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All in all out vs. scaling in and out


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View Poll Results: All in all out or scale in and out?
All in, all out 85 32.20%
All in, scale out 112 42.42%
Scale in, scale out 67 25.38%
Voters: 264. You may not vote on this poll

 
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All in all out vs. scaling in and out

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  #101 (permalink)
 timendaGain 
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sixtyseven View Post
@timendaGain,
Adding - and exposing yourself to more potential risk - also exposes yourself to more potential gain.

Iím not an expert on this so bear with the density of my skullÖ.
When 5 contracts are added to an initial position of 10 one is positioned with 15 contracts. While there may be some value in comparing that trade of 15 contracts with the AIAO system trading of 10 contracts, I think itís important to also compare full size positions with one another - 15 Add to 15 AIAO. In doing so I see the Add method as a safer version of the AIAO while AIAO yields a higher return. I modified your spreadsheet to show this. In all cases profitability begins at a 51% edge, as one would expect.

While putting on a trade it feels safer to start with a smaller size. For reversion to the mean styles of trading, adding when price goes against you can help you make individual trades work out.

I think that the reason why adding/scaling in is advised is because it's too difficult to get the initial entry just right consistently enough. Instead we need to spread our entries across multiple price points to get more even trading results. This means that sometimes the initial entry is right and the trader completes the trade with a smaller size.

I used the example of scaling in when price moves against you. I fully understand that style of increasing the position size.

I'm struggling with why I would add more when it's moving in my favor. I just don't think that the market is more likely to continue moving in my favor just because it has been. In fact, I find it less likely.

I donít understand the difference between scaling and adding on your spreadsheet. Please explain.

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  #102 (permalink)
 Itchymoku 
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Basically the market doesn't just go in one straight line up or down, so why would it make any sense to trade it in such a static fashion. That's the conclusion I've come to with testing not only all in/all out vs scaling in/scaling out, but also with scalping considering it runs along the same concept (price is more chaotic on a lower level). Trading a little further out generally equates to price moving from point a to b with more stability. I've found being able to scale into a position particularly helpful too.

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  #103 (permalink)
 Itchymoku 
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Silvester17 View Post
just out of curiosity a few questions

scaling in:

- the majority of my losing trades, I'm fully loaded. the majority of my winning trades, I'm not

scaling out:

- I only scale out of winning trades, but I don't scale out of losing trades. (the answer to get out of a losing trade because it's not valid anymore can also be used for a target)

Are they questions for me?



if you scale into a winning trade it should be far enough in your favor that if it comes back to break even it's a good idea to get out or scale out at break even. I try to scale in when the market pulls back after going in my favor. Try to hold all of your scales till the trade hits your limit order. (it's probably not a good idea to scale in too much even if the trade is going your direction unless you have a enough cushion room to your net break even where you can scale out*)

If the trade is going against you I'd only suggest to scale in once, not repetitively. If then the trade comes back to break even or you recoup some of your loss it's okay to scale out and minimize your risk. Then if the trade goes in your favor past your break even mark and gives you some wiggle room it's okay to scale in again like in the first paragraph. I hope that clears up some confusion. That's what works best for me for the most part.

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  #104 (permalink)
 PeakGrowth 
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A couple of points.

Scaling out will never produce a higher expectancy than all out if you have back tested your system and know your optimal exit, this is a mathematical fact. If you have 2 scale out points (whether it be a fixed + runner, or whatever), it will always be the average of the two. If through back testing, one scale out has a PF of 1.5 and one has a PF of 2.0, then scaling out will produce 1.75, which will always be lower than the most optimal exit at 2.0. What this means is that you are theoretically trading the average of two systems, therefore, if you want to scale out, you should back test both systems to ensure they both have a positive PF, otherwise, you will be trading sub optimally for no real reason.

Scaling out will smooth out your equity curve but at the expense of expectancy. This counteracts each other so the higher leverage allowed due to the smoother equity will only bring your return back to approximately where your previous return would have being, defeating the purpose. It will actually be cheaper due to commissions and slippage to just trade the higher expectancy one with lower leverage and higher draw down.

This basically means that scaling out won't add any value to a system which does not already have a positive expectancy and you should be careful not to be deluded that you can turn a losing system into a winning one just by scaling out.

Additionally, the argument that you don't know what your optimal exit is, is not true. If you cannot pick an exit point with added expectancy, you should just use a time exit or do more research. Your entry and exit should both add expectancy, not take away from it. For example, if you test a system with a 2 pt stop loss, 1 point exit (some people scale out at this point to pay for the trade) and a 4 point exit with the same stop loss, it is quite obvious through back testing the 1 point exit in almost all cases simply does not add expectancy and hence, should not be scaled out at this point. The 4 point is optimal and the 1 point is not. If you don't know what your expectancy is for each scale out - you should probably find out.

Finally, scaling out is good psychologically for the discretionary trader, but does not add value mathematically. There is nothing wrong with scaling out if it helps you psychologically.

Scaling in is a very good strategy, depending on your market and time frame and is very situational. For scaling in to work, you need to be in a market that trends strongly and used on a time frame higher than intraday. If you are a momentum trader on the intraday time frame, scaling in doesn't work because trends don't last long enough for scaling in to work. This is especially true for ES traders. Daily and above is where scaling in works as the trends can last longer as there is no time constraint like intraday traders. Additionally, scaling in should not be used with targets (unless you can pick them with a very high expectancy) as large and uncommon trends need to be allowed to run to pay for all the failed scale ins.

