"Scaling out" is inferior behavior

[Buy1Sell2]

I agree and disagree. Yes you have to assume that the historically optimal exit point remains optimal but that is true about all aspect of your trading.

The strategy you use is based on its history and you assume it will keep working. How do you know that any aspect of your strategy is still valid going forward? You don't - that's what trading is all about.

To say that you are not going stick with the historical optimal exit point because you think it may no longer be valid means that you dont trust your system anymore. If 6 used to be optimal but you are not sure it still is then why is 3 a better guess? Surely you need to have some rational reason behind such a change.

If your post-trade analysis uncovers that 5 is now a better exit then 6 then by all means change you exit from 6 to 5. I just dont ever see a reason to exit half at 5 and half at 6 - that sounds like an emotional decision, not a logical one.

Excellent posting.

 

[Pekelo]

Here is the clear answer

The guy said it is black and white for him. That was his first mistake, it is not. You can not generalize about it, I gave you an example, for certain strategies it is better to get out completely, for others you scale. I give you another quick example:
The market is in a tight, boring range. By scaling in and out you make a little. The price never hits your entry or exit so by going full you made zero money. End of story.

There is no clear answer.

But welcome to the 2nd DECADE debating it!

Edit: 3rd your personal example. You were up like 40 points 3 days ago with your short. Had you scaled out, you would be in nice profits instead of almost giving back all of it.

 

[JSSPMK]

Buy1Sell2 is making a statement about a strategy that it relevant to him and he wants everyone to trade like him. That's a fallacy of his statement assuming we all trade the same way. I don't scale in/out, yet I see how it can be more profitable sometimes depending on variables.

 

[Buy1Sell2]

The guy said it is black and white for him. That was his first mistake, it is not. You can not generalize about it, I gave you an example, for certain strategies it is better to get out completely, for others you scale. I give you another quick example:
The market is in a tight, boring range. By scaling in and out you make a little. The price never hits your entry or exit so by going full you made zero money. End of story.

There is no clear answer.

But welcome to the 2nd DECADE debating it!

Edit: 3rd your personal example. You were up like 40 points 3 days ago with your short. Had you scaled out, you would be in nice profits instead of almost giving back all of it.

You are making the same mistake that a lot of posters have made before you. --You are talking about individual trader's strategy where I am talking about what outperforms on EVERY strategy. For example, if I employ a losing strategy, I will lose less by not scaling in or out. This is because when I have a winning trade within the losing strategy, I will reap greater benefit by having my full position on at outset and the trade will run to maturity as defined by the strategy with full position. This is not about whether or not, on a particular trade , I should have done this or that. --Yea, I may have a losing strategy, but it will lose less by not scaling.

 

[Buy1Sell2]

Edit: 3rd your personal example. You were up like 40 points 3 days ago with your short. Had you scaled out, you would be in nice profits instead of almost giving back all of it.

NO----I would have been better off by taking the whole position off and re-entering with the whole position. ----Scaling would have underperformed.

 

[tiddlywinks]

NO----I would have been better off by taking the whole position off and re-entering withe whole position. ----Scaling would have underperformed.

TRUE

 

[Pekelo]

For example, if I employ a losing strategy,

First, why would you do such a thing? Second, it is not true. The average of a scale in doesn't have to be more then a full entry, stop loss can be set for both at the same distance. For the scale in you just have to use averages...

 

[Pekelo]

NO----I would have been better off by taking the whole position off and re-entering with the whole position. ----Scaling would have underperformed.

This is actually true, but you didn't. So scaling out would have been better than not doing anything. And the point was that when you were up 50 points, we didn't know for sure which way it was going to go. So scaling out took some profit, but let some in just in case it keeps going.

Thus in the case the market keep falling scaling out would have made more than exiting at 50 points.

Bottom line is: You have to be cocksure when using full position, scaling let's you get away with being wrong more often...

And this is the real take away from this thread... Now I am done debating the subjective...

 

[JSSPMK]

You are making the same mistake that a lot of posters have made before you. --You are talking about individual trader's strategy where I am talking about what outperforms on EVERY strategy. For example, if I employ a losing strategy, I will lose less by not scaling in or out. This is because when I have a winning trade within the losing strategy, I will reap greater benefit by having my full position on at outset and the trade will run to maturity as defined by the strategy with full position. This is not about whether or not, on a particular trade , I should have done this or that. --Yea, I may have a losing strategy, but it will lose less by not scaling.

I posted an example where scale out strategy has outperformed due to win ratio (which is random).

 

[Buy1Sell2]

The average of a scale in doesn't have to be more then a full entry, stop loss can be set for both at the same distance. For the scale in you just have to use averages...

Thus, you have now agreed to the tenet and have made my point for me.