"Scaling out" is inferior behavior

[FanOfFridays]

Quote from taowave:

I have asked you repeatedly for some trading rules to apply your definitive rule,and all you can come up with is bullshit statements like "its a mathematical fact

Don't forget that other gem from B1S2

"The optimal exit point for any trade can be determined before the trade is put on"

Again, let him rant, as long as beginners seeing this don't get the idea that any of this has any merit. Each trader must develop a method that works for him, taking into account the myriad factors that affect trade decisions, factors which are necessarily different from trader to trader.

 

[Buy1Sell2]

Quote from traderNik:

Don't forget that other gem from B1S2

"The optimal exit point for any trade can be determined before the trade is put on"

If I wrote that verbatim, then I did not present it in a way that I meant to. I am sorry if that is the case. What I mean to say is that for a given signal and timeframe I, (or anyone) can determine the optimal profit target over the long haul. It cannot be determined on each individual trade before you put it on, but you can know over a series of trades what the best profit target is. Now as far as what I do with trailing stops, I can look at the market and establish when it is going to reverse with a great deal of accuracy, but this only as the trade is occurring, not before the trade starts.

I will go back and look to see if I worded this the way you put it. If so, I apologize in advance for miscommunicating that.
In summary, I am not able to tell the optimal target on each individual trade before it is put on--but I can find the optimal target for a group of trades and this is something that anyone can do.

 

[Buy1Sell2]

Quote from taowave:

It is no mathematical fact.It is your opinion.I have asked you repeatedly for some trading rules to apply your definitive rule,

This is the rub. It doesn't matter what the rules are--whether you are taking a stop below the low two days ago or you are using a 1 pt stop with a 2 point profit target. The rules don't have any effect on the math. It's the same for all rules--scaling out is inferior to not scaling out.

 

[Buy1Sell2]

Quote from taowave:

Remember you are the same person who admitted that you once believed scaling in was the "proper way to trade"...Was that a mathematical fact as well,until you changed your stance??

No it was not a mathematical fact that scaling in was superior and I did not claim that it was. In fact, I was using inferior behavior when I was scaling in and I was using it because it felt good and I had been doing it for a long time. I have now learned humbly that it is however, a mathematical fact that not scaling in superior and that is now what I do--Full position in--Full position out. I determined that by scaling in, I was having some winners that did not have the full position on and it was hurting my results.

 

[taowave]

Quote from Buy1Sell2:

for a given signal and timeframe I, (or anyone) can determine the optimal profit target over the long haul. It cannot be determined on each individual trade before you put it on, but you can know over a series of trades what the best profit target is. Now as far as what I do with trailing stops, I can look at the market and establish when it is going to reverse with a great deal of accuracy, but this only as the trade is occurring, not before the trade starts.

At long last......The major fallacy in your argument is that you are gifted with the ability to " look at the market and establish when it is going to reverse with a great deal of accuracy"and "universally" apply a methodology that works best with those who can accurately predict market behavior..Quite frankly,if I had that gift,I wouldnt bother with trailing stops,and I am not sure why you do...

Your title should have read "Scaling out is inferior behavior IF you are the 1 in 10,000 trader who can look look at the market and establish when it is going to reverse with a great deal of accuracy"...That is the major reason you should liquidate 100%,and a very good argument for applying as much leverage as you can stomach.

You need to understand that you (apparantly) are a very good reversal trader and that the majority of traders are not.So,once again,liquidating 100% works best for your given skill set.To say that Scaling out is inferior is naive,misleading and FALSE...

 

[2006]

Scaling out is usefull in both Long term as well as Short term trading. You never know when a position will go in your face.

Best to take some off and cover expenses. There are also positive mental aspects in taking some off the table.

 

[taowave]

Quote from 2006:

Scaling out is usefull in both Long term as well as Short term trading. You never know when a position will go in your face.

B1S2 is gifted in that he "knows" when a position is about to reverse,and if you are one of the chosen,then he is correct that you shouldnt scale out.However,for mere mortals and the majority of traders,scaling out may be the way to trade..

 

[2006]

To each his own. I'm just stating my opinion from experience.

If he's getting rich using that method than more power to him.

No flame here on other's techniques.

 

[I Trade 4 Money]

I never scaled out... but I realized many of the SUCCESSFUL people in my prop firm used scaling out as viable exit strategy. Of course there might be situations where you exit out all your positions, instead of scaling out, but from what I undertand by limiting yourself by not including scaling out as part of your overall exit strategy is a big mistake. I'm gonna start including scaling out for part of my exit strategy!!!!!

 

[nitro]

You guys have to understand something.

Imagine you knew to some probability > 50% what your opponent was going to do. Then you could use that information to advantage by estimating probabilities of opponent choice.

Imagine you are a fund and you have to buy 10 million shares of stock. You can either use a VWAP style to accumulate those shares, or you could use a hybrid strategy of, VWAP + wait for pullbacks, to buy the some of the shares. If the funds "knew" that scale out behavior by traders was the preferred choice, it could in effect be able to lower it's cost of acquiring those shares by runing the hybrid strategy. Of course, if we knew that they knew what we know...

Read up on Axelrods Prisoners Dilema, and see how a modified Tit-For-Tat was able to beat Tit-For-Tat

http://www.synctrading.com/phpbb/viewtopic.php?p=61#61

if the program had some knowledge of the opposing program.

My point is, you should run mixed strategies on exit, and not be a sitting target.

nitro