Scaling in causes a much more volatile equity curve and will flip most systems with a higher than 50% win rate to lower than 50% and further increase your win/loss ratio. The main issue with this is that it increases draw down periods and losses in a row significantly, so scaling in is counter productive for the discretionary trader psychologically, but increases PF in general if done properly at the right time, on the right market, on the right time frame.

In terms of what is the right time to scale? This can only be answered either on a discretionary basis or on a back tested basis. If you know the runup distribution for your losing trades and scale in outside of the first/second or third SD of this distribution, then scaling in will add PF. If your losing trade runup distribution is too wide, it means your entry is not good enough or your exit is not good enough and you should not scale in. It is also important you know the distribution of your winning trade run ups so that you know the trends you are capturing have enough gas in them for scaling in to work. Scaling in is extremely hard to do well, if you don't have an established edge you will only exacerbate how quickly you'll blow yourself up. Hence if you are new to trading, don't do it.

The conclusion is this:
- Scaling out helps psychologically but reduces PF and blows you up slower if your system is not positive expectancy.
- Scaling in damages psychologically but increases PF and blows you up much quicker if your system is not positive.

If you want the highest expectancy, you should scale in all out on daily+ timeframes. All in all out for intraday.
If you want the least psychologically damaging method that allows you to stay in the game for longer so you can help yourself beat yourself, then you should go all in and scale out.

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  #105 (permalink)
 Itchymoku 
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PeakGrowth View Post
Scaling out will never produce a higher expectancy than all out if you have back tested your system and know your optimal exit, this is a mathematical fact.

There's no way to mathematically know the outcome of a trade based on previous data. The information within a trade is much more relevant than information before the trade has started. Scaling allows you more options to choose which data points have out preformed and which have under preformed, whilst using a single entry or exit throws all of your available resources to the whim of the market.

Scaling into a position doesn't necessarily have to be used on a trending market either. It does have some psychological benefits, but that's not the reason I like to use it.

I've rarely ever seen anyone use a system that works long term that uses all in - all out. If you do, let me know.

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  #106 (permalink)
 Itchymoku 
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Actually I'll even go as far to say that back-testing doesn't really work either. You're basically just exiting on arbitrary figures. It may help to back-test, but I think there's more required to know where to exit than just averaging mfe on previous trades that meet some set of criteria. When you start doing more research you're basically just curve-fitting. There's no end to it.

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  #107 (permalink)
 PeakGrowth 
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Itchymoku View Post
Actually I'll even go as far to say that back-testing doesn't really work either. You're basically just exiting on arbitrary figures. It may help to back-test, but I think there's more required to know where to exit than just averaging mfe on previous trades that meet some set of criteria. When you start doing more research you're basically just curve-fitting. There's no end to it.

U are making the assumption that an optimal exit is based on averaging an mfe, which reduces expectancy. I never said that was the case. Optimal can be achieved in a couple of ways, for one, knowing that you don't know what optimal is and using a time exit such as EOD can work. There is an optimal and there is at least ones that are sub optimal. For example, a 2 tick vs a 10 tick target will have different results and one will most definitely be better than the other. By knowing this you can at least avoid a strategy that just won't work at all.

Sorry but back testing does work, if your system can't survive a back test then it will never survive in real trading. A back test is simply used to prove that your hypothesis of a market efficieny can survive in the past so there is a larger chance it will survive in the future. Back testing is used to prove survivability and an inefficieny in the past not predict returns.

I would go as far as to say if you don't back test your idea you are throwing your money away.

By looking for patterns either with discretion or not you are by definition curve fitting, the issue with developing a method is not curve fitting, it is over fitting with too many rules.

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  #108 (permalink)
 Itchymoku 
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PeakGrowth View Post
U are making the assumption that an optimal exit is based on averaging an mfe, which reduces expectancy. I never said that was the case. Optimal can be achieved in a couple of ways, for one, knowing that you don't know what optimal is and using a time exit such as EOD can work. There is an optimal and there is at least ones that are sub optimal. For example, a 2 tick vs a 10 tick target will have different results and one will most definitely be better than the other. By knowing this you can at least avoid a strategy that just won't work at all.

Sorry but back testing does work, if your system can't survive a back test then it will never survive in real trading. A back test is simply used to prove that your hypothesis of a market efficieny can survive in the past so there is a larger chance it will survive in the future. Back testing is used to prove survivability and an inefficieny in the past not predict returns.

I would go as far as to say if you don't back test your idea you are throwing your money away.

By looking for patterns either with discretion or not you are by definition curve fitting, the issue with developing a method is not curve fitting, it is over fitting with too many rules.

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Yeah, but you'll always be back testing on data that has already happened even if you are comprehensive with applying it to all different sorts of periods of volatility or types of market behavior. By choosing the data you pick, or even not choosing it, you are assuming the market will act similar going forward live as the market behaved previously.

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  #109 (permalink)
 Tymbeline 
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As a member who joined this year, I'm glad this old (but timeless) thread was bumped, today, because I hadn't read it before and found it particularly interesting.

Having now read it all, two main things strike me, here.

