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Trade manage, Scaled out or no?

  • Post #1
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  • First Post: Jun 9, 2009 10:16am Jun 9, 2009 10:16am
HI all, I use to put Break even to quycly and now Im trying to make a scaled out and leave the SL in the same place but, my potential profit its too less than my all position :

I trade one mini, in the SL size I take the half, more or less its 50 pips = 25 usd.
If the trade go to 200 pips I made 100 usd more.

If I dont make the scaled out I will made 200 usd not 125 usd.

What do you think its better to scaled out or not?

thanks for all
  • Post #2
  • Quote
  • Edited 3:02pm Jun 9, 2009 11:43am | Edited 3:02pm
A very powerful strategy if used properly. I nearly always scale out of a trade. You can get lots of information about this if you read the J16 thread from the beginning. I have learned a lot (and still do) from the generous traders there.

The main principle is to take a profit and move stops to break even in a trade so that a portion of the trade can be left to run without worry. Then the trade can never be a loser. Sometimes trades can then run for days or even weeks using, say, a three bar trailing stop on the daily.

I sometimes scale into a trade if it is counter trend. That way, if I am wrong and the trend has not changed, my losses are minimised.
Gone to a better place
Scaling out is a great way to reduce your reward while keeping all of your risk. Do the math, it's a horrible idea!
Quoting philmcgrew
Scaling out is a great way to reduce your reward while keeping all of your risk. Do the math, it's a horrible idea!
I don't mean to compromise R:R ratios. I think we may be misunderstanding. If I trade 3 lots, say, and move my Sl to break even at 1:1. Then close 1 lot at 2:1, then close 1 lot at 3:1 then let the final lot run, what's horrible about that?

It's a way of being greedy whilst locking in some profit.
Gone to a better place
Quoting philmcgrew
Scaling out is a great way to reduce your reward while keeping all of your risk. Do the math, it's a horrible idea!
Exactly! The idea behind any good scaling is to increase your reward whilst keeping your risk constant.
The breaking of a wave cannot explain the whole sea.
Well, I'm glad to see that both sides of this perennial debate have weighed in saying "No no no!" and "Yes yes yes!"

I don't agree with the assessment that you reduce your reward and keep all the risk. As long as you leave some portion of your trade to run, you'll make up for the occasional full entry stop-out in the long run.

Does a full entry stop-out hurt? Sure it does. But you can take them knowing that in the long run your free trade portions are out there riding the big moves.

I scale out almost all the time. I have some low-risk/high-reward entries I use to put the odds more in my favor. That's how it works.
You are in a maze of twisty little passages, all alike.
Thats great, but I think if you scaled out too early you will ruin your RR, and if not, accepting the risk you easy can take a 1:3 RR I need to make some math and look if its good or not, I think its good scaled out but not with a few of pips....

For have a 1:3 RR ratio I will need to scaled out at 200 pips? more or less
and let the other run, maybe I need a rule to dont scaled out before I can lock sufficient profit to have a worse case scenario of 1:2 RR.

But its hard, Im thinking on put BE when will be safe and let it run and add more lots if I see a new signal to enter, I know its more risky but not too much, I only add If I have some profit lock in the other trade. What do you think?

and thanks alll for your words
Quoting philmcgrew
Scaling out is a great way to reduce your reward while keeping all of your risk. Do the math, it's a horrible idea!
Each to their own but i'm with Phil on this and have only just come to realise it
  • Post #9
  • Quote
  • Edited 3:40pm Jun 9, 2009 3:38pm | Edited 3:40pm
Obviously you have to have some rules in place about when and how much you scale out.

Let's call the distance between my entry and initial stop R. When price goes 1R in my favor, I'll frequently cover 1/2 and move the stop to breakeven. At that point I let the other 1/2 ride. If it continues to move in my favor I'll trail the stop to just behind major turning points.

Mark Douglas (Trading in the Zone) suggests scaling out in thirds. I haven't come up with a sensible set of rules for thirds so I stick with halves.

Trader Mike (http://tradermike.net) says he generally moves his stop to breakeven at 1R, but he won't start taking partial profits until price hits 2R. I find I can't wait that long but I think that's just my immaturity as a trader.

