The question is whether or not after defining your profit target that you have set for yourself, it makes sense to get out of some of the position prior to maturity. The answer is no.

Exactly, we are talking about what happens AFTER maturity.

TNG

 

[thenewguy]

Quote from Buy1Sell2:

That is the part of the definition of scaling out unless you are short.

This is the entire problem. You are talking about selling part of the position on the way up, we are talking about exiting part of it when you feel the move is over and leaving some on in case the trend continues in the direction of your trade.

TNG

 

[Buy1Sell2]

Quote from volente_00:

you are assuming to many variables. First off the guy having 50% win using scale outs is going to have a higher winning ratios than the one who does not scale out. When the one who does scale out gets stopped out after scaling out, he will only be losing half where as the other guy will lose double on every stop out. The 2 traders can not have the same exact stop out loss total if one is scaling out.

Vol, you are getting dangerously close to making my argument for me here.

 

[volente_00]

Just explain how the two have the same exact stop out loss $ if the one who scales out only has half the position left to lose on.

 

[Buy1Sell2]

Quote from thenewguy:

Exactly, we are talking about what happens AFTER maturity.

TNG

After maturity is a new trade setup with entirely different percentage expectancies. Let's be honest, when you define a system you are calculating the probabilities of a trade reaching maturity. If the trade after maturity still had a high expectancy why would you take any of it off. Better homework would define a better maturity "area". In any case, the trade after maturity would follow the same guidelines--it would be better to not scale out of the trade that you left on.

 

[volente_00]

B1S2, run the same example for 2 point target and 2 point stop between the 2.

 

[Buy1Sell2]

Quote from volente_00:

Just explain how the two have the same exact stop out loss $ if the one who scales out only has half the position left to lose on.

Of course they don't have the same stop loss once you scale out and move the stop up. They also don't have the same ability for profit. Let your trades run to your target whatever that may be. Over time you will be much better off. The strategy of scaling out and moving stop to breakeven is a strategy to keep from losing anything. It is not a strategy designed to win big.