why scale out
- Thread starter investwthme
- Start date
i can only see scaling working long term if you were counter trend trading. otherwise
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it works in both trend and counter-trend trades, it all depends on entry trade location.
i have posted in other threads how i identify chop from a potentially directional move using internals (add, tick, vold, vix) to help with figuring out if its a move or a head fake. besides watching internals like a hawk, i also look for inter-market diverergences between ES, NQ, YM, Russell. so besides watching MP for the long-term view, PA for the short-term view, and delta for exhaustion/continuation i also look at one other thing that i ties all of the above together......but that is for me only. some things are better left unsaid....especially in this paranoid and horrid place called ET.
The true professionals who post on this site actually provide valuable input, and you are one such person. Thank you for posting your scaled trades; it's provided me (and I'm sure many others) with insight into the value of this method.
Every neighborhood has its crazies; it's best to ignore them.
the days i make the most money are typically when i have one trade that lasts most of the day. so the avg. trade for me is x hours. on such days i make between 1.5k - 3k, and occasionally more. on days where the first trade doesn't work out i usually end the day with less then 1k profit or in the red.
I will give you an example, lets say you are in a trade which you think will make say 5 points. You scale out 1/2 your position at 3 points and bring your stop to break even.
There are now 2 possibilities after this occurs.
1) The trade goes all the way to 5 points and you made money.
2) The trade goes back to break even and you made money.
Now lets assume you did not plan to scale out, the the same trade goes to 3 points.
There are now 3 possibilities after this occurs.
1) The trade continues on to the 5 point target you made money.
2) The trade reverses and you get stopped out at a loss.
3) The trade reverses, you are so upset that you are about to get stopped out on a trade that could have been profitable, that you remove your stop, and start adding contracts since you know it will go back up and you can make your money back. However, you were glued to your chart and did not see on the news that North Korea just launched a nuke at the united states causing you to blow out your account even though we were able using laser guided rockets to explode the nuke harmlessly over the ocean.
So in conclusion while you might have made more money by not scaling out, you can also have a better money management system in place by using a scale out strategy.
There are now 2 possibilities after this occurs.
1) The trade goes all the way to 5 points and you made money.
2) The trade goes back to break even and you made money.
Now lets assume you did not plan to scale out, the the same trade goes to 3 points.
There are now 3 possibilities after this occurs.
1) The trade continues on to the 5 point target you made money.
2) The trade reverses and you get stopped out at a loss.
3) The trade reverses, you are so upset that you are about to get stopped out on a trade that could have been profitable, that you remove your stop, and start adding contracts since you know it will go back up and you can make your money back. However, you were glued to your chart and did not see on the news that North Korea just launched a nuke at the united states causing you to blow out your account even though we were able using laser guided rockets to explode the nuke harmlessly over the ocean.
So in conclusion while you might have made more money by not scaling out, you can also have a better money management system in place by using a scale out strategy.