I think that there are profitable who scale out and profitable traders who don't. I'd argue that it's more of a personality thing rather than a "right way"/"wrong way" thing.
You are in a maze of twisty little passages, all alike.
Quoting nach_madrid
Thats great, but I think if you scaled out too early you will ruin your RR,
Therein lies the problem. Taking profit by setting targets is guessing. Scaling out is simply guessing multiple times on the same move. IF you don't know how far the market is going to move how do you know when 1/3 or 2/3rds of the move has occurred?
I hear you Phil and although you probably don't remember I do - your helping me in my earlier days.

I will think on this.

There is an interesting post here which backs up your premise - quote: "After simulating 18,554 Forex trades he calculates the profit factor of his simple version of DIBS as 1.27. (return of 127 dollars for every 100 dollars risked. With 1/2 profit taking profit factor dropped to 1.21 but the equity curve was substantially smoother making possible greater leverage. Anyone who has done serious market modelling will realize the incredible power available from this size PF." from post: http://www.forexfactory.com/showpost...postcount=7099

This seems to back up your view.
Gone to a better place
Scaling is a good thing, but I would not do it religiously all the time. It depends on the market and the account situation.
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Scaling reduces reward. I can't think of a scenario where I would prefer to have less profit.
Quoting philmcgrew
Scaling reduces reward. I can't think of a scenario where I would prefer to have less profit.
Thats absolutly true, but I think we scaled out for fear to loss, maybe need to accept completely the risk after put a trade, and after this put break even when its too safe to do it and then let it run to your profit target, its easy to say but hard to do, for now Im scaling out the trades half at SL size and let it run, but I know its bad for my RR ratio... I will look some formula to do it better.

Thanks all for your words!!
Quoting philmcgrew
Therein lies the problem. Taking profit by setting targets is guessing. Scaling out is simply guessing multiple times on the same move. IF you don't know how far the market is going to move how do you know when 1/3 or 2/3rds of the move has occurred?
If taking profits by setting targets is guessing and Scaling out is simply guessing multiple times on the same move, what is the best way to end your trades?
I've often pondered on the same question: To scale in or to scale out.
However, I am currently reading Reminiscences of a Stock Operator (I can't believe I've waited this long to read it after all the bulls**t books I've read before it!), in which Jesse Livermore discusses how he scales in. eg if he wants five positions in a stock/commodity then he will go in with a fifth and if price doesn't go his way then why should he throw more at it.
Now, my main system uses a flat 1% per trade,in and out fairly short term, but I am working on a longer term system using the higher time frame for the direction I want, then scaling in 1% at a time on lower time frames, only adding to my positions when the previous trade is moved to b/e. This way I hope to only lose smaller amounts if (or should I say when) the market ranges/whipsaws on me but be able to build multiple positions when those lovely trends come along for BIG winners. I expect alot of small losses and b/e trades but should hopefully get some nice 10+ baggers or more to really cash in on longer term trends.
Yes you are right, right now im happy making scaled out, I put the trade and when I have the same profit than SL I scaled out half, after this I move when I can the sl to BE and if I see a posible scaled in I reload the trade with the half again, its working good for now, and my RR its 1:2, for a 50 pips SL I need 150 pips move to have 1:2 ratio but its fine for me, thankss
Quoting kenkomo
If taking profits by setting targets is guessing and Scaling out is simply guessing multiple times on the same move, what is the best way to end your trades?
You can trail your positions mechanically or using discretion. By doing so, you can let the market run as long as it wants and you will be exited when it is done moving. Like most of trading, there is a little "art" to this. Trail to close and you will simply get stopped out. Trail too loose and you give up profit on the reversal.
  • Post #19
  • Quote
  • Edited 8:57am Jun 15, 2009 8:56am | Edited 8:57am
Quoting smikester
I don't mean to compromise R:R ratios. I think we may be misunderstanding. If I trade 3 lots, say, and move my Sl to break even at 1:1. Then close 1 lot at 2:1, then close 1 lot at 3:1 then let the final lot run, what's horrible about that?

It's a way of being greedy whilst locking in some profit.

Yes you do.

You have two different scenarios/strategies:

 

  1. 3 lot full move.
  2. 3 separate trades with 3 different targets – this is the case of scaling out.

In both scenarios the risk is the same (if you set the same SL for each lot) but in the 2 reward is smaller.

BUT as always every situation has two sides its plusses and minuses.

Scaling out reduces gains but improves smoothenes of the capital curve , essentially we are scaling out to get paid and preserve profits.

To me it is not the question to scale or to not but the main question is: is the 1 lot with the minimal target justified in terms of risk/reward?

Guy, can you please provide me with a simple EA which has trailing stop loss and allows scaling the profit targets. Please
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