First, there's a kind of widespread background assumption (actually it's also been expressly stated in a couple of places) that "scaling is of no value to scalping". My take-home from this (especially given that Big Mike, who describes himself as a scalper, is routinely using scaling - and I'm sure he's far from the only steadily profitable, professional trader in that position) is that much depends on one's exact definition/description of what's classified as "scalping": it's one of those terms rarely precisely defined, and therefore rather prone to being discussed somewhat at cross-purposes.

Secondly:-

baruchs View Post
Scaling in/out is logically wrong.
Maybe psychologically its OK.

This is undoubtedly far more true for some than for others.

Personally, I find most psychological benefit in trading from the things that satisfy me logically and evidentially in the statistical/probabilistic sense, because that way they become part of my edge-awareness confidence.

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  #110 (permalink)
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PeakGrowth View Post
A couple of points.

Scaling out will never produce a higher expectancy than all out if you have back tested your system and know your optimal exit, this is a mathematical fact. .

Your fact is only a fact if you believe in systems. I too was once a believer....

A system being something mechanical with a defined entry and exit point.

But the fact is - to agree with your argument, you have to take a leap of faith that a mechanical system is possible in the first place. So your fact is based on a leap of faith.

Discretionary directional trading is based on right here, right now, the market is directional (or non-directional) and that the final outcome cannot be known but that scaling out is one way to ride the trade out.

All this talk of back testing, expectations, systems, ratios has little relationship to real world proprietary trading. Nor does it bear any resemblance to algorithmic trading. It's really the realm of a number of retail 'automation' platforms - where there's scant evidence that a single trader has ever automated their way to profit.

To put some perspective on this - consider the hundreds of millions of dollars invested by HFT firms to be the fastest link between disparate servers in order to scalp a penny of price discrepancy. Would they really invest that money to arb latency of they could just write a "strategy" to directionally trade the market?

I don't think so and I am yet to hear a convincing argument as to why automated directional (non-arb) trading is feasible.

Over the past few months there have been times when the market has become more volatile and at some points liquidity took a huge drop. On those days, you are more likely to see runners, so scaling in makes sense. In the summer time when the range traditionally drops, all in-all out makes more sense. On normal days, I can see an argument for scaling out because that is what I do on those days.

So for me it's like this. I let the type of action dictate the way I enter AND the way I manage a trade. There's no way I'm going all in when my chosen market is slipping 6 ticks one way or the other in a few seconds. But when it slows down to a crawl, how can I realistically do anything other than put on the max position and get out at a fair profit when the chance of a runner is close to zero.

Just know your market. Know that exit isn't a one size fits all and understand that "trading = mathematical" is just one of many religions in trading that may or may not be true.

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  #111 (permalink)
 Itchymoku 
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DionysusToast View Post
Your fact is only a fact if you believe in systems. I too was once a believer....

A system being something mechanical with a defined entry and exit point.

But the fact is - to agree with your argument, you have to take a leap of faith that a mechanical system is possible in the first place. So your fact is based on a leap of faith.

Discretionary directional trading is based on right here, right now, the market is directional (or non-directional) and that the final outcome cannot be known but that scaling out is one way to ride the trade out.

All this talk of back testing, expectations, systems, ratios has little relationship to real world proprietary trading. Nor does it bear any resemblance to algorithmic trading. It's really the realm of a number of retail 'automation' platforms - where there's scant evidence that a single trader has ever automated their way to profit.

To put some perspective on this - consider the hundreds of millions of dollars invested by HFT firms to be the fastest link between disparate servers in order to scalp a penny of price discrepancy. Would they really invest that money to arb latency of they could just write a "strategy" to directionally trade the market?

I don't think so and I am yet to hear a convincing argument as to why automated directional (non-arb) trading is feasible.

Over the past few months there have been times when the market has become more volatile and at some points liquidity took a huge drop. On those days, you are more likely to see runners, so scaling in makes sense. In the summer time when the range traditionally drops, all in-all out makes more sense. On normal days, I can see an argument for scaling out because that is what I do on those days.

So for me it's like this. I let the type of action dictate the way I enter AND the way I manage a trade. There's no way I'm going all in when my chosen market is slipping 6 ticks one way or the other in a few seconds. But when it slows down to a crawl, how can I realistically do anything other than put on the max position and get out at a fair profit when the chance of a runner is close to zero.

Just know your market. Know that exit isn't a one size fits all and understand that "trading = mathematical" is just one of many religions in trading that may or may not be true.

Well said, well said.

There is a ted talk about how intelligence is measured in AI and scientists have found that the number one thing is how many options the program leaves for itself. The more options, the more efficient it can navigate through problems. I would say this concept parallels to many aspects of life.

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  #112 (permalink)
 PeakGrowth 
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Itchymoku View Post
Yeah, but you'll always be back testing on data that has already happened even if you are comprehensive with applying it to all different sorts of periods of volatility or types of market behavior. By choosing the data you pick, or even not choosing it, you are assuming the market will act similar going forward live as the market behaved previously.

The only way you can have a trading plan is if you assume the market will act similar in a way going forward live as the market behaved previously - that is what a trading plan is. It's not making the assumption it always will, but that there is a higher probability at certain poiints (VAL, POC, VAH, order flow, whatever) it will act in a certain way and you are trying to capture that edge. The only way you can know if the market will react in a certain way is either with years of experience following the same plan, or automation of your thoughts. Either way, it is a repetition and not completely random, if there is no repetition then the market is completely chaotic and it won't be possible to make money from it.

