"Scaling out" is inferior behavior

Do you scale out of positions?

  • I always scale out

    Votes: 113 14.1%

  • I scale out most of the time

    Votes: 228 28.5%

  • Most of the time, I do not scale out

    Votes: 189 23.6%

  • I never scale out

    Votes: 270 33.8%
  • Total voters
    800
such a dumb thread.

how about if you are trading an illiquid stock in which you have a considerable position? would you scale out then?

or if you are trading a liquid stock and have a monster position. I guess hitting the bid with a market sell would be the best thing to do..

GL
 
Quote from 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.
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Note: I didn't say you couldn't be successful by scaling out. It is just inferior over the long haul to a strategy that does not scale out.
 
Quote from nitro:

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

nitro
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Nitro--there only 3 types of exits. 1. Reversal exit 2. Profit target 3.Trailing stop

No matter which one you use, it will still be more profitable to exit entire positions at once over the long haul. :)
 
Quote from GSCO:


how about if you are trading an illiquid stock in which you have a considerable position? would you scale out then?

or if you are trading a liquid stock and have a monster position. I guess hitting the bid with a market sell would be the best thing to do..

GL
More...

If you are trading an illiquid instrument, you should make certain that you are extremely underleveraged. But the same principles apply--exit all at once.

Always exit all at once. 401ker's are the only ones who should scale out.
 
Quote from taowave:

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...
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??? I don't believe you have been reading the posts---
 
Quote from Buy1Sell2:

Note: I didn't say you couldn't be successful by scaling out. It is just inferior over the long haul to a strategy that does not scale out.
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Sure about that?

http://www.esignalcentral.com/university/get/documents/Catch22 Written Report rev3 WEB.pdf

"Common Invalid Assumptions--Because the trials were performed by hand, a number of valuable lessons were learned. Several assumptions, which seemed reasonable in the heat of trading, proved not to be true when the data was tallied.
One example is the comparison between the "A" and "B" series tests. During trading, much opportunity seemed to be lost when half positions were closed at the target price. Often the remaining half-position reversed at that point and stopped out at break-even. It seemed obvious that closing the entire position at the target would generate more profit. However, once the final results were summed up, the opposite proved to be true."
 
Quote from Buy1Sell2:

Note: I didn't say you couldn't be successful by scaling out. It is just inferior over the long haul to a strategy that does not scale out.
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I mean...are you REALLY sure?

http://www.thebeaumontfund.com/eng/level1/lv1files/mar2002.pdf

"These results are mainly related to specific features of the investment methodology applied by The Beaumont Fund. More precisely, these results are obtained by effect of the strict money management constraints that force, through a high degree of control of portfolio risks, rather frequent scaling out of open positions, even in the presence of strong market trends. While this behaviour leads to slight under-performance in long term trending markets compared to trend following CTA strategies, the lower degree of exposure to market reversals generates an interesting protection against capital drawdowns and a consequently better performance over the long run."
 
Quote from Buy1Sell2:

If you are trading an illiquid instrument, you should make certain that you are extremely underleveraged. But the same principles apply--exit all at once.

Always exit all at once. 401ker's are the only ones who should scale out.
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the problem with trading large positions is that you don't know where the top is. but by offering a little here and there you can get a good feel of where the market is going to take your stock.

I'll throw out half my position just to see how strong the market is. and if it swallows it up. Then I may buy more because the strength is there.

(this will probably be taken the wrong way) but it's obvious you've never traded in a stock where you are a big player. Not that you're style doesn't make money. But just don't be ignorant of how others can make money in different ways.
 
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