"Scaling out" is inferior behavior
- Thread starter Buy1Sell2
- Start date
Some posters are playing semantics. This is again an attempt to obfuscate the discussion and, other than this response, the quoted post will be ignored as it is irrelevant. The fact remains that traders who scale are taking more decisions concerning the optimal exit point and optimal amount when scaling and it is common sense that they will typically make more mistakes than the all in/all out trader. --Good fortune to all!!--Ishmael
Exactly the point. The OP continues to pretend that by 'scaling out', we mean what you just said, that is, the removal of portions of the position at, to use his (mistaken) example, the 'break even' point (and other predetermined places). If you look back, he is always trying to characterize the act of scaling out in these terms.
Of course this is ridiculous and I have made it abundantly clear that to take a part of the position off at B/E when price action doesn't warrant it is a big mistake.
Once again, these are the claims being made by the OP. I have already provided all the links to the posts which include these statements by the OP.
1. Daytrading is inferior behaviour
2. He can determine the 'optimal exit point' for each trade before the trade is placed. This is how he knows to hold positions until 'the end of a move' (the OP's phrase), even if price action shows that a change may be imminent.
3. Scaling in is also inferior behaviour
4. He knows the best way to execute every trading strat, even those he doesn't employ.
The central tenet of this thread is that the OP claims he can predetermine the 'optimal exit point' for any trade. That in itself is a strange idea, but the OP goes further. He claims that the 'optimal exit point' can be determined through backtesting.
Of course this idea is silly for anyone who has any experience with market modelling.
It is likely that the OP does not trade real money. He may be an Econ student or someone with a mathematical bent who is interested in the markets.
Oh yes, I forgot. The other thing that the OP believes is
5. Traders should trade from one side only
5. Traders should trade from one side only
Quick reminder here:
Traders who are scaling in/out have their biggest position on when there is the most risk, but have a smaller position on when the trade is going in their favor where they could reap the best reward. Common sense dictates that this behavior is inferior by nature. Can you make money over the long haul by scaling? Certainly. Can you make more money over the long haul by using an all in,all out strategy ? Absolutely!--Good fortune to all !!--Ishmael
Traders who are scaling in/out have their biggest position on when there is the most risk, but have a smaller position on when the trade is going in their favor where they could reap the best reward. Common sense dictates that this behavior is inferior by nature. Can you make money over the long haul by scaling? Certainly. Can you make more money over the long haul by using an all in,all out strategy ? Absolutely!--Good fortune to all !!--Ishmael
Exactly, they could if they know in advance where the move is going to end.
Since this is impossible, scaling out will often be optimal, in situations where price action shows the trader that the conditions which obtained at the time the trade was placed have changed.
Interesting that the OP does not understand that value at risk does not change when a trade goes in ones favour. The OP is the kind of trader who says 'Oh well, it's house money. Let it ride'. This is a common beginner error. This confusion on the part of the OP, the belief that if a position goes in your favor, your VAR goes down, is a big clue as to why the OP holds these mistaken beliefs.
If we all had a crystal ball, we could leave our full positions on until the end of every move. Since we do not, scaling out will sometimes be optimal, especially when we have established a position by scaling in.
One of the nice aspects of the information in this thread is that it has shown that even the trader who is not able to identify the proper place to exit, will still benefit from all in, all out. We need to remember and recognize, that the trader who cannot find the optimal all out exit will also not be able to find the optimal scale out area and they will benefit over the long haul by making one decision instead of two or more. This is easy stuff--Ishmael
Quote from Buy1Sell2:
One of the nice aspects of the information in this thread is that it has shown that even the trader who is not able to identify the proper place to exit, will still benefit from all in, all out. We need to remember and recognize, that the trader who cannot find the optimal all out exit will also not be able to find the optimal scale out area and they will benefit over the long haul by making one decision instead of two or more. This is easy stuff--Ishmael
Where do you come up with this nonsense ?
If a trader is not good at recognizing the optimal exit point, then SCALING OUT will offer them the chance to make more profit on the trade as they now have more than one chance to work the exit. Using your all out theory, if a trader is constantly suffering from cutting winners to soon, they will then be able to satisfy the internal battle in their mind between fear and greed by using scaling out which will reduce stress, smooth the equity curve and more often than not increase the bottom line unless the trader has a 90+% winrate.
No No No. The trader using all in, all out will from time to time have huge winners simply by staying in. They control risk and let the winners run to full maturity. (If they are using targets, they will get the full target) .The scaler will never get this due to too much fiddling which will mostly be wrong. Scalers start with a position that is too large and have to pare back their position to a normal size in order to feel better about the trade and themselves. --Ishmael