Anyhow this deviates from the original question of the thread - you are of the anecdotal esoteric camp and I am from the evidence based camp, so we will never agree - so I do agree we agree to disagree.

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  #113 (permalink)
 PeakGrowth 
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DionysusToast View Post
Your fact is only a fact if you believe in systems. I too was once a believer....

A system being something mechanical with a defined entry and exit point.

But the fact is - to agree with your argument, you have to take a leap of faith that a mechanical system is possible in the first place. So your fact is based on a leap of faith.

Discretionary directional trading is based on right here, right now, the market is directional (or non-directional) and that the final outcome cannot be known but that scaling out is one way to ride the trade out.

All this talk of back testing, expectations, systems, ratios has little relationship to real world proprietary trading. Nor does it bear any resemblance to algorithmic trading. It's really the realm of a number of retail 'automation' platforms - where there's scant evidence that a single trader has ever automated their way to profit.

To put some perspective on this - consider the hundreds of millions of dollars invested by HFT firms to be the fastest link between disparate servers in order to scalp a penny of price discrepancy. Would they really invest that money to arb latency of they could just write a "strategy" to directionally trade the market?

I don't think so and I am yet to hear a convincing argument as to why automated directional (non-arb) trading is feasible.

Over the past few months there have been times when the market has become more volatile and at some points liquidity took a huge drop. On those days, you are more likely to see runners, so scaling in makes sense. In the summer time when the range traditionally drops, all in-all out makes more sense. On normal days, I can see an argument for scaling out because that is what I do on those days.

So for me it's like this. I let the type of action dictate the way I enter AND the way I manage a trade. There's no way I'm going all in when my chosen market is slipping 6 ticks one way or the other in a few seconds. But when it slows down to a crawl, how can I realistically do anything other than put on the max position and get out at a fair profit when the chance of a runner is close to zero.

Just know your market. Know that exit isn't a one size fits all and understand that "trading = mathematical" is just one of many religions in trading that may or may not be true.

I do believe in systems, so it is applicable - though your time frame is short term scalping of order flow and I would only apply systems to longer term capturing momentum from OTF trading, which is different - there are many hedge funds who use systems to do that.

I don't think mathematical is the only way, I believe in discretionary, infact, I think for short time frames discretionary is the only way to go except for arb as you mentioned, as order flow is hard to automate.

However, my logic is still sound - if you scale out twice or three times, and then charted your performance of each scale out and one particular scale out is clearly making you all the money, then you should not scale out of the other one since you DO have the skill to almost always pick an optimal. However, if the performance is intertwined, where one outperforms the other and then alternates, then you should scale out as that means you can't pick an optimal exit. Does that not make sense?

If I analyse my past performance and there is a clear persistent pattern, then I would try improve on it.

edit:

Also I think your definition of system is different to mine, it can have a defined entry point (order flow, breadth, etc) but not necessarily a defined exit point. Exit can be time, an opposing signal, etc but I am not talking specific targets. You are thinking data mined systems which I don't condone and won't work as you pointed out, I am thinking automation of a sound market hypothesis (order flow, market internals, value area, etc).

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  #114 (permalink)
 shzhning 
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PeakGrowth View Post

...if you scale out twice or three times, and then charted your performance of each scale out and one particular scale out is clearly making you all the money, then you should not scale out of the other one since you DO have the skill to almost always pick an optimal. However, if the performance is intertwined, where one outperforms the other and then alternates, then you should scale out as that means you can't pick an optimal exit. Does that not make sense?

I'm afraid that indeed does not make sense. This actually reminds me of an old story that goes more or less like this: A hungry man was treated with a big dinner. After the 8th serving, he was finally done. He said to himself: had I known the 8th serving is the magic one, I probably should skip the first 7 servings and jump to the final serving directly.

In short term trading, it's hard to know which particular scale out is "making all the money". Without the other scale out, the "optimal" scale out will be our elusive 8th serving

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 PeakGrowth 
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shzhning View Post
I'm afraid that indeed does not make sense. This actually reminds me of an old story that goes more or less like this: A hungry man was treated with a big dinner. After the 8th serving, he was finally done. He said to himself: had I known the 8th serving is the magic one, I probably should skip the first 7 servings and jump to the final serving directly.

In short term trading, it's hard to know which particular scale out is "making all the money". Without the other scale out, the "optimal" scale out will be our illusive 8th serving

That is quite literally the worst analogy ever.

It's not hard to know, the issue is that you don't know because you don't understand it.

If you are all in and scale out, say 2 in and 1 out at POC and 1 out at VAH, you are effectively trading two separate methods at the same time, 1 with an exit at POC and 1 at VAH. If you have the data, you can easily see which exit type earned what money. If you are consistently losing money scaling out at POC, then once you only all out at VAH, you will increase your returns for the same amount of initial risk. If you can only earn consistent money by using both POC and VAH, then scaling out is the right method. This is called self improvement.

This works for all in scale out, however, if you decide to scale in and scale out, then it won't be reliable since subsequent scale in's will be dependent on the initial entry. You would then look at how much money your initial entry is making you, then your subsequent scale in is making you. If scale ins are consistently losing you money, the you should not scale in. Infact, if your initial entry isn't even making you money you should just go do something else.

This also applies if you don't use targets and you use price spikes. Perhaps you scale out at spike 1 and spike 2, you can then see if spike 1 or 2 is paying for half of your stop outs. If it's not, then the target is too close and you should only go all out at spike 2, then consider if spike 3 is worth chasing as the second scale out. This can all be quantified, if you know how to do it.

