Hi Howard,
Thanks - I'll try to dig up those articles. It
seems to me that the scale-out method would generally be favored by a trader who
is psychologically in need of some stress relief, not because it is proven to be
more profitable.
Having been harshly punished financially in the
past by my lack of trading discipline, I could easily see myself scaling out,
just to be sure I wasn't going to watch the prices reverse and stop me out with
nothing to show. Just a feeling, you see, not a necessarily rational decision
based on backtesting!
It might also be that for me, it would be best
to use a scale-out approach until the fear of loss abates somewhat, and more
confidence in my methodology and trade management is gained realtime, since
psychology is a big part of trading.
Not trying to contradict what you say, just
wondering aloud...
Thanks again,
DC
----- Original Message -----
Sent: Saturday, September 19, 2009 10:18
PM
Subject: Re: [RT] exit strategies
Hi
Dennis --
It does depend a little on the trading system you are using,
but in general the results are better when you neither scale in nor scale
out. That is -- take your full position when you get your buy signal and
exit completely when you get your sell signal. I have one article in
each of the most recent two issues of Active Trader -- one about scale-in and
the other about scale-out.
Thanks,
Howard
On Thu, Sep 17, 2009 at 6:53 AM, Dennis L. Conn <dconn@xxxxxxxx>
wrote:
Hi RTs,
I hope this will generate some relevant
discussion on the pros and cons of scaling out of a trade as opposed to
closing a position completely on reaching a target. So to those who have any
inclination to share their reasons/experience with one or the
other...
1) Do you take profits (or tighten your stop)
at one or more targets on part of your position, and let the remainder ride,
or
2) Do you prefer to be completely flat at some
pre-determined target?
3) Does it depend on the timeframe you yourself
trade, e.g., do you do it one way when daytrading and another way when
taking a swing trade lasting days or weeks?
4) Does it also depend on your entry
method/system, e.g., whether you you use one setup/trigger or another, or
perhaps whether you scaled into a trade?
I've read/heard a couple of well known
author/traders argue for one way or the other, and they
disagree on whether profitability is enhanced by one way or the
other. I also realize that it can be more stressful for some traders to
be in a profitable trade than to hold a losing position, so it may be a
matter of relieving some stress to take partial profits as a trade goes
their way. Also, one may change one's mind on which exit
strategy to use, as one progresses/succeeds as a trader.
So, if anyone would care to take the
time to explain their reasons for their preference(s), I think it would
make for a decent give and take.
Regards,
DC
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