Risk/reward in the Long Run ...

[torero]

I usually treat scaling in and out as each separate trades so keep things simple. If I get in at $10 with 900 shares, then scale out 300 (trade 1) at $11, then another 300 at $12 (trade 2), and so on.

[trader273]

	Quote:	torero
	I usually treat scaling in and out as each separate trades so keep things simple. If I get in at $10 with 900 shares, then scale out 300 (trade 1) at $11, then another 300 at $12 (trade 2), and so on.

Well if something like that works for you that is great. However, whenever I have run a test of piecing out vs all out, the scaling out has never come out ahead. It always seemed that I would take less on the winners ( since scaling out lowers your average when compared to getting all out). Like your example here. Your average profit is 1.5 instead of 2 if you got all out at 12. But when stops occurred, it was for my full lot. Just doesnt make sense to me that I would be willing to take a full loss on my full lot, all the while taking less on my winners. Maybe it was just me though. Every trader has their own way.

[torero]

I usually scale in as the market goes my own, sometimes more positions as the trend is confirmed. But I only say this for forex because I have found the e-minis to be less trendy so pyramiding doesn't do as well.

[neutral]

i strongly advice all newbes to stop, to read, to contemplate and to understand this post

	Quote:	DbPhoenix
	Judging by your posts here and elsewhere, you appear to be fairly new, and much of what you want to know may become clear as you become more experienced (I'd like to say "will" become clear, but that is often not the case). Issues of nearby rewards and tight stops and trailing stops and risk:reward ratios and where do I enter/exit and how I do I distinguish up from down are among the most common puzzlements that beset beginners and are all a consequence of their not knowing just what it is that they're looking at. Once you understand what you're looking at and become familiar with it, you should be able to determine the best entry for your risk tolerance, and you will have defined what constitutes a reversal signal (I say "should" because many people never do). Once that's accomplished, it's simply (but not necessarily easily) a matter of entering when you're supposed to and staying in until you get your reversal signal. At that point, all the issues regarding stops and r:r and cutting profits short and so forth will for the most part evaporate.

[darthtrader]

	Quote:	trader273
	Just doesnt make sense to me that I would be willing to take a full loss on my full lot, all the while taking less on my winners. Maybe it was just me though. Every trader has their own way.

I pretty much agree totally with what smwinc posted. The problem with scaling out is you need to have an extremely high win rate that is extremely consistent. If your putting on full risk on losers and scaling out then you will never have full risk on for your big wins, but will have it on for losers. To me the long term problem with that is your never going to be able to figure out when a massive buy/sell program comes in and sweeps the market, or a random news event moves the market. You will be on the wrong side of that event with full risk on and not ever get lucky and have full risk on while being on the correct side of that event.

[torero]

If you're talking about scaling out, then yes, there are disadvantages but for some, the need for instant gratification is still uncontrollable so by taking off a 1/4, 1/3, etc. to make him feel better and let the rest run. At least he's more of less breaking even if the rest don't pan out. Sometimes, meeting a resistance/support zone with full position can be somewhat risky if prices reverses and runs away. Just saying, taking some profits and let the rest ride wouldn't be a bad option is all. I do it but I do it scaling in a well. I'm speaking of scaling in when the market goes my way, not averaging down.

I think the problem with new traders is that they tend to take profits too fast , usually the entire position and miss out on the rest of the trend. I think this is a best progressive way to encourage them to stay in a position longer when the trend is going their way and learn from "holding when you're right". I, for one, get more aggressive when the market tells me I'm right, I'll pile in.