If you actively continue to use a particular scale out even though you know full well from your trading history you lose money from using it, then you are just giving money away.

@DionysusToast uses all in/scale out so what I said applies. However, I am not saying that his scaling out doesn't work or saying scaling out doesn't work in general, I am saying if your previous trading data tells you a certain scale out point is not profitable, it should not be used as your other scale outs would be just masking your sub optimal scaling - you can quite easily increase your profitability by smartly looking at your past trading, whether it be a backtest or live trading history.

If your answer to this is that, you don't know what rule you are using to exit and that you are just feeling the market on the way out, then you are just going by the seat of your pants or your years of experience, then in which case you keep doing your thing and none of this applies. Whether you are successful would be up to how good your flying pants are.

What gets measured can be improved, rather than deluding yourself that nothing can be improved because the market is unpredictable (which it is not) you would be better served to have an open mind.

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 PeakGrowth 
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Go to about 35 minutes in FT71's video here, this thread reminds me of this video I watched ages ago.



Actually just watch the whole thing.

Anyhow, if you are vehemently against any sort of analysis on your own trading then go for it, not my money.

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 Scalpguy 
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Everything works in the right hands. Period.

Is it 100% mechanical or 100% discretional or mixed. You are limiting yourself by saying that only 1 style works. If it does not work for you it is only you. Others are different. So are their systems and profits.

Datamining is a good tool for somebody. Past market action of course not very useful (or better to say: easy) for future actions but helps you a lot to learn execution (yourself). If "lucky" or not too hasty you may find something which can be turned into workable strategy or method. Someone finds hes problem by going through hes trades and calculating different kind of ratios & other mathematical stuff, other pal writes extensive trading log which will help him in this and that... numerous methods and tools available find the best ones which works for you. No matter if someone here whining it did not work for him so it will not work for you either which by the way is ridiculous thinking.

By the way one Poll option is missing: Scale in, all out (=what I am using)

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 Itchymoku 
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peakgrowth I don't want to leave a bad taste because after all it's Christmas, this is merely debate. In all the years I've been on this forum and have talked to traders I've never really seen anyone do well long term with intraday automated systems based on back testing. @kevinkdog may be an exception.

Scaling in and out is almost like an insurance policy if you have the patience and diligence to not let greed and fear interfere.

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 PeakGrowth 
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Itchymoku View Post
peakgrowth I don't want to leave a bad taste because after all it's Christmas, this is merely debate. In all the years I've been on this forum and have talked to traders I've never really seen anyone do well long term with intraday automated systems based on back testing. @kevinkdog may be an exception.

Scaling in and out is almost like an insurance policy if you have the patience and diligence to not let greed and fear interfere.

That's ok - you have already just proven my point with your own argument by saying kevindog is an exception; big mike is also an exception. Nobody said it was easy, there is a difference between possible and impossible and you just made my argument for me.

I might also point out in a professional environment if you come up with a strategy and you don't do proper back testing you will get laughed out the door. If you don't do back testing for yourself as a retail, just because nobody is laughing you out the door doesn't mean it's a good thing. If you just start firing off based on a theory that you just concocted, you have a low chance of achieving anything. You might have to come up with 30 theories before one of them works, do you have the time to manually forward test them each for years at a time, that is provided you don't sabotage yourself?

Once again, if you have read my posts and though about it, I have said back testing is used to prove it won't completely fail. A system that was back tested and failed completely has no chance of being a winning system, ever - therefore it is useful in determining if this is the case and whether you are wasting your time from the get go. Even a break even back test is useful, as you can use discretionary to turn it into a winning one.

Automation is simply ensuring your execution is 100% on point. Nobody (or I haven't) has said automation only works with stuff like RSI, and MA crosses or whatever. It can be applied to many types of tools discretionary traders use, such as cumulative delta, volume, tick, breadth, volume profile, delta momentum and so on and so forth. If your discretionary rules are specific enough, you can automate them provided you have the skill set to do so.

Once again, if you have read my posts and thought about it, I said scaling IS an insurance policy, as it helps your psychology and slows your burn rate if you are running a negative expectancy system. I also think it's a good idea if you are discretionary.

Feel free to debate me as much as you want, but I debate based on theory and evidence rather than anecdotes and analogies.

Anyhow, back on topic as I am done debating this topic in the inappropriate thread.

The simple truth is if your scale in/out points are not making you money (and you can find out by looking at your history), then you should not do it - you will instantly increase your expectancy by doing so. This is situational, everyone is different and should find out for themselves, hence, the answer to this thread is it depends.

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PeakGrowth View Post
That's ok - you have already just proven my point with your own argument by saying kevindog is an exception; big mike is also an exception. Nobody said it was easy, there is a difference between possible and impossible and you just made my argument for me.

I might also point out in a professional environment if you come up with a strategy and you don't do proper back testing you will get laughed out the door.

This is not true at all. Prop traders get taught how to trade, not how to backtest. I know the management at a number of prop firms as well as many prop traders and they do not back test, they see trading as a skill that you develop over time, not as a 'system' you fine tune.

What they do is teach, review, journal, practice and (if you are lucky) mentor.

Floor traders never got to do any backtesting either. They were certainly professional.

