To SCALE or Not to SCALE a profit?

Originally posted by vladiator

You are right but for the wrong reason :D This approach might have phsychological side benefits. But those aren't the main reason to do it. The main reason is it reduces the volatility. In theory it is irrelevant if you can tap on additional resources. In practice, the volatility of your account size matters.
You can also look at it from a different angle, although it may not seem relevant at first. But bear with me for a sec.
The main reason academics (and practitioners alike) argue one should diversity is to reduce the volatility. In this case, you are looking at diversification <b>over time</b> as opposed to the usual <b>accross assets</b> look. In other words, if you have a strategy where you take a position in some security and close it later to roll over into the next position, you might on average have a profit of some percentage. BUT, that doesn't mean you'll ever get there b/c the volatility of outcomes may take you out. By scaling in/out you reduce the variability of final outcomes and by making the distribution tighter are more apt to get that average return.
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Brother,

Smoothing out your equity curve reduces volatility in your trading account. You are just spinning my idea around. Dont underestimate psychological benefit. We are human beings not robots.


--MIKE
 
Originally posted by nitro

I have modeled this in TS. My conclusions are inevitable...you can scale into a trade, and that doesn't seem to affect the result terribly on the short side. However, it seems to on the longside - you want to get out "en-masse" on a long trade that goes against you. [BTW, there are some hidden variables here that I must disclose - this assumes symmetric stop loss pain - perhaps an oversimplification]

FWIW, I always go in full force and get out full force. It doesn't mean I won't add to a trade, but that is because I would see it as a new trade, not as scaling into an established one. The fact that there is already a position on with "identical" entry parameters is a coincidence for me.

nitro
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What about exiting winners?
 
You can trade anyway you want to and you can set up your Rs anyway you desire but please before your argue that scaling out must be for psychological wimps -- try it. You will see hey you know that trade I got out of === If I had stayed in to my target I would have made more money. Then later you will say hey you know that trade I scaled out of for profit on my first half -- well I am glad I did because the second half was a loser. Now is that a full R loser--- no. So you see you do not take full r losers all the time if you scale out.

In the end it is all Rs and that is why the post by the guy saying you should look at it as two separate trades is correct.

Now for the kicker. (This was posted before). There is no information like the information you get when you see how the market handles the first half of your trade. As a short term trader I get so much information from my "scouts" that I am glad I was not so rigid in my thought as to think that scaling out wrecked my Rs.

Also if you are good at picking your scalp entries you can load up blow out a few lock in profit and then trade em like all the other suckers out there who have not locked in a profit all ready. Because it is a lot easier to blow out a few into a program that you caught from the beginning than trying to unload em later when you do not have the program frenzy going on.

All trades are not created equal and that is why a good discretionary trader at times buys more and blows em out in pieces. If I know I can make a dime but I am not sure I can make 50 cents how can I not scale out of that trade. I do not understand how there can even be an argument on this point.

Do what you will on your time frame. But scaling is what made me profitable.
 
Originally posted by bone

I think I'll scale out of this apparent loser.

Vlad says that's what I should do.

Idiot.

Amateur.

You have no fucking idea.

Cost me $15,000 to get out. All at once. Hit the entire Bid. If I chose to scale out, would have cost me about $250,000.
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Give everyone a break you moron! I can list dozens of cases when I could have ended up with a loss if I took it in one trade and made thousands instead by scaling out.
I have no idea? Oh, shut the f#ck up! If you don't understand the basic concepts of statistics, what is there to talk about?
I had EP overnight. It opened way lower. I could have lost about 20% of my account, instead I made about 10%.
And what the f#ck is wrong with you dude? Why be so freaking rude? My logic was very sound and based in real science. You can here as a true idiot and vented out your pathetic frustration b/c you lost some 15 G? Suck it up and move on. If you keep taking you losses in one gulp, then GET USED TO IT! I'd rather not.
PS and do read those stat books instead of comics, moron.
PPS and don't you f#cking dare call me an ameteur.
 
Why would you risk 20% of your account on one trade, Mr. one-lot wonder? Is that the way to go? Do you walk up to a roulette table and put your entire stake on red or black?

Why not stop-loss at 5%, and get long again at a MUCH BETTER LEVEL? That way, including your 5% loss, you could have made 25% instead of 10%? By the way, Junior, I haven't read a comic book in years. I'm an Engineer by training, so I understand statistics way better than you.

I am offended by jags like you giving such idiotic advice. You're no different than Jack Grubman giving advice about WorldCom. Nobody risks 20% of their account on a trade and stays around for very long. I am a professional trader - I do this for a living. I support a family of five... big house, 5 cars, vacation home, private tuition for three kids. I do it by making smart decisions, minimizing my risk, and trading size.

Your problem is that you're right and the market is wrong. You advocate huge capital drawdowns and promote it to others. Criminal on your part, AMATEUR.
 
Originally posted by bone
I am a professional trader... I support a family of five... big house, 5 cars, vacation home, private tuition for three kids.
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Likewise, only it's not my family.
 
Originally posted by jem
If I know I can make a dime but I am not sure I can make 50 cents how can I not scale out of that trade. I do not understand how there can even be an argument on this point.
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Well I guess we are even because I don't know how any trader can even make the above statement :confused:

Since when is this a game of being "sure" about anything on a micro-level (trade to trade)? You have to do what is best on the macro-frame. If it is in the traders best interest to scale out -- as measured on a macro-frame, then by all means they should be doing so, but you can't just snatch up 10cents because it is there.

I have employed certain methods where it was in my best interest on a statistical macro frame to lighten up at a certain R-level and I have and currently employ methods where it is in my best interest to add at a current R-level. You can't take such a narrow view.. At the risk of sounding like a cliche or back of a T-shirt you have to see the forest through the trees.

I take gains over 15pts in the ES -- I risk 3 on the outset and then add at the 1R-level and adjust the stop to maintain the initial risk exposure of 3. Adding at the 1R drastically raises the overall expectancy of the method on the macro-frame -- can you sit here and tell me that I should be scaling out at the 1R level just because I am sure it is there, that entire notion is ludicrous at best Jem!

Oh and for the record, I am not at all against scaling out if it makes sense or cents on the macro-frame, but I am against scaling out if it does not make sense or cents to be doing so on the macro-frame. If a trader is just scaling out because it is easier then he is trying to bend the outside world to meet his inside world. A trader must meet the market with his inside world or she will eventually crush him!

PEACE and good trading Jem,
Commisso
 
jcom, just to set the previous misunderstanding straight, I am not against pyramiding. All that I have to show for myself is the result of a pyramid. I am against portraying both the scale in and scale out as some sort of mm scheme which can compensate for a trading system that can't survive on an all in or all out basis.

Your scale in technique is really an entry system not a mm system. And I'm not talking to you because you already know it, but some (namely that GG guy) were thinking that maybe simply scaling in would solve all his problems.

But just to mention one more thing more politely this time, if you scale in, or out, one must also consider the unused capital sitting on the side when the full load is not on, and then fairly compare that to an all in all out system where the full capital is being used the whole trade.

(we got to get some more stuff going on the psycho forum, that is now my favorite part of this site.) And I don't care what they say, see how even this trading thread has drifted in and out of the mind thing?
 
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