"Scaling out" is inferior behavior

[taowave]

Trader A goes long on a cross of the 50 day MA and sells at a 20 percent profit target.

Trader B goes long on a cross of the 50 day MA and sells on a downside cross of the 50 day MA.

Traders are equally profitable With much different r/r profiles.

Are you stating that the combination of Trader A and Trader B with identical entries but different exits can never produce a higher risk adjusted return than the stand alone traders?

Scaling out is simply 2 systems with identical entries but different exits.Unless you can prove that NOT scaling produces higher risk adjusted returns,your beliefs are simply an opinion.

 

[Buy1Sell2]

Trader A and Trader B are using two different systems. Trader A's system will be optimized by exiting all at once. Trader B's system will be optimized by exiting all at once.

 

[taowave]

That's correct, Scaling out is 2 different systems.We agree there

I don't know why you can't use a little creativity and take the next logical step.You are so dam close..

Trader A and Trader B are using two different systems. Trader A's system will be optimized by exiting all at once. Trader B's system will be optimized by exiting all at once.

 

[Buy1Sell2]

Scaling out is taking partial profits or losses before trade maturity or stop out. It is not 2 different systems, especially not from two different traders.

 

[taowave]

What happens if instead of 2 traders, we have one trader splitting his capital on half allocating
Equal amounts to 2 systems with identical entries but different exits.

Scaling out is taking partial profits or losses before trade maturity or stop out. It is not 2 different systems, especially not from two different traders.

 

[Buy1Sell2]

Trader decides which system is the optimal system over the long haul and trades that system all in all out. Let's not be obtuse.

 

[Handle123]

Full position in, full position out, will earn more, or lose less over the long haul, on every system whether good or bad.

I absolutely agree with you for long term trading and my day trading getting out at whatever exit of all at once gives most in profits in my back testings and using no trailing stops. But that is not how I trade long term, given the fact of having taxes to pay, and losses to recover to be able to have decent positions relative to one's account, taking profit at defined point makes it easier AND be able to sleep. Many long term traders have incredible years hitting 35% profitable trades, I have never come close to 35% in long term commodities, it might be 4-5 years of rollovers before I get rewarded for staying in a position till comes to term. I generally hit like 10% and less till trade is totally exited, so taking off half position at deep enough profit allows me to continue to keep equity curve small increases and hedging upon entry allows me to often stay close to even for the year recovering loses on future side. Since most markets cycle, great years is when many markets are ending/reversing. I have changed percentages of targets taken off from 50 to 30% in recent years as I have found high percent areas to add to positions.
I am trend trader mostly in stocks but again low losing percentages, I take profit often at $1-4 bucks on half to get to breakeven stops. If I get in low enough on good dividend paying stock, I will keep it past where I entered and sell call options like a madman. Recently adding Credit Spread options to make profits is medium term trading and that is all or nothing thus far but not doing but 5-10 lots.

But "Buy1Sell2" is right IMHO that scaling doesn't make much sense, if one thinks trend will continue, why get out, but in my case, just a nervous nilly, LOL.

 

[romik]

There seems to be a lot of people around scaling out of their trades. Why? They seem to swear by their systems' ability to see turning points on intraday basis, yet they can't hold their positions without having to scale out prior to price reaching another turning point, which they would have taken anyway (according to their hindsight charts). Really interesting logic. Why not simply hold full position till that other point is reached and one either closes or reverses?

 

[Buy1Sell2]

There seems to be a lot of people around scaling out of their trades. Why? They seem to swear by their systems' ability to see turning points on intraday basis, yet they can't hold their positions without having to scale out prior to price reaching another turning point, which they would have taken anyway (according to their hindsight charts). Really interesting logic. Why not simply hold full position till that other point is reached and one either closes or reverses?

Excellent posting and point.

 

[Buy1Sell2]

yes if you think entirely in probabilities this might be true. yet, by legging out, one of your position will always be wrong.

however, i am restricting myself to position trading and entering and exiting is based only on the original setup or reason. this also helps a great deal in removing anxiety when the position moves in the wrong direction.

most losing decisions are made in the face of adverse conditions based on emotions. by sticking with your original setup you dont have to live thru the agony of this.

This is exactly correct in it's entirety.