Your viewpoint is a systematic one - based on a belief set that the market is systematic. Not all share your view, nor can you really prove that it is an absolute as you seem to think.

I scale out and you say that I am definitely giving money back when I do that. That's not an assessment you are in a position to make.

But let me add some more to what I do....

- In a very slow market I will be all in/all out. Range trading
- With a more normal market, which on my market means runs that can last 30 mins to an hour and then reverse, I scale out because the target is unknown and depends purely on how other traders behave in terms of jumping on the move (as well as those that get stuck fading it).
- In a very fast market, I will scale in. Mostly because I know I can go offside quickly and that the market can put in a larger run, so I will de-risk the trade by starting small

Now - I could turn all this into statistics but that presumes that I can draw cause from the effect. I am a firm believer in logging but I log the state of the mark



PeakGrowth View Post
If you don't do back testing for yourself as a retail, just because nobody is laughing you out the door doesn't mean it's a good thing. If you just start firing off based on a theory that you just concocted, you have a low chance of achieving anything. You might have to come up with 30 theories before one of them works, do you have the time to manually forward test them each for years at a time, that is provided you don't sabotage yourself?

Once again, if you have read my posts and though about it, I have said back testing is used to prove it won't completely fail. A system that was back tested and failed completely has no chance of being a winning system, ever - therefore it is useful in determining if this is the case and whether you are wasting your time from the get go. Even a break even back test is useful, as you can use discretionary to turn it into a winning one.

Automation is simply ensuring your execution is 100% on point. Nobody (or I haven't) has said automation only works with stuff like RSI, and MA crosses or whatever. It can be applied to many types of tools discretionary traders use, such as cumulative delta, volume, tick, breadth, volume profile, delta momentum and so on and so forth. If your discretionary rules are specific enough, you can automate them provided you have the skill set to do so.

You simply cannot automate certain styles of trading. There is too much nuance involved. It's not about rules, it's about the fact that automation will DUMB DOWN your trading style. You have to lose a lot of the nuance.

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 PeakGrowth 
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DionysusToast View Post
This is not true at all. Prop traders get taught how to trade, not how to backtest. I know the management at a number of prop firms as well as many prop traders and they do not back test, they see trading as a skill that you develop over time, not as a 'system' you fine tune.

What they do is teach, review, journal, practice and (if you are lucky) mentor.

Floor traders never got to do any backtesting either. They were certainly professional.

Your viewpoint is a systematic one - based on a belief set that the market is systematic. Not all share your view, nor can you really prove that it is an absolute as you seem to think.

I scale out and you say that I am definitely giving money back when I do that. That's not an assessment you are in a position to make.

But let me add some more to what I do....

- In a very slow market I will be all in/all out. Range trading
- With a more normal market, which on my market means runs that can last 30 mins to an hour and then reverse, I scale out because the target is unknown and depends purely on how other traders behave in terms of jumping on the move (as well as those that get stuck fading it).
- In a very fast market, I will scale in. Mostly because I know I can go offside quickly and that the market can put in a larger run, so I will de-risk the trade by starting small

Now - I could turn all this into statistics but that presumes that I can draw cause from the effect. I am a firm believer in logging but I log the state of the mark




You simply cannot automate certain styles of trading. There is too much nuance involved. It's not about rules, it's about the fact that automation will DUMB DOWN your trading style. You have to lose a lot of the nuance.

The back test / forward test already exists in the successful track records of the prop and floor traders, hence there is no need to back test an existing method that works. If you told a new retail person with no mentoring and abilities to just go ahead and start trading on a method they just made up, would that be wise?

Trading an unproven method with no testing is stupid - if you argue that isn't the case then I got nothing else to say.

I never said you are definitely giving money back when scaling, you are defending a remark I never made. I said IF anybody's past performance shows scaling doesn't give you any love you should go all out. I don't even know what your stats are nor do I care.


Quoting 
@DionysusToast uses all in/scale out so what I said applies. However, I am not saying that his scaling out doesn't work or saying scaling out doesn't work in general,

I also never said you can automate all styles, and that I in fact think discretionary on a short time frame like yours is necessary


Quoting 
I don't think mathematical is the only way, I believe in discretionary, infact, I think for short time frames discretionary is the only way to go except for arb as you mentioned, as order flow is hard to automate.

Do you and Itchy both read with blinders on?

To each their own - if you don't like to use statistics to evaluate past performance and see if you can fix any patterns then that is your deal. There most certainly are patterns, especially in personal behavior which you can find and fix but if it's not your cup of tea then lets agree to disagree.

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 Scalpguy 
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PeakGrowth View Post
Anyhow, back on topic as I am done debating this topic in the inappropriate thread.

The simple truth is if your scale in/out points are not making you money (and you can find out by looking at your history), then you should not do it - you will instantly increase your expectancy by doing so. This is situational, everyone is different and should find out for themselves, hence, the answer to this thread is it depends.

I agree 100%.

I do not see/know/have heard any other way how to find the best scale in/out method for your own system than trading it again in history and simulating the different methods. Even if the strategy is based into very same ideas than others. Different people different results.

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 mykee 
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@DionysusToast
But let me add some more to what I do....

- In a very slow market I will be all in/all out. Range trading
- With a more normal market, which on my market means runs that can last 30 mins to an hour and then reverse, I scale out because the target is unknown and depends purely on how other traders behave in terms of jumping on the move (as well as those that get stuck fading it).
- In a very fast market, I will scale in. Mostly because I know I can go offside quickly and that the market can put in a larger run, so I will de-risk the trade by starting small



Thank you for sharing.

