"Scaling out" is inferior behavior

[FanOfFridays]

Don't bother with facts, GSCO. We have provided ten different explanations to B1S2 as to why his blanket statement is untrue.

Recently he tried to get out a side door by saying that when you take half a position off you are not scaling out, but in fact initiating a new trade.

The bottom line is - there are several different and unrelated situations in which scaling out might be the optimal strategy. The most obvious is in automated trading system design. B1S2's assertion is based on a false premise - that one can 'identify the optimal exit point for every trade before the trade is initiated'.

 

[FanOfFridays]

Quote from GSCO:

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.

Sounds a bit like Larry Livermore Seems like your strategy makes some sense.

"I sold 1000 and the market ate them up so I knew I wanted to be long the stock"

 

[whitster]

another one of OP's faults is that he fails to recognize the difference in what is an optimum strategy.

for example, assume that given one's methodology/system that scaling out gives an average return of 500% per year with a 10% risk of 30% drawdown and a 5% risk of ruin

and that setting a hard target of X points for the same setup gives an average return of 600% per year with a 15% risk of 30% drawdown and a 10% risk of ruin.

which is "better?"

well... that depends

different exit strategies do not just affect the total % return, given sufficient 'n' for the edge to work out.

they also affect smoothness of equity curve, drawdown, risk of ruin, etc.

of course the fact that he is already backpedaling, without admitting his logical errors, shows that he is just wasting our time with his trollish postings anyway

 

[BlindLemonBoosh]

Not to pile on the OP, but...
"Failing to risk-adjust your returns" is inferior behavior.

 

[Buy1Sell2]

Quote from whitster:


of course the fact that he is already backpedaling, without admitting his logical errors,

There has been zero backpedaling. In the Mr Quant example, the trader did not remove any of the trade before the expectancy calculation was achieved. This is the essence of what I am saying--Leave your full position on to either your target , trailing stop or new trade.

As far as scaling in goes, my research shows that I would have made more by not scaling in and so I was incorrect in thinking that scaling in was better. It is not. Bottom line, I still stand by what I have mathematically proven several times in this thread and with personal experience. Scaling out is inferior behavior.

 

[Buy1Sell2]

Quote from traderNik:


Recently he tried to get out a side door by saying that when you take half a position off you are not scaling out, but in fact initiating a new trade.

No--this was a long time ago in this thread when I explained that aspect to Mark. NO attempt to get out the side door--I don't need to. Scaling out is inferior behavior, I am happy however, to see the posts against my position because it helps me to understand why some traders make less and also gives insight into one of the reasons that markets "pull back". I feel more comfortable than ever now.

 

[Buy1Sell2]

Quote from traderNik:

B1S2's assertion is based on a false premise - that one can 'identify the optimal exit point for every trade before the trade is initiated'.

This is not the premise --

 

[Buy1Sell2]

Quote from GSCO:

(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.

Believe I am not ignorant of the way others trade. That is why I started the thread. It is not being lost on everyone.

 

[BlindLemonBoosh]

Quote from Buy1Sell2:

In the Mr Quant example, the trader did not remove any of the trade before the expectancy calculation was achieved.

Mr. Quant also scales out before the original expectancy has been achieved if the newly calculated expectancy dictates to do so. This is commonly referred to as "reacting to changing market conditions".

Would you like me to present a new example?

 

[FanOfFridays]

Quote from Buy1Sell2:

my research shows ...