Why do they do it?

Phantom also says that scaling is pointless for the short term trades you and I do on ES - it's all in and all out according to that wisdom.

Ergo, it's down to knowing your 'edge' and when to push it when circumstance dictates.
 
DionysusToast said:
Depends on the type of trading you are doing. I've read Phantom or the Pits and he says that you can't be succesful if you don't scale in to a winner. I've never met that guy but I know people that scale out of trades very succesfully.

On a long, scaling in averages up your price and scaling out averages it down. Averaging up your price moves UP the place you'll break even and the place you'll start to lose. It's not something I'd be comfortable with. Certainly if I were to do it, it would have to be pyramid fashion - that I'd probably be able to live with.

I don't think either way is right or wrong but I do feel that day trading is more suited to scaling out than scaling in. Now of course, if you scale out - you don't need the same position size each time, you might go 'all in' on a trade because you feel it's more likely to work out.

Obviously, on way allows you to be in a trade before 'pushing it' and another way requires you to have a clue from the start. If you have no feel for the chance of a specific trade working out, you can't really commit more to any it.

BTW - the phantoms book is free - let me know if anyone wants it. It's a good read.
Click to expand...

I've done some backtesting on scaling in. Do this if you want (like the Turtles) and you'll make more money when market conditions are right, BUT overall your drawdowns will be larger.

If a risk based measure of a system is the return relative to the drawdown, I've not found that scaling in is better (the opposite, in fact).

I don't know about scaling out.. my guess is that it doesn't help because for those rare 5R winners, you'll have nothing left in it at the end.

This is the case for a longer term (i.e. using dailies) trend system .... I don't know how it applies to intra-day techniques.
 
robster970 said:
Phantom also says that scaling is pointless for the short term trades you and I do on ES - it's all in and all out according to that wisdom.

Ergo, it's down to knowing your 'edge' and when to push it when circumstance dictates.
Click to expand...

That's an awkward one because for scaling in to be correct you would also need to be able to add onto a trade, which actually lowers your average.
1/
Imagine you short gold at 1300 with 50% of a position, it goes against you, you addon your second half at 1350 and the market starts to move with you. All good. You've averaged a 1325 entry and can now manage it.

2/ You short gold at 1300 with a 50% position and it immediately goes your way. You now have a winning position but it's half of what you would normally win with a full position.

3/ Imagine you short gold at 1300 with 50% of a position, it goes against you, you addon your second half at 1350 and the market goes further against you. You've averaged a 1325 entry and then stop out at 1375.

By doing the above you are making sure that your losing positions are always full positions but your winning positions might either be 50% or 100%.
So, the win ratio is skewed towards losing more.

Obviously, it';s more complicated than that due to volatility, usualy retraces at some point, etc. etc.

meanreversion said:
I don't know about scaling out.. my guess is that it doesn't help because for those rare 5R winners, you'll have nothing left in it at the end.
Click to expand...
5R can be possible even on swing trades but I suppose it's tricky due to the whippiness. Intraday 3R or more is doable with scaling out.
 
meanreversion said:
Sorry, by scaling in I mean adding to a position as the market goes in your favour.
Click to expand...

Aha...gotcha. So basically you enter a small position to find out what happens and then as you are proved right you add on more...but it does lower the average a bit.
Probably one of the more conservative methods and got nothing against that...have used it a few times on trades I'm not sure about. It still leads to a few times where the trade moves against you and you think of averaging in the other way.
You have to be careful on the risk as well when lowering the average.
 
SanMiguel said:
That's an awkward one because for scaling in to be correct you would also need to be able to add onto a trade, which actually lowers your average.
1/
Imagine you short gold at 1300 with 50% of a position, it goes against you, you addon your second half at 1350 and the market starts to move with you. All good. You've averaged a 1325 entry and can now manage it.

2/ You short gold at 1300 with a 50% position and it immediately goes your way. You now have a winning position but it's half of what you would normally win with a full position.

3/ Imagine you short gold at 1300 with 50% of a position, it goes against you, you addon your second half at 1350 and the market goes further against you. You've averaged a 1325 entry and then stop out at 1375.

By doing the above you are making sure that your losing positions are always full positions but your winning positions might either be 50% or 100%.
So, the win ratio is skewed towards losing more.

Obviously, it';s more complicated than that due to volatility, usualy retraces at some point, etc. etc.


