"Scaling out" is inferior behavior

[FanOfFridays]

Quote from Buy1Sell2:
I have proven beyond any doubt that all in/all out over the long haul is superior to scaling.

One interesting thing about this thread is the total lack of proof that has been tendered by the OP in support of his assertion that all in/all out is superior to scaling over the long haul . Every time someone asks him why he believes that scaling out is inferior for all systems at all times, he provides vague generalizations. Repeatedly, respondents have pointed out that there are flaws in his way of thinking. These flaws are both technical and conceptual. The response always ends the same way - see the sentence quoted above. The OP simply restates his original assertion.

Perhaps the most glaring philosophical flaw is the OP's inability to understand that there are as many systems as there are traders, and scaling out is optimal in many cases, especially when multiple entries are used. The OP's response to this was quite convenient and predictable. He simply stated that he had determined that scaling in was suboptimal as well!!.

The central tenet of this thread is that the OP claims he can determine the optimal exit point of any trade before the trade is placed - that is, he can determine the length of a market move before a trade is placed. This is intuitively absurd to anyone who has traded the markets with real money; it is the sort of statement that we would expect from an academic.

The large majority of traders here scale out at least part of the time. The hallmark of a good trader is the ability to adapt to changing market conditions and not be stuck in a mental rut which dictates that he must behave in one way all the time.

In addition, we have recently learned that the OP believes that the duration of market moves can be predetermined by backtesting. This bizarre twist to the tale provides further proof that the OP does not trade with real money, but is working with a simulator program of some kind. He is probably either an economics student or someone with a mathematical bent who is interested in the markets.

 

[Buy1Sell2]

Quote from volente_00:

Backtest this buy1



How many times a month does the es move in a 100 point range ?


How many times a month does it move in a 10 point range ?

Volente, I have already shown that a system that is a losing system still benefits from all in/all out because it loses less money. What I will remind you here is that the whole point is that if you use a 10 point target, then let the full trade run to the 10 points, don't pull some at 9 points. If you use a 100 point target, then let the full trade run to 100 points, don't take some off at 90 points. This is common sense folks and many posters try to move the discussion to other areas that are irrelevant to the discussion at hand. I will also point out that any system that is designed to scale out, is inferior to the system that allows the trade to run fully. This has been proven time and again here in this thread and cannot be refuted. --Good trading to everyone--Ishmael--

 

[Buy1Sell2]

Quote from volente_00:

Backtest this buy1



How many times a month does the es move in a 100 point range ?


How many times a month does it move in a 10 point range ?

What you are attempting to do, and have tried in the past, is to change this to a debate over whether short term or longer term trading is better. That is not the premise of this thread although I know which one is better for the vast majority and have stated so. The bottom line is that all in /all out is superior on EVERY time frame. --Your friend, Ishmael

 

[FanOfFridays]

Quote from Buy1Sell2:

What I will remind you here is that the whole point is that if you use a 10 point target, then let the full trade run to the 10 points, don't pull some at 9 points. If you use a 100 point target, then let the full trade run to 100 points, don't take some off at 90 points. This is common sense

This is the type of statement that we would expect from a theoretician and not someone who trades real money. What if market conditions show you that things have changed and the premise upon which your target was based is no longer viable? In that case the optimal strat is to take some profit and move stops up, thus ensuring that a winner does not turn into a loser and that you are participating in a further up move should it occur.

The only way to trade the strat as outlined by the OP is if you had foreknowledge of the extent of the market move in which you're participating. That is the essential claim being made by the OP - in his own words

Quote from Buy1Sell2:
I am able to determine the extent of market moves before they occur. I can determine the optimal exit point for any trade before the trade is placed

Please note that the OP has stated that the technique which he uses for figuring out what's going to happen in the future is backtesting.

Studying and acting on price action is the only way to trade effectively. The market will often change character and if it does, the astute trader will change his view, as opposed to stubbornly sticking to his preconceived beliefs. If you set a price target and a stop loss, and market conditions change, scaling out and moving protective stops up is an effective way to lock in profit while ensuring that you participate in further up moves. Just ask any fund manager.

The almost total lack of participants here who are siding with the OP is a strong indicator that his theory-based ideas are not relevant in the real world of real money trading.

 

[Buy1Sell2]

Quick reminder:
----It doesn't matter whether or not the trader can identify optimal exit points. The optimal exit point argument is irrelevant to the discussion at hand. --Any system, even losing systems, benefit from not scaling. Traders who can define optimal exit points will have potentially better systems than those who cannot, but when they scale out, their systems will be inferior to what they could otherwise be. Pretty much common sense folks---Ishmael

 

[volente_00]

Quote from Buy1Sell2:

What you are attempting to do, and have tried in the past, is to change this to a debate over whether short term or longer term trading is better. That is not the premise of this thread although I know which one is better for the vast majority and have stated so. The bottom line is that all in /all out is superior on EVERY time frame. --Your friend, Ishmael

No, I am giving you an example for when scaling out will produce a bigger net profit which voids your broad assumption that scaling out is inferior for everyone.

