"Scaling out" is inferior behavior

[FanOfFridays]

Quote from Buy1Sell2:

The thing to remember is that optimal targets CAN be found . However you will notice that I never use profit targets. I let winners run in full. Over time this is the correct method. A person who is scaling out is missing the opportunity for the homerun that will make the month's trading. It's difficult for people who are making money scaling out to see that they would be making more by not. It's human nature that people are defensive about themselves and I understand that.

Yes, it is indeed human nature to be defensive. If you start a thread and then realize that the premise was wrong, it is very hard to say 'You know what? I guess I can't really say what is best for everyone and I have to admit that it is impossible to know the 'optimal exit point' in advance'.

I understand that

 

[FanOfFridays]

Quote from 777:

Sometimes scaling out is correct.

One other thing that B1S2 seems to be unaware of. There are many automated systems that are designed specifically to NOT attempt to find the optimal exit point for every trade. The more you try to exit every trade at the absolute to or bottom, the more risk you expose yourself to. There are systems that are designed to give away a bit of return to gain a reduction in risk. These systems attempt to take the meat out of a move but are not interested in the 'optimal exit point'. They are programmed to scale out when targets are hit. However, targets are clearly not the same thing as 'optimal exit point for every move'.

Systems are tools and there are many different tasks which tools need to perform. Therefore, there are many different types of tools. To say that you can use 1 tool for every job is... well, to be frank, it's a little naive.

 

[fearless9]

Quote from traderNik:



Systems are tools and there are many different tasks which tools need to perform. Therefore, there are many different types of tools. To say that you can use 1 tool for every job is... well, to be frank, it's a little naive.

TN .. quite right, well put.

The natural order to making money is
1 ... to have a philosophy
2 ... to make a plan
3 ... to acquire the tools to fulfill 1 and 2
4 ... to measure the outcome accurately

Why is ET consumed with 3 with little or no regard to 1 and 2.
I intentionally omitted 4 because it will be self evident without 1 and 2.
3 tends to fall into place if 1 and 2 are
harmonious to the task in hand.

 

[Don Bright]

Don't forget the psychological factor of "covering half" - or "closing half" of a position. When you're in a bad position, many are "sure" that if they cover, the stock will reverse (not a good mind set, not matter what). If they sell half, they're happy (or happier at least), that they did so if it goes against them further. If it does turn around, they're happy(happier), that they still have half the position...both result in a better state of mind, IMO....and this can lead to getting into better trades. "Whenever unsure, cover half" - has helped a lot of traders overcome their mental roadblocks over the years.

FWIW,

Don

 

[taowave]

Well said Nick,
I would think that anyone who has spent serious time and effort in learning the art/science of trading should know that the market simply will not allow a "correct" method to exist.

IMHO its a very naive to think that there is A correct way to trade the market.

I am quite sure anyone who puts in the time to backtest/simulate will eventually come to that very same conclusion....

With that said,I would agree with D Bright,and say the emotional aspect of trading dictates what is the "correct" method of trading for any one trader....

Quote from traderNik:

One other thing that B1S2 seems to be unaware of. There are many automated systems that are designed specifically to NOT attempt to find the optimal exit point for every trade. The more you try to exit every trade at the absolute to or bottom, the more risk you expose yourself to. There are systems that are designed to give away a bit of return to gain a reduction in risk. These systems attempt to take the meat out of a move but are not interested in the 'optimal exit point'. They are programmed to scale out when targets are hit. However, targets are clearly not the same thing as 'optimal exit point for every move'.

Systems are tools and there are many different tasks which tools need to perform. Therefore, there are many different types of tools. To say that you can use 1 tool for every job is... well, to be frank, it's a little naive.

 

[Buy1Sell2]

Quote from Don Bright:

Don't forget the psychological factor of "covering half" - or "closing half" of a position. When you're in a bad position, many are "sure" that if they cover, the stock will reverse (not a good mind set, not matter what). If they sell half, they're happy (or happier at least), that they did so if it goes against them further. If it does turn around, they're happy(happier), that they still have half the position...both result in a better state of mind, IMO....and this can lead to getting into better trades. "Whenever unsure, cover half" - has helped a lot of traders overcome their mental roadblocks over the years.

FWIW,

Don

Don has made quite a bit of my case here for me. His comments are directed solely at a trader being scared and needing to remove half to get an emotional lift. --Scaling out is employed by scared money--( not insinuating that Don is scared money)

 

[Buy1Sell2]

Quote from taowave:


With that said,I would agree with D Bright,and say the emotional aspect of trading dictates what is the "correct" method of trading for any one trader....

Again, this is in favor of my tenet that scared money scales out.

I think it would be a good idea for me to run over a point here that seems to get lost: It's not the amount of the target that is the key--it is allowing your target to be hit once you have done your research. In my case, I don't use targets, but I let he trade run until I see a reversal. In either case, the premise of my thread is that "no matter what your system or target is, the trade should be allowed to run fully". Many have changed the premise in their posts.

 

[Buy1Sell2]

Quote from taowave:

With that said,I would agree with D Bright,and say the emotional aspect of trading dictates what is the "correct" method of trading for any one trader....

Keep in mind, I am saying that whatever STRATEGY you employ, there is only one way to correctly trade and that is to cut losses short and ride winners.

Oh, I suppose if you are scalping for one or two ticks, then maybe that is different. (still would cut losses though right?)

 

[taowave]

Quote from Buy1Sell2:

Again, this is in favor of my tenet that scared money scales out.

I think it would be a good idea for me to run over a point here that seems to get lost: It's not the amount of the target that is the key--it is allowing your target to be hit once you have done your research. In my case, I don't use targets, but I let he trade run until I see a reversal. In either case, the premise of my thread is that "no matter what your system or target is, the trade should be allowed to run fully". Many have changed the premise in their posts.

B1S2,

I think you are misinterperting what people have said,or at least what I said...

From the thousands of simulations I have ran,there is no one clear cut "correct way to trade"......You may be successful waiting for a contra signal to exit 100% of your position,but that does not imply that others may or may not be more successful scaling out...

What you may have stumbled upon,is given the set of indicators/parameters for your testing/trading period,exiting 100% on exit signals performed better than scaling out..But if you think that is the grail and the correct way to trade every style,every system,every market,you are only fooling yourself...

As for the emotional aspect of trading,you have fallen prey and are a victim of your belief systems.You may not realise it,but no one has changed the premise in their posts.You simply can not see the forest thru the trees and no amount of reasoning or statistical evidence will alter your views..

FYI,that does not mean you will not be/are a successful trader,or VERY successful....As I have said before,there are many ways/methods of rading successfully,and the topic of scaling out vs 100% exit has a negligible effect in the long term..

As Don implied,its more of a comfort level...

 

[Buy1Sell2]

Quote from taowave:


As Don implied,its more of a comfort level...

Bingo