5R can be possible even on swing trades but I suppose it's tricky due to the whippiness. Intraday 3R or more is doable with scaling out.
Click to expand...

I think when you're taking 1-6 pts on ES, scaling in makes little sense. On swing trading, I can see on ES you'd have to be working the daily to make any sense of that - I can't see scaling on 4H working that well as when it chops, which it does every now and again, you're probably going to get a good drawdown.
 
I've just read one of the most popular threads on this forum (I couldn't help noticing most of the followers being new members).

The vendor sold them the system few months ago. As I understood, after him selling the first system (it was not performing according to the expectations), he introduced new improved version (and presumably took some money for that version as well). At the beginning he was posting regularly and now he hasn't posted for some time.

The followers already parted with their money (not much, but never than less every little helps the vendor) and they are following the system which is not making money. Now they are having thoughts along these lines: it's been bad for 2 months only - give it some more time to get realistic idea etc.

What can one conclude from this experience? First thought that comes to my mind is the vendor is good at using people's greed and maybe not that good at trading.

It's sad to see all that new traders enthusiasm being abused on a massive scale.
 
bedsit said:
It's sad to see all that new traders enthusiasm being abused on a massive scale.
Click to expand...

Clearly if a vendor is chopping and changing systems every two minutes then theres something not quite right :LOL:

I was reading a thread yesterday in which a bunch of new members where complaining about a system. The desiger of that system had lost 120 pips during the month of January, and they therefore concluded that this service was a SCAM (and they are probably right in this case).

However, If we assume that the system goes on to make 2000 pips over the next 12 months, we are looking at 5% drawdown. If the vendor loses a similar amount in february, thats only a 10% drawdown.

These dunces have expectations that are completely unrealistic. Its funny, but its sad too, and until they remove themselves from the sorts of environment that constantly fills their heads with nonsense about making 100 pips a day, they'll continue to lose simply because they dont actually understand what it means to win.
 
bedsit said:
I've just read one of the most popular threads on this forum (I couldn't help noticing most of the followers being new members).

The vendor sold them the system few months ago. As I understood, after him selling the first system (it was not performing according to the expectations), he introduced new improved version (and presumably took some money for that version as well). At the beginning he was posting regularly and now he hasn't posted for some time.

The followers already parted with their money (not much, but never than less every little helps the vendor) and they are following the system which is not making money. Now they are having thoughts along these lines: it's been bad for 2 months only - give it some more time to get realistic idea etc.

What can one conclude from this experience? First thought that comes to my mind is the vendor is good at using people's greed and maybe not that good at trading.

It's sad to see all that new traders enthusiasm being abused on a massive scale.
Click to expand...

Isn't this just a reflection of one of the beginners' biggest hurdles they have to overcome: the determination to cut losses? My trading improved enormously once I accepted (and put in to practice) that there's no future in throwing good money after bad & to get out of a trade as soon as it's evident that it's going nowhere.
 
robster970 said:
Phantom also says that scaling is pointless for the short term trades you and I do on ES - it's all in and all out according to that wisdom.

Ergo, it's down to knowing your 'edge' and when to push it when circumstance dictates.
Click to expand...

Indeed - the only difference is whether you do that before you enter of afterwards.

All I can say about Phantom in this respect is - he's entitled to his opinion. :)

Good book though, right?
 
meanreversion said:
I've done some backtesting on scaling in. Do this if you want (like the Turtles) and you'll make more money when market conditions are right, BUT overall your drawdowns will be larger.

If a risk based measure of a system is the return relative to the drawdown, I've not found that scaling in is better (the opposite, in fact).

I don't know about scaling out.. my guess is that it doesn't help because for those rare 5R winners, you'll have nothing left in it at the end.

This is the case for a longer term (i.e. using dailies) trend system .... I don't know how it applies to intra-day techniques.
Click to expand...

Scaling out helps immensly in day trading. Psychologically it is of benefit because you get to book some profits early. Then you can peel off some more as you get to the next major hurdle and then sit on the rest (or 4 or 5 scale outs) for a pressure free larger move. If you always shoot for the moon all in, all out, you'll be stopped out all the time. Conversely, if you always shoot for the nearest target, you'll be chipping away with tiddlers.

Of course, each to his own.
 
bedsit said:
The followers already parted with their money (not much, but never than less every little helps the vendor) and they are following the system which is not making money. Now they are having thoughts along these lines: it's been bad for 2 months only - give it some more time to get realistic idea etc.

