the op has a long term passive investor mentality where scalin' out may not be the best approach to maximize profits. he has absolutely no clue about the mechanics of daytradin' since he already said he consider daytradin' and tradin' the open inferior behavior as well. just no wonder he cant possibly be aware that scalin' out is not only effective but also a necessary 'evil' in many circumstances, especially on thin issues that spike all day in matter of minutes if not seconds.
"Scaling out" is inferior behavior
- Thread starter Buy1Sell2
- Start date
the op has a long term passive investor mentality where scalin' out may not be the best approach to maximize profits. he has absolutely no clue about the mechanics of daytradin' since he already said he consider daytradin' and tradin' the open inferior behavior as well. just no wonder he cant possibly be aware that scalin' out is not only effective but also a necessary 'evil' in many circumstances, especially on thin issues that spike all day in matter of minutes if not seconds.
he also fails to recognize that index futures contracts move with a different dynamic than many stocks, and certainly different than the type of "breakout trades" or 'trend trades" that many day and swing traders play in the equities markets.
for example, 4-6 days a month is the average # of days that fit a "trend profile" for the index futures. clearly, a strategy(s) that mostly relies on wider stops and bigger moves and breakout strategies must either sit out most index days, or make a lot of losing trades.
this is differnet from swing and equity trading where one can CHOOSE their instrument based on its current price action
i trade the exact same instrument every day. i have to respond to what it is doing.
i have just over 20 setups, but i have some that i have not used in over a month, others that i might use several times in one day, and not once in another. it depends on what the market is doing.
one setup, i checked the stats for the purpose of this discussion has given me
here's an example of one trade setup results over the last two months to illustrate my point. remember, this is ONE setup. it is a relatively common one. sometimes, multiple times per day. some days - zero occurances.
(cue data...)
84/102 trades made money
(82%). So, if i enter this trade, i have an 82% chance it will make me $$$. it's a hi probability, small target trade.
average pts per trade: 6.3 (*3 contracts)
biggest loss: 11 points (note I set a 10 pt stop for this setup, but on a few occasions i had 1 pt slippage on my stop)
greatest #of pts: 38
in the vast majority of circumstances, at least my first target was met on this trade (it was approximately 82%, but slightly different due to the premature exits on some trades, meaning the %age of positive and first target trades is SLIGHTLY different). on this trade, as soon as my first target is met (5 points), i move stop to entry +1 on my second 2 contracts. so, if i stop out, i make 5 pts on one contract, and make more than slightly break even on 2 (the 1 pt over the breakeven is commission + about $.50 per contract).
a smaller percentage i make the first two targets +5, +8
upon making the 2nd target, I keep my stop at +1 and there are various (discretionary criteria for exit).
my rules for ALL trades, are never widen a stop, but i can move stop in (on certain criteria- like target being met), or exit prematurelty, if certain factors are present (whether for a loss or gain).
but, on a fair percentage of trades, i was stopped out after the first target was met (it reversed and hit my stop).
i could go back and crunch the #s (over a larger time period for robustness) to see if maybe scaling out 2 of 3 contracts @ +6 would give better positive expectancy, but last i checked - it didn't.
enuf trades met my 2nd target to justify the wider target, etc. etc.
this is just an example, but it shows the absurdity of the poster believing that he KNOWS that i would do better by not scaling out, when he doesn't even know the trade setups i am using.
for example, 4-6 days a month is the average # of days that fit a "trend profile" for the index futures. clearly, a strategy(s) that mostly relies on wider stops and bigger moves and breakout strategies must either sit out most index days, or make a lot of losing trades.
this is differnet from swing and equity trading where one can CHOOSE their instrument based on its current price action
i trade the exact same instrument every day. i have to respond to what it is doing.
i have just over 20 setups, but i have some that i have not used in over a month, others that i might use several times in one day, and not once in another. it depends on what the market is doing.
one setup, i checked the stats for the purpose of this discussion has given me
here's an example of one trade setup results over the last two months to illustrate my point. remember, this is ONE setup. it is a relatively common one. sometimes, multiple times per day. some days - zero occurances.
(cue data...)
