"Scaling out" is inferior behavior

[kut2k2]

Quote from Thunderdog:

A very small fraction of my account size. I might vary it slightly, depending on the quality of the setup, but that's mostly just to make myself feel important.

OK how about a simple test? You pick the stock (free historical data available at yahoo), you pick the time period (5+ years), you pick the public domain timing strategy, you pick the initial account size, etc. The only variable will be your fixed-fraction position sizing versus my alleged optimal position sizing, and we'll see which is riskier (you pick the criterion for that as well ).

 

[Thunderdog]

Quote from kut2k2:

OK how about a simple test? You pick the stock (free historical data available at yahoo), you pick the time period (5+ years), you pick the public domain timing strategy, you pick the initial account size, etc. The only variable will be your fixed-fraction position sizing versus my alleged optimal position sizing, and we'll see which is riskier (you pick the criterion for that as well ).

Thanks for the offer, but I principally trade NQ intraday using solely my own method, which I am not prepared to share in any detail. The relative size of my trades is a function of my familiarity with that market and my comfort level with my own approach. However, I will stipulate that you are prepared to put your sizing approach to the test and are not just passing wind. Fair enough? Have a good weekend.

 

[kut2k2]

Quote from Thunderdog:

Thanks for the offer, but I principally trade NQ intraday using solely my own method, which I am not prepared to share in any detail. The relative size of my trades is a function of my familiarity with that market and my comfort level with my own approach. However, I will stipulate that you are prepared to put your sizing approach to the test and are not just passing wind. Fair enough? Have a good weekend.

Fair enough. You have a good one as well, TD.

 

[Buy1Sell2]

Quote from smilingsynic:

Scaling out on winners ensures lower exposure on the inevitable big winners.



Psychologically, it is harder to let winners ride than to cut losers short. No one wants to be in that 95% camp of the losers, so they cut short winners out of fear they'll turn into losers.

Cutting losers short is not enough. One must have the courage to let winners ride. Few can do that; hence, few are winners.

Yep

 

[Buy1Sell2]

Quote from kut2k2:


Scaling in and scaling out are ad hoc money management gimmicks to try to overcome weak entries and weak exits. If that works for you, OK, but let's not pretend like it's better than having strong entries, strong exits and optimal position sizing.

Most assuredly.


Sacling out appeals to traders who are overexposed with their position sizing. It is a scaredy cat strat.

 

[kut2k2]

Quote from Buy1Sell2:

Most assuredly.


Sacling out appeals to traders who are overexposed with their position sizing. It is a scaredy cat strat.

Just to clarify my opinion in this thread, it applies only to mechanical traders. I would not presume to know what is best for a discretionary trader, that being a highly subjective and individualistic activity.

But for mechanical trading -- trading which can be programmed into a computer --, scaling is simply a suboptimal strategy. Optimal position sizing precludes scaling in because the last thing a trader wants to do is add to a position that is already optimal size, and scaling out leads to lower profits.

 

[Buy1Sell2]

Quote from kut2k2:

Just to clarify my opinion in this thread, it applies only to mechanical traders. I would not presume to know what is best for a discretionary trader, that being a highly subjective and individualistic activity.

But for mechanical trading -- trading which can be programmed into a computer --, scaling is simply a suboptimal strategy. Optimal position sizing precludes scaling in because the last thing a trader wants to do is add to a position that is already optimal size, and scaling out leads to lower profits.

Doesn't matter. The math doesn't care whether it is a mechanical or non-mechanical trader.

 

[fearless9]

Like so many of these trading conversations on ET, those Posters who have reached a critical mass of knowledge with their trading can see the point of view of those who are trailing behind them
but the reverse seldom applies.

As to "scaling" I do not engage in it for two reasons.

1 ... I trade ES several times each morning and things are happening very fast.

2 ... more importantly, I am not here to
maximise trades, only daily profits.

I regard each trade as a "stand alone" trade.
Quite frankly, I am only interested in my daily ratios.

regards
f9

 

[illiquid]

Wow, this thread is still alive? A year or so later, my opinion stands as:

Sometimes I sell everything at once.

Sometimes I scale out slowly, especially in a thin name.

Sometimes, after exiting a partial position, I will rebuy/sell and double up on the position, depending upon how the tape subsequently acts.

I hope that's concrete enough for some of you, and vague enough for others.

 

[Buy1Sell2]

Quote from Van Halen:

Although there are exceptions to every rule, I generally agree with B1S2. Van Tharp (Trade your way to financial freedom) discusses the pitfalls of scaling out also.

Thanks!!