B1S1, your assumption doesn't make sense to me. The win/loss ratio when scaling out should be higher compared to an "all out" approach. You could get to 4.5 pt target but not to the 9 pt target. The scale out would be a profitable trade versus a losing trade using the "all out" approach.
"Scaling out" is inferior behavior
- Thread starter Buy1Sell2
- Start date
it doesn't make any sense because Ishmael can't do simple math.
the results are the same, assuming the variables are the same.
but scaling out is multiple trades at different times, so the results could vary, because as we all know, prices can change at any time.
but it was a good try.
B1S1, the point is that whatever the win/loss ratio is when scaling out, it would be even lower for an "all out" approach assuming everything else being equal.
Now, the example of the trader who is using a losing system:
Four ES Contracts 90% win ratio all in/all out versus
Four ES Contracts 90% win ratio scaling out at half target.
1 pt target 10 pt initial stop loss
1st example with 20 trades
18 winners for 1 X (4 conracts) = 72 pts ($3600)
2 losers for 10 X (4 contracts) = -80 pts (-$4000)
Net loss $-400
2nd example with 20 trades
18 winners for 1 X(2 Contracts)=36 pts ($1800)
18 winners for .5 X(2 Contracts)=18 pts ($900)
2 Losers for 10 X(4 Contracts) =-80 pts (-$4000)
Net profit $-1300
As you can see, even the trader who employs a losing system will lose less by not scaling out. --Ishmael
Four ES Contracts 90% win ratio all in/all out versus
Four ES Contracts 90% win ratio scaling out at half target.
1 pt target 10 pt initial stop loss
1st example with 20 trades
18 winners for 1 X (4 conracts) = 72 pts ($3600)
2 losers for 10 X (4 contracts) = -80 pts (-$4000)
Net loss $-400
2nd example with 20 trades
18 winners for 1 X(2 Contracts)=36 pts ($1800)
18 winners for .5 X(2 Contracts)=18 pts ($900)
2 Losers for 10 X(4 Contracts) =-80 pts (-$4000)
Net profit $-1300
As you can see, even the trader who employs a losing system will lose less by not scaling out. --Ishmael
i'm too busy trading to check his math.
Quote from Buy1Sell2:
Now, the example of the trader who is using a losing system:
Four ES Contracts 90% win ratio all in/all out versus
Four ES Contracts 90% win ratio scaling out at half target.
1 pt target 10 pt initial stop loss
1st example with 20 trades
18 winners for 1 X (4 conracts) = 72 pts ($3600)
2 losers for 10 X (4 contracts) = -80 pts (-$4000)
Net loss $-400
2nd example with 20 trades
18 winners for 1 X(2 Contracts)=36 pts ($1800)
18 winners for .5 X(2 Contracts)=18 pts ($900)
2 Losers for 10 X(4 Contracts) =-80 pts (-$4000)
Net profit $-1300
As you can see, even the trader who employs a losing system will lose less by not scaling out. --Ishmael
Not necessarily. The winning percentage could be exactly the same. Perhaps the trade that runs to 9 pts 50% of the time also runs to 4.5 pts only 50% of the time. You see, there is no guarantee that scaling will give you a higher winning percentage. It is however, more likely that it will and that strokes the ego of the scaler. As I have shown, it makes better sense to trade all in all out in all circumstances, even if you are a person that cannot define the market optimal exit. --Ishmael
Quote from Buy1Sell2:
Not necessarily. The winning percentage could be exactly the same. Perhaps the trade that runs to 9 pts 50% of the time also runs to 4.5 pts only 50% of the time. You see, there is no guarantee that scaling will give you a higher winning percentage. It is however, more likely that it will and that strokes the ego of the scaler. As I have shown, it makes better sense to trade all in all out in all circumstances, even if you are a person that cannot define the market optimal exit. --Ishmael
and since no one can define the optimal exit point, then...? come one, ishmael, you can say it.
A good exercise that will help you understand the premise better, would be for you to calculate and report what the winning percentage would have to be at the 4.5 pt target to make scaling out a better profit. Then, calculate what all in , all out would do at the 4.5 target with that winning percentage.--Ishmael
It's possible, but highly unlikely. To make your point about scaling out you really need to have more real-world assumptions. Seriously, if you're basing your entire argument that the winning percentage when scaling out is the same as taking off your entire position, then your argument is weak. I'm not trying to be insulting, just critiquing your logic.