84/102 trades made money
(82%). So, if i enter this trade, i have an 82% chance it will make me $$$. it's a hi probability, small target trade.
average pts per trade: 6.3 (*3 contracts)
biggest loss: 11 points (note I set a 10 pt stop for this setup, but on a few occasions i had 1 pt slippage on my stop)
greatest #of pts: 38
in the vast majority of circumstances, at least my first target was met on this trade (it was approximately 82%, but slightly different due to the premature exits on some trades, meaning the %age of positive and first target trades is SLIGHTLY different). on this trade, as soon as my first target is met (5 points), i move stop to entry +1 on my second 2 contracts. so, if i stop out, i make 5 pts on one contract, and make more than slightly break even on 2 (the 1 pt over the breakeven is commission + about $.50 per contract).
a smaller percentage i make the first two targets +5, +8
upon making the 2nd target, I keep my stop at +1 and there are various (discretionary criteria for exit).
my rules for ALL trades, are never widen a stop, but i can move stop in (on certain criteria- like target being met), or exit prematurelty, if certain factors are present (whether for a loss or gain).
but, on a fair percentage of trades, i was stopped out after the first target was met (it reversed and hit my stop).
i could go back and crunch the #s (over a larger time period for robustness) to see if maybe scaling out 2 of 3 contracts @ +6 would give better positive expectancy, but last i checked - it didn't.
enuf trades met my 2nd target to justify the wider target, etc. etc.
this is just an example, but it shows the absurdity of the poster believing that he KNOWS that i would do better by not scaling out, when he doesn't even know the trade setups i am using.
"the op has a long term passive investor mentality where scalin' out may not be the best approach to maximize profits"
which again shows his logical fallacy he is employing.
example:
i have been in PIXR since steve jobs took over. I added on weakness on a few occasions and pared off on one extreme, but NEVER scaled out, in the sense that my position now is relatively larger than it was in the past. i have a trailing stop to lock in plenty of profit. that's it.
but that's a different instrument, a different time frame, and a different trading methodology (i invested in PIXR purely on fundamentals. well, pretty much purely. i didn't ignore the charts, but i invested mostly on management, product placement, etc. not price action)
i'm not suggesting this is the RIGHT way to trade INDEX futures.
which of course is my point about the diferences due to instruments, setup, time fram, etc
which again shows his logical fallacy he is employing.
example:
i have been in PIXR since steve jobs took over. I added on weakness on a few occasions and pared off on one extreme, but NEVER scaled out, in the sense that my position now is relatively larger than it was in the past. i have a trailing stop to lock in plenty of profit. that's it.
but that's a different instrument, a different time frame, and a different trading methodology (i invested in PIXR purely on fundamentals. well, pretty much purely. i didn't ignore the charts, but i invested mostly on management, product placement, etc. not price action)
i'm not suggesting this is the RIGHT way to trade INDEX futures.
which of course is my point about the diferences due to instruments, setup, time fram, etc
Quote from Buy1Sell2:
When you scale out and keep some on, you must have done your homework to determine expectancy. If the expectancy is high enough then it makes sense to leave the entire position on instead of scaling out. If the expectancy is not high enough, then it makes sense to exit the full position at the lower level. Traders must do their homework and determine expectancies at different sizes of moves when their signals occur. You find the size of the move that has the best expectancy without being stopped out and you leave the whole position on. There is no sound argument against this position.
You can do your homework until you turn blue, but whatever expectancy you come up with is in your head, not in the market. Your "argument" makes sense only if you're trading in hindsight, which, again, appears to be the case.
The professional trader concerns himself with risk before contemplating reward. You take the approach of a gambler, not that of a professional trader.
LC
Most portions of trading are dependent on the individual and how they trade. This however is not one of them. You see, a person doesn't need to know what someone's setups are or what indicators they use. The truth is that no matter what the setups are, they should always be run to their maturity. Scaling out chokes any system and any setup over time. Again, no one is saying that money can't be made scaling out, but you will make less of it by doing so. That's a stone cold fact.
Quote from Buy1Sell2:
Most portions of trading are dependent on the individual and how they trade. This however is not one of them. You see, a person doesn't need to know what someone's setups are or what indicators they use. The truth is that no matter what the setups are, they should always be run to their maturity. Scaling out chokes any system and any setup over time. Again, no one is saying that money can't be made scaling out, but you will make less of it by doing so. That's a stone cold fact.
You need to revise your broad statement to " Scaling out before the original profit target is reached chokes any system and any setup over time".
Actually, no.
The idea that you can know what 'maturity' is beforehand is a fallacy.
As simple as it is, this idea seems really really tough for you to understand.
It seems that your approach to trading is to gamble for the big win as opposed to making steady gains. This might work. Or it might not.
Once again, I will just point out that you made your first post without even considering the decisions of someone who is trading to generate income vs. someone (like you, presumably) who is not raking his account. For someone who is interested in generating income, scaling out is a common technique. I think that the results of your poll reflect this difference in strategy.