What can one conclude from this experience? First thought that comes to my mind is the vendor is good at using people's greed and maybe not that good at trading.
Click to expand...

Hi Bedsit,

I was just reading your recent post. Please let it be clear that I am in no way sticking up for the vendor here - I am appalled by some of the things I am reading on the Paul Chalmers thread.

However, I don't think the fault is in the newbies for thinking "It's been bad for 2 months, better give it some more time..."

Just because results have been bad for 2 months does not mean they will continue to be.

In my opinion, it depends somewhat on the strategy that is being implemented and any vendor should be upfront from the start (especially if they are a signal service) of what to expect in terms of results.

If you take my own results as an example. I ran a model account - this was live money but traded at high risk in a proprietary way in order to show how to grow an account. (I have a particular way of doing this but I won't go into it now.)

The point I am making is if you look at the distribution of my results below, if a new person joined in July and dropped 14% and then saw I wasn't trading in August, you think they would stick around? Or say they join in November, drop 17% and then only recoup a mere 2% in December...same story. Your name will be all over the next thread as a scammer.


Distribution of results:

July 2009: -14.42%
August 2009: No Trading
September 2009: +208.06%
October 2009: +57.53%
November 2009: -17.11%
December 2009: +1.92%
January 2010: +18.67%
February 2010: +68.99%
March 2010: -25.71%
April 2010: +88.12%
May 2010: -31.49%
June 2010: +23.35%
July 2010: +64.81%

Total: + 980.97%

Any profitable swing trader will be able to tell you that trading is about execution: You ride out the time when the market is not conducive to your approach and try to keep losses to a minimum and that is all to pave the way for hitting it hard when the market is good for your particular approach to it.

The net result is almost a 1,000% profit after 12 months trading but it doesn't come in the even distribution that all the newbies love. i.e. The "I make one hundred pips each and every single day I trade..." spiel that the internet marketers love to write.
 
Last edited:
trader_dante said:
Hi Bedsit,

I was just reading your recent post. Please let it be clear that I am in no way sticking up for the vendor here - I am appalled by some of the things I am reading on the Paul Chalmers thread.

However, I don't think the fault is in the newbies for thinking "It's been bad for 2 months, better give it some more time..."

Just because results have been bad for 2 months does not mean they will continue to be.

In my opinion, it depends somewhaton the strategy that is being implemented and any vendor should be upfront from the start (especially if they are a signal service) of what to expect in terms of results.

If you take my own results as an example. I ran a model account - this was live money but traded at high risk in a proprietary way in order to show how to grow an account. (I have a particular way of doing this but I won't go into it now.)

The point I am making is if you look at the distribution of my results below, if a new person joined in July and dropped 14% and then saw I wasn't trading in August, you think they would stick around? Or say they join in November, drop 17% and then only recoup a mere 2% in December...same story. Your name will be all over the next thread as a scammer.


Distribution of results:

July 2009: -14.42%
August 2009: No Trading
September 2009: +208.06%
October 2009: +57.53%
November 2009: -17.11%
December 2009: +1.92%
January 2010: +18.67%
February 2010: +68.99%
March 2010: -25.71%
April 2010: +88.12%
May 2010: -31.49%
June 2010: +23.35%
July 2010: +64.81%

Total: + 980.97%


Any swing trader will be able to tell you that you ride out the down time and clean up when the market is good.

The net result is almost a 1,000% profit after 12 months trading but it doesn't come in the even distribution that all the newbies love. i.e. I make one million pips each and every single day I trade...
Click to expand...

err...OOI how do you get 980 from that?
eg If you go down 20% one month, it takes much more of an increase than 20% to get the money back the next month.
 
You must log in or register to reply here.

Similar threads

C
Why do skilled traders teach/train write books?
2
Replies
33
Views
7K
15 min tlb
1
S
Futex Investment & Trading Academy - is it worth the it?
2
Replies
36
Views
20K
Jaydee
Jaydee
B
BBC iplayer, Who Wants to be a Millionaire Trader?
2
Replies
32
Views
9K
ceeme
C
K
Education is the key
5 6 7
Replies
132
Views
25K
jimmy1jag
J
A
Are they worth it?
Replies
9
Views
7K
CityTrader
CityTrader
Top