"Scaling out" is inferior behavior
- Thread starter Buy1Sell2
- Start date
Here is a post from another thread that supports much of what I have said is the reason for scaling--
http://elitetrader.com/vb/showthread.php?threadid=64965&perpage=6&pagenumber=10854
http://elitetrader.com/vb/showthread.php?threadid=64965&perpage=6&pagenumber=10854
this argument is truly a joke.
b1s2 knows he is insane.
Everyone who has backtested multiple systems knows if you can blend systems you can have much better results.
While the scaled part of the trade might have a better smoother curve (because you will have a higher percent right) ... you do not even have to argue the scale can do better.
Even if the second system is not as good as the first ---- blending systems can lead to a better, more profitable and less risky program.
you have to be a novice to argue against scaling.
b1s2 knows he is insane.
Everyone who has backtested multiple systems knows if you can blend systems you can have much better results.
While the scaled part of the trade might have a better smoother curve (because you will have a higher percent right) ... you do not even have to argue the scale can do better.
Even if the second system is not as good as the first ---- blending systems can lead to a better, more profitable and less risky program.
you have to be a novice to argue against scaling.
Quote from Buy1Sell2:
We're well past the proof stage of this thread. All in , All out has already been established as superior over the long haul. Please address the points currently being discussed.==Ishmael
Such a concept could never be established.
That has got to be a blatant lie or foolish ignorance.
Given real life real time trading only a non trader could try and make such a silly assertion.
But even given your assertion... you tell me your given trade amount and your percent right on your trades.
If you get it get it right more than 50% of the time without hitting your stop I will tell you to trade larger and scale out one tick into profit once you recover costs? Boom you lose.
(In reality you would hold out for half your normal trade or 1 atr or something but my example proves you are incorrect. Or at the very least it proves you could never prove your point.)
If your trades are losers more than 50% of the time, I guarantee there will be scale outs that make more money for you. Boom you lose.
Do you trade with real money?
Do you know your winning percentages.
Have you consider stats such max adverse excursion and max profitable excursion.
If you did look at such stats you would know how absurd your claim is.
The opposite is the case.Quote from Buy1Sell2:
We're well past the proof stage of this thread. All in , All out has already been established as superior over the long haul. Please address the points currently being discussed.==Ishmael
This thread has shown that scaling out is optimal in many situations. Furthermore, there has been not one iota of proof offered for the OP's assertion, aside from the OP's statement that it is so. Apparently the OP believes that if he says 'Scaling out is inferior behaviour', this constitutes a rigorous proof.
The OP is a failed daytrader who has made the following statements on these boards
1. "Daytrading is inferior behaviour".
2. "I can identify the extent of a price move before the move occurs (the 'optimal exit point'). I can do this through backtesting".
3. "I know the best entry and exit protocols for every conceivable trading technique".
4. "In addition to scaling out being sub-optimal, scaling in is also sub-optimal"
It would take a very long post to enumerate the errors in thinking and conception contained in the OP's posts. Flexibility and adaptability are the most important traits in a trader. Blanket statements such as the ones made by the OP should be a warning to beginners. This type of thinking will eventually lead to ruin.
The OP's assertion is 100% based on the mistaken notion that the optimal exit point can be determined before a trade is placed. This is the central tenet of the thread. As this is not possible, scaling out will be optimal in those situations in which price action shows the trader that the conditions which obtained when the trade was placed have changed.
Quote from 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
Unless you're operating on a very fast timeframe, why on earth would you not scale in and out as price action evolves? You trade on a huge timeframe; how can you know whether the move will go 50pts and last two months, or go 500pts and last a year?
Quote from Buy1Sell2:
The next consideration that must be looked at is the number of times a trader makes decisions. The more decisions that a trader makes, the more chances he will have to be wrong. Traders are more likely to make decisions that are incorrect, thus it is important to keep the number of decisions to a minimum. Each time there is an entry or exit, this represents a decision that is being made by the trader. Scaling requires more entries and more exits and thus creates a greater potential for incorrect entries and exits. It is best to avoid this and the all in/ all out style limits the chances for bad decisions. Good trading everybody!--Ishmael
This is only relevant when time is considered. Unless one is operating on a timeframe where things are moving too quickly for good decision-making, whether you make five decisions per week or five per year is totally irrelevant.
You might as well claim that it's more "optimal" to win five times out of ten than fifty times out of a hundred, when there's clearly no difference.
The assumption here seems to be that 'scaling out' means exiting fixed portions of the position at fixed, arbitrary points, such as 'breakeven,' '$1000 profit' etc. I can certainly believe that kind of strategy is suboptimal, since the market doesn't move according to arbitrary PnL reference points.