"Scaling out" is inferior behavior

[traderdragon2]

I let it ride and then scale out.

If I dump all my shares at once, I sometimes move the market and get too much slippage in lower volume stocks.

 

[ammo]

i start scaling out a few ticks before my desired target simply because it might not get there and because we're all watching the same movie and when it does get there i may want to reverse direction

 

[HoundDogOne]

Quote from Buy1Sell2:

Scaling out is inferior behavior. When we have a winner, it makes more sense to let it ride. Will that cause us to give back profits sometimes? Yes. However, it will keep you in the really big winners and more than offsets the savings by scaling out.

--The reason folks scale out is many times due to the fact that they took a larger position than they were comfortable with initially. In effect, they were wildly overextended. The scale out feature simply gets them back to where the total position is now of a more correct size for their account size and comfort level. In summary, they were scared when the original position was on and now have been lucky enough to get some profits and feel they can let the rest run. What happens though when the initial trade goes against? --Sometimes they let the whole trade run as losses mount. -No, it's better to size correctly and let it run to where you can exit at a time of your own choosing (borrowed line from George Bush). No sense being a weak hand.

This is pretty much nonsense.

It's just another example...
Where a guy just says "my personal style" = "optimal trading".

A ** pro trader **...
Scalps his way into a position as he builds it...
Scalps continuously for the duration of the position...
And then scalps his way out of a position.

This maximizes profits for winners...
And minimizes losses for losers.

Why?

Because you are constantly piling up profits off the bid/ask spread.

The guy who started this thread...
Ignores this lucrative fact and leaves about 50% on the table.

 

[Don Bright]

All we can do is make "good entries" and "good exits" based on all the current market conditions (prem/disc, nyob, peer, pair, sector, ecn depth, etc. )...whether you choose to scale out or not is pretty much simply a personal trading decision.

I think "inferior behavior" is a bit much, LOL.

Good topic for my magazine column, be sure to read April TASC.

Don

 

[version77]

Quote from Buy1Sell2:

Scaling out is inferior behavior. When we have a winner, it makes more sense to let it ride. Will that cause us to give back profits sometimes? Yes. However, it will keep you in the really big winners and more than offsets the savings by scaling out.

--The reason folks scale out is many times due to the fact that they took a larger position than they were comfortable with initially. In effect, they were wildly overextended. The scale out feature simply gets them back to where the total position is now of a more correct size for their account size and comfort level. In summary, they were scared when the original position was on and now have been lucky enough to get some profits and feel they can let the rest run. What happens though when the initial trade goes against? --Sometimes they let the whole trade run as losses mount. -No, it's better to size correctly and let it run to where you can exit at a time of your own choosing (borrowed line from George Bush). No sense being a weak hand.

"Scaling out is inferior behaviour" -- For you perhaps.

"They took a larger position than they were comfortable with" -- For you perhaps.

"They were wildy extended" -- For you perhaps.

"Gets them back... a more correct size for their account size" -- For you perhaps.

"Gets them back... for their... comfort level"... -- For you perhaps.

"They were scared" -- For you perhaps.

"now have been lucky enough to get some profits" -- For you perhaps.

"Sometimes they let the whole trade run as losses mount" -- For you perhaps.

Your reasons you have stated that scaling out is inferior makes me
think you have noobie ideas floating around in your head...

 

[romik]

Quote from version77:

"Scaling out is inferior behaviour" -- For you perhaps.

"They took a larger position than they were comfortable with" -- For you perhaps.

"They were wildy extended" -- For you perhaps.

"Gets them back... a more correct size for their account size" -- For you perhaps.

"Gets them back... for their... comfort level"... -- For you perhaps.

"They were scared" -- For you perhaps.

"now have been lucky enough to get some profits" -- For you perhaps.

"Sometimes they let the whole trade run as losses mount" -- For you perhaps.

Your reasons you have stated that scaling out is inferior makes me
think you have noobie ideas floating around in your head...

Version, if you were an overweight person, would you have an issue with somebody pointing it out to you? etc.

 

[Don Bright]

Quote from romik:

Version, if you were an overweight person, would you have an issue with somebody pointing it out to you? etc.

Hey - no Fat People comments...LOL.

My response would be "what? I'm overweight? Damn, didn't realize that" - It's just the last 100 pounds or so, I can barely notice, LOL.

Don :eek:

 

[version77]

Quote from romik:

Version, if you were an overweight person, would you have an issue with somebody pointing it out to you? etc.

Excuse me, but I don't see the connection...

 

[FanOfFridays]

At this point, the results of this thread are clear. It has been unequivocally shown that the majority of traders scale out at least some of the time.

There has been no proof whatsoever that scaling out is always sub-optimal. The only proof the OP offers is 'Scaling out is sub-optimal because I said scaling out is sub-optimal'.

The suggestion that one set of rules apply to every trader no matter what his or her style is intuitively unreasonable.

There is no way for any trader to know the 'optimal exit point' for every or even any trade. Again, the only evidence that anyone can find this magical 'optimal exit point' is the assertion of the OP. There has been nothing offered to support this claim other than 'It's true because I say it's true'.

There are many automated systems designed specifically to scale out. In these systems, scaling out is necessary in order to maximize risk/reward ratios. The OP, although possibly a winning trader, has clearly never tried to automate a trading strategy by coding it up. The impossibility of identifying the 'optimal exit point' becomes clear when you are trying to automate a strategy.

Quote from Buy1Sell2:
I view daytrading and trading at the open as inferior behavior as well.

This member seems very rigid in his thinking. The hallmark of the great trader is flexibility and an ability to admit that one's initial assumptions were incorrect.

 

[jasonbraswell]

Holy crap! This thread is still alive????

THE MARKET DOESN'T CARE WHAT YOUR INITIAL POSITION IS!!! IF YOU THINK IT'S RATIONAL TO SCALE IN THEN YOU MUST THINK IT'S RATIONAL TO SCALE OUT!!!!

lol!