Unless you are just a scalper, by scaling out and moving the stop to breakeven you will always increase your % win rate. One of the worst mistakes a trader can make is letting a winner turn into a loser. On any given trade you have no idea how far it can go in the money. By scaling out some you reduce your losses if the trade goes back against you but also limit your gains but the theory behind a proper scale out strategy is the gain lost on not having the full position is less than the gain made on the scaled out trades that would have turned back to net losers had you not scaled out.
why scale out
- Thread starter investwthme
- Start date
Unless you are just a scalper, by scaling out and moving the stop to breakeven you will always increase your % win rate. One of the worst mistakes a trader can make is letting a winner turn into a loser. On any given trade you have no idea how far it can go in the money. By scaling out some you reduce your losses if the trade goes back against you but also limit your gains but the theory behind a proper scale out strategy is the gain lost on not having the full position is less than the gain made on the scaled out trades that would have turned back to net losers had you not scaled out.
Scaling out is an inferior and scaredy cat strat. Thank you for your time.
http://www.elitetrader.com/vb/showthread.php?s=&threadid=78975&highlight=scaling
You shouldn't think in terms of 'scaling in' and 'scaling out'. Those terms discuss current size in relation to previous size. But previous size (how much you put on at entry) has *nothing whatsoever* to do with the correct size to have on now.
The only real input into your size decisions is "what is the current risk/reward profile at the present price?". If it's amazingly good, have on big size. If it's good, have on normal size. If it's acceptable, have on small size. If it's low, neutral, or hard to tell, have on nothing. If it's crap - reverse.
If you are exiting partial positions just because you have a profit (e.g. selling half once you have made 1x your risk), then you don't know what you are doing and need to go back to the drawing board.
The only real input into your size decisions is "what is the current risk/reward profile at the present price?". If it's amazingly good, have on big size. If it's good, have on normal size. If it's acceptable, have on small size. If it's low, neutral, or hard to tell, have on nothing. If it's crap - reverse.
If you are exiting partial positions just because you have a profit (e.g. selling half once you have made 1x your risk), then you don't know what you are doing and need to go back to the drawing board.
Quote from Buy1Sell2:
Scaling out is an inferior and scaredy cat strat. Thank you for your time.
http://www.elitetrader.com/vb/showthread.php?s=&threadid=78975&highlight=scaling
I got through the first 20 pages, enough.
I think i would let my profits ride until it reaches my intended target them move my stop closer and continue letting it ride or getting stopped out.
But b1s2 what would you do if it didn't reach your target. Will you move your stops closer to lock in a profit.
ex: your long es 5 contracts @820 price moving to your target 825 but it doesn't get there. (Your stop is one dollar) Suppose it went to 824. Are you going to move your stop up or are you willing to let it fall to 820 to see if it goes back up again. I guess I am asking how wide of a stop are you using and are you moving it up as the trade goes to your favor.
As usual, one of the best reply on the thread.
The way I trade is letting the trade come to me ex: breaking a trendline and triggering my buy/sell stop. It is the only thing I use so far, with pivot points and sometimes 20 and 200 ma. As far as risk reward I guess the previous support level then either a continuation or a reversal. That last part usually messes me up. I would say that to be the place to scale out.
by scaling in and out, you can (theoreticly also) have no losing days and no lasting drawdowns (daytrading). also it changes risk: reward in many ways, allowing you to entry and exit higher risk trades always profiting or break-even with-out having to wait for the right high probability set-up.
Therefore I view scaling in and out as a valuable tool not only because objectively it can mitigate risk, but also because it limits emotions and for most traders that will be a great help.
Therefore I view scaling in and out as a valuable tool not only because objectively it can mitigate risk, but also because it limits emotions and for most traders that will be a great help.