"Scaling out" is inferior behavior

[volente_00]

Quote from Buy1Sell2:

Here is the correct math on your example Vol.

2 contracts traded per trader

SCALER
10 trades

8 winners

1 x 4.5 points for half the position
1 x 9 point for the other half


2 losers for 3 points each


NONSCALER
10 trades

8 winners for 2 contracts x 9 points each

2 losers for 2 contracts x 3 points each

Let's take your last ES trade as an example


nonscaler

2 contracts

2 x 140 points profit




scaler


2 contracts

1 contract x 228

1 x 140 points



Who had a higher profit ?


If one is outraday trading and using triple digit stops and trying to capture triple digits targets than without a doubt the scaler will ALWAYS have a higher win rate than a non scaler due to mean reversion in ES.


I ask again, please show me a chart where ES has moved 300 points down without one 100 point bounce in between the move.

 

[austinp]

<i>"Here is the correct math on your example Vol.

2 contracts traded per trader
SCALER
10 trades
8 winners
1 x 4.5 points for half the position
1 x 9 point for the other half
2 losers for 3 points each


NONSCALER
10 trades
8 winners for 2 contracts x 9 points each
2 losers for 2 contracts x 3 points each</i>

Absolutely correct. Optimal math always, always, always lies with all-out exits holding for big gains.

Every scalper with zero exceptions is in one or several trades each day that would have captured 75% to 90% of the entire day's range, if left unfettered to run.

Therein meets mathematical fact with logistical reality. The weakest link in our equation as traders is our own fear of loss. We've all been in countless traders near high or low of the day which was scalped out of for a pittance, whereas if left untouched to maximum fruition would have caught a week's worth of scalping gains in one fell swoop.

My final trade this morning was ES short 1331 = trailed out 1329. Why? Layers and layers of support were visible at 1327.50 where price action stalled. That was the logical = emotional fact.

Now let me ask you this: where was the session low? Was 1329 the optimal exit, scaled out or all out? Hardly. But it was the exit which made sense at the time.

No scale-out traders ever talk about the choppy days where half the trades get whacked full size at max loss, and the remainder traders go half out at partial profit = second half whipsawed out at stop. It's always assumed that most trades work deep in a scale-out trader's favor without ever running into sideways chop.

Reality is this: holding until it hurts, every trade every day is the optimal exit strategy. Every one of us has trades on near session highs or lows. Hold them all as if each is the one, and some invariably will be.

Natural greed = fear (same emotion) prevents us from doing that. Hence, we invent creative ways to exit trades that pander to our emotional weakness. Whatever works for us in the end is all that matters. Even if it ain't optimal, it may the only way which is long-term sustainable.

That is the difference between theory and reality for a profession colored in endless shades of gray rather than painted purely black & white.

 

[Buy1Sell2]

Quote from volente_00:

Let's take your last ES trade as an example


nonscaler

2 contracts

2 x 140 points profit




scaler


2 contracts

1 contract x 228

1 x 140 points



Who had a higher profit ?


If one is outraday trading and using triple digit stops and trying to capture triple digits targets than without a doubt the scaler will ALWAYS have a higher win rate than a non scaler due to mean reversion in ES.


I ask again, please show me a chart where ES has moved 300 points down without one 100 point bounce in between the move.

Actually , the trader taking all off at 228 points would have made more. Once again, what you are trying to show is an argument about proper entry and exit and not an argument for scaling out. Many folks are trying to confuse the two.

(You are really making an argument for not scaling out also without realizing it. )

 

[Buy1Sell2]

Quote from traderNik:

the optimal exit point, which he claims is known before the trade is placed. After all, every one of us knows that if your target is hit, there is ZERO chance that the market will continue on your direction.

Anyone can calculate the optimal exit point. ------ also, I never said there was zero chance that a trade would not move farther than the optimal exit point.

 

[volente_00]

Quote from Buy1Sell2:

Actually , the trader taking all off at 228 points would have made more. Once again, what you are trying to show is an argument about proper entry and exit and not an argument for scaling out. Many folks are trying to confuse the two.

(You are really making an argument for not scaling out also without realizing it. )

But only if the trader always know the optimum exit point. No one does so that is why it makes sense to take some off at target 1 and let the rest run, if you are wrong you still make money even it it goes back to your original stop versus the non scaler, who will let the whole position go back to a loss. By doing this one ends up with a much higher % win rate and I already showed how that will translate to a higher profit.

 

[Joab]

After all this debate I think the answer is ........ It Depends

Depending on your style of trading scaling out or in is best.

If you can find good trends and are skilled at money management for that style I would say Scale in.

If your a counter trend trader, I would say scale out.

 

[Buy1Sell2]

Quote from volente_00:

But only if the trader always know the optimum exit point. No one does so that is why it makes sense to take some off at target 1 and let the rest run, if you are wrong you still make money even it it goes back to your original stop versus the non scaler, who will let the whole position go back to a loss. By doing this one ends up with a much higher % win rate and I already showed how that will translate to a higher profit.

Your calculations were well off the mark when the attempt to show scaling as more profitable. Also, while 140 points profit was not as good as 228, it was however much greater than the optimal exit point for the setup I used. (Anyone can calculate optimal exit point). In other words, by not scaling, I actually did better than the scaler who most likely would have taken some off of the table at 20 or 30 points. I was able to do this by using trailing stops and staying in the trade at full position. Scaling has been totally debunked by the math in this thread and remains inferior to not scaling.

 

[Buy1Sell2]

Quote from Joab:

After all this debate I think the answer is ........ It Depends

Depending on your style of trading scaling out or in is best.

If you can find good trends and are skilled at money management for that style I would say Scale in.

If your a counter trend trader, I would say scale out.

No. ----------Scaling out is inferior irrespective of style or strategy. The math remains the same regardless. It's just common sense.

 

[smilingsynic]

Quote from Buy1Sell2:

Your calculations were well off the mark when the attempt to show scaling as more profitable. Also, while 140 points profit was not as good as 228, it was however much greater than the optimal exit point for the setup I used. (Anyone can calculate optimal exit point). In other words, by not scaling, I actually did better than the scaler who most likely would have taken some off of the table at 20 or 30 points. I was able to do this by using trailing stops and staying in the trade at full position. Scaling has been totally debunked by the math in this thread and remains inferior to not scaling.

A scaler who would have taken some off the table at 200 points would have done better. Again, shoulda, coulda, woulda means nadda.

I would argue that a better topic for discussion would be "trailing stops versus scaling out--which is better?".

 

[JSSPMK]

Quote from smilingsynic:



I would argue that a better topic for discussion would be "trailing stops versus scaling out--which is better?".

Excellent point, but how do you establish what's more profitable? Scaling & trailing methods vary, so do trader skills. Also market conditions vary all the time.