 

[volente_00]

Quote from Buy1Sell2:

What I will remind you here is that the whole point is that if you use a 10 point target, then let the full trade run to the 10 points, don't pull some at 9 points. If you use a 100 point target, then let the full trade run to 100 points, don't take some off at 90 points.

And the whole point is you personally trade without a predetermined profit target so how can you prove something you don't even practice ?


Unlike you, I never know 100% if any of my es trades will give -3 or +40 intraday so I choose to scale out in order to take advantage of what the market gives me. By not exiting, all out, I have the option of letting my winners run without cutting into my original capital.

 

[FanOfFridays]

Quote from Buy1Sell2:
Quick reminder:
----It doesn't matter whether or not the trader can identify optimal exit points. The optimal exit point argument is irrelevant to the discussion at hand. --Any system, even losing systems, benefit from not scaling. Traders who can define optimal exit points will have potentially better systems than those who cannot, but when they scale out, their systems will be inferior to what they could otherwise be. Pretty much common sense folks---Ishmael

On the contrary - the claim that it is possible to identify the optimal exit point before the trade is placed is the central tenet of this thread. The OP is claiming that he can calculate the duration of a price move before a trade is placed and this is why he is able to leave positions on until the optimal exit point is reached.

It is instructive that the OP is now trying to distance himself from his claim that he can identify the optimal exit point for any trade before it is placed. Last year, this was the central theme of the thread, and the OP used smileys and parroting the same phrase over and over as a rebuttal as member after member asked him to explain how it is that he could know where a price move would end.

If a trader does not know where a price move will end (and there isn't a trader on earth who can claim that he knows this) scaling out will be optimal in several different situations. The majority of members here agree and there seems to be no one willing to step up and agree with the OP that it is possible to identify the optimal exit point for any trade before the trade is put on.

Lastly, it is instructive that the OP has now stopped saying that he can identify the extent of future market moves by backtesting, which is one of the strangest claims ever to be seen on these boards.

 

[Buy1Sell2]

Scaling out is inferior behavior. When we have a winner, it makes more sense to let it ride. Will that cause us to give back profits sometimes? Yes. However, it will keep you in the really big winners and more than offsets the savings by scaling out.

--The reason folks scale out is many times due to the fact that they took a larger position than they were comfortable with initially. In effect, they were wildly overextended. The scale out feature simply gets them back to where the total position is now of a more correct size for their account size and comfort level. In summary, they were scared when the original position was on and now have been lucky enough to get some profits and feel they can let the rest run. What happens though when the initial trade goes against? --Sometimes they let the whole trade run as losses mount. -No, it's better to size correctly and let it run to where you can exit at a time of your own choosing (borrowed line from George Bush). No sense being a weak hand.---Ishmael

 

[FanOfFridays]

In the absence of any sort of empirical proofs, we generally get the same type of statements from the OP. The arguments amount to this

"Scaling out is inferior behaviour because I said it".

To suggest that one approach to exit management is right in all cases, for all traders, in all trades in all markets is so obviously wrong, one wonders how the OP developed the impression. The answer is actually quite simple. The OP does not actually trade. He is likely a theoretician.

For beginners reading through these pages, please note that

1) At the beginning of this thread, the OP, under fire by members who were wondering how he could know that a move would proceed to his profit target in all cases, made the following statement

I am able to determine the optimal exit point for any trade before the trade is placed.

This statement was met with disbelief by all who read it. The OP went further. He said

The extent of a price move can be determined before the market moves

In the past week, the OP has been scrambling to distance himself from these comment, claiming that "it is not important that the optimal exit point be determined (even though I can do it)". In fact, this claim is the central tenet of this thread. If you are in a trade and price action shows you that the conditions which obtained when you placed the trade have changed, the optimal course of action is to take some profits and move stops up so that you can participate in a further move and get taken out if the market reverses...

unless

you have some foreknowledge of the extent of the market move. This is exactly what the OP said last year. He said

"I don't take partial profits because I am able to determine in advance the optimal exit point".

Lastly, in the past weeks the OP has told us that the method he uses for determining the extent to which a market will move is... wait for it... backtesting. Anyone who has any experience of backtesting knows that the last thing it's good for is predicting the future.

My posts here continue to attempt to dispel any notion that a one-size-fits-all method is available to beginners for trade optimization. Please chart your own course and do not be swayed by theoreticians who claim that they know what is best for every trader.