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PeakGrowth View Post
The back test / forward test already exists in the successful track records of the prop and floor traders, hence there is no need to back test an existing method that works. If you told a new retail person with no mentoring and abilities to just go ahead and start trading on a method they just made up, would that be wise?

That's not how prop shops work. There's a very small percentage of prop shops that want bums on seats to execute a specific strategy. I know a prop trader that was considering such a position in a Canadian shop as it was close to where he was located. The biggest problem he had with the job was that they'd dictate very strictly how he could trade. It was not an attractive proposition for him. On the one hand he wanted back in prop, on the other hand he wanted to execute his own style.

They effectively wanted drone-traders which is the opposite of what most prop shops are doing. That is taking people with promise, showing them how the market works and helping them to develop as traders. If you don't believe this, call a prop shop, ask them how many traders they have and how many are executing exactly the same method. They won't - they'll all be growing in different directions because prop shops want to develop independent traders that evolve with the markets, not finger pushing drones. It's a bit like teaching a man to fish as opposed to giving him a fish.

I met 5 traders for a coffee in Singapore one day - all at the same prop shop. All doing very different things. Some on spreads, some on outrights and one girl trading the queue position in what can only be described as marginally less exciting than watching paint that had already dried.

Once in a trade, it's a matter of monitoring until you are convinced the market is following through. If it doesn't follow through, if you get in a trade and then work your way out because you feel momentum is simply not there - then you will be out, maybe at a profit. You may be a scale-out trader but decide after 4 or 5 ticks that the market is stuck and then unwind the position. So you got 'all out'. This does no mean there are no rules but it does mean that trying to turn the numbers into trade management statistics is problematic because the stats are not situation specific. Stats for April 2015 and stats for December 2015 would not be comparable for day traders because of the different conditions.



PeakGrowth View Post
Trading an unproven method with no testing is stupid - if you argue that isn't the case then I got nothing else to say.

Practice is what makes you better at trading. Practice, journaling and reviewing your trades are not backtesting but they are proven ways of improving as a discretionary trader to the point you can get to live. It's not stupid it's just skill development, not mechanical method implementation.


PeakGrowth View Post
I never said you are definitely giving money back when scaling, you are defending a remark I never made. I said IF anybody's past performance shows scaling doesn't give you any love you should go all out. I don't even know what your stats are nor do I care.

This is where we agree then. There is no right or wrong. It cannot be mathematically proven that scaling is better or worse in all cases. It is just one of many aspects of trading that we have to think about every day.


PeakGrowth View Post
I also never said you can automate all styles, and that I in fact think discretionary on a short time frame like yours is necessary


Do you and Itchy both read with blinders on?

Yes, of course.


PeakGrowth View Post
To each their own - if you don't like to use statistics to evaluate past performance and see if you can fix any patterns then that is your deal. There most certainly are patterns, especially in personal behavior which you can find and fix but if it's not your cup of tea then lets agree to disagree.

I didn't say you cannot have statistics and I am a firm believer in having a trade journal. Where I disagree really comes from cause and effect. I have bad days where the day is bad because I thought the day would play out one way and I stuck to my guns on that despite the market clearly doing something else. My journal records such things "being a dick" is a common sentence in my journal. When I look at my journal, it reads more like a diary than a spreadsheet. I am interested in how well I followed my plan, what techniques I applied, how well they worked, how the day played out. So I build a picture of the type of activity, what techniques I applied, how well I applied them and how they worked.

Of course I can get stats, what worked well in what conditions and my rating for how well I followed my plan. What I don't do is data mine the results because that could find 'causes' that don't exist - patterns that appear that are nothing more than randomness or just a reflection of that period of time (such as a period of exceptional volatility).

Data mining just the technique applied and the results is not valid in my opinion because that is only a small part of the equation in any period. Market conditions, news risk, market maker participation are just as important and have just as much effect as specific trade strategies applied during that period. So you end up crunching partial data. So you can either try to quantify 5000 data points or embrace the "skills" aspect of trading.

I see it as a way to ensure I build on my experience because in the heat of the moment, you can get so caught up that you don't really spend time to reflect on what you did.

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PeakGrowth View Post
That is quite literally the worst analogy ever.

It's not hard to know, the issue is that you don't know because you don't understand it.

If you are all in and scale out, say 2 in and 1 out at POC and 1 out at VAH, you are effectively trading two separate methods at the same time, 1 with an exit at POC and 1 at VAH. If you have the data, you can easily see which exit type earned what money. If you are consistently losing money scaling out at POC, then once you only all out at VAH, you will increase your returns for the same amount of initial risk. If you can only earn consistent money by using both POC and VAH, then scaling out is the right method. This is called self improvement.

OK - so this is one of the trades I regularly take.

Market opens up, we end up rotating in a 6 point range. We have a decent size range built and "value" is a way of defining the range. In other words, you look for a long entry around the VAL and a short around the VAH.

So you go long somewhere around the VAL, you target the VAH but you have a hurdle in the way - the POC. So you take some off ahead of that first hurdle, target the VAH if it gets through the POC and work your way an exit if it fails to get through POC.

So what you did was got into a long - saw 'hurdles' ahead. You could "all out" at the first hurdle but instead you pay attention at each hurdle and react accordingly. That surely must be a better approach than "this price or bust".

Certainly, it didn't seem like the worst analogy ever.

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 Itchymoku 
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@PeakGrowth


Please show me at least one system that works long term that uses all in / all out that is based on back testing.
Provide a brief description of what it does. You can obfuscate it to some degree if you wish to keep some of the variables secret. Explain it vaguely as pseudo code if it's too lengthy. I just want one example of a system that uses this type of trading.


I don't need exacts or a broker statements. I don't want this debate to get lost in being able to prove, it isn't about proving, it's about simply seeing a system that works.

Show me a journal, book, video of someone who uses this type of trading for over a year and is profitable. ANYTHING.

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 trendisyourfriend 
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Itchymoku View Post
@PeakGrowth


Please show me at least one system that works long term that uses all in / all out that is based on back testing.
Provide a brief description of what it does. You can obfuscate it to some degree if you wish to keep some of the variables secret. You can just explain it vaguely as pseudo code too if it's lengthy. I just want one example of a system that uses this type of a trading.


That it is all. If you can't do this then please do us all a favor and leave your lengthy rebuttals aside. And this goes to anyone who supports the topic.

I don't need exacts or a broker statements. I'm not asking anyone to prove the system. I just want to be shown a system that works with this type of trading. That is all.

thank you.


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 Itchymoku 
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trendisyourfriend View Post

- need a description of how it works
- needs to work long term

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 PeakGrowth 
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Itchymoku View Post
@PeakGrowth


Please show me at least one system that works long term that uses all in / all out that is based on back testing.
Provide a brief description of what it does. You can obfuscate it to some degree if you wish to keep some of the variables secret. Explain it vaguely as pseudo code if it's too lengthy. I just want one example of a system that uses this type of trading.


That it is all. If you can't do this then please do us all a favor and leave your lengthy rebuttals aside. And this goes to anyone who supports the topic of all in / all out intra-day trading.

I don't need exacts or a broker statements. I don't want this debate to get lost in being able to prove, it isn't about proving, it's about simply seeing a system that works.

Show me a journal, book, video of someone who uses this type of trading for over a year and is profitable. ANYTHING.

thank you.

Read any of the market wizards books, there are a ton of mechanical traders there.

Ernest Chan is one
Managed Accounts | QTS Capital Management, LLC.

I don't need to dig up any more because my point is proven.

Unlike you, coming out of this debate I have even more respect for @DionysusToast than I did before because he can debate his side with facts and experience. You on the other hand, can't debate out of a wet paper bag.

YOU of all people want evidence based replies? This is coming from the guy who believes in fibonacci and probably how the alignment of Saturn with our moon will affect our markets, you aren't even in the same league.

Since you can't read, I'll help you one more time - I never said anything apart from all in/out works - it most certainly can work. If you have an edge, it doesn't matter if you do AIAO, AISO, SIAO, SISO, you will make money, how much of it you make depends on how you apply those 4 methods in the right situations and part of figuring that out is looking at how you did in the past, whether it be your live results or a back test.

In terms of who would be doing a favor and leaving anything aside, I'd say with gems like this:


You're the one making a fool of yourself. Here's some evidence for you - nobody thanked your posts because they weren't any good.

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 Itchymoku 
Philadelphia
 
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PeakGrowth View Post
Read any of the market wizards books, there are a ton of mechanical traders there.

Ernest Chan is one
Managed Accounts | QTS Capital Management, LLC.

I don't need to dig up any more because my point is proven.

Unlike you, coming out of this debate I have even more respect for @DionysusToast than I did before because he can debate his side with facts and experience. You on the other hand, can't debate out of a wet paper bag.

YOU of all people want evidence based replies? This is coming from the guy who believes in fibonacci and probably how the alignment of Saturn with our moon will affect our markets, you aren't even in the same league.

Since you can't read, I'll help you one more time - I never said anything apart from all in/out works - it most certainly can work. If you have an edge, it doesn't matter if you do AIAO, AISO, SIAO, SISO, you will make money, how much of it you make depends on how you apply those 4 methods in the right situations and part of figuring that out is looking at how you did in the past, whether it be your live results or a back test.

In terms of who would be doing a favor and leaving anything aside, I'd say with gems like this:


You're the one making a fool of yourself. Here's some evidence for you - nobody thanked your posts because they weren't any good.

I apologize about the lengthy rebuttals statement and about what people have to prove on this forum. I didn't want this debate to get out of sorts and am sorry it turned out that way. I understand there are people who are profitable with all in all out but it's probably on the range of 1.618% or less, those that were lucky. The thanking my own posts thread was just a joke and not of relevance here.

And by the way PeakGrowth Happy holidays, I still love ya my brotha


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 PeakGrowth 
Sydney, Australia
 
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Itchymoku View Post
I apologize about the lengthy rebuttals statement and about what people have to prove on this forum. I didn't want this debate to get out of sorts and am sorry it turned out that way. I understand there are people who are profitable with all in all out but it's probably on the range of 1.618% or less, those that were lucky. The thanking my own posts thread was just a joke and not of relevance here.

And by the way PeakGrowth Happy holidays, I still love ya my brotha


I apologise for making those remarks as well especially in regards to paper bags, it was out of line.

Anyhow, I think in regards to this topic whatever works for you is what's best for you.

Happy holiday to you too and love you too!

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