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Advice from traders with 5+years experience
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Advice from traders with 5+years experience

  #51 (permalink)
Curtis
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  #52 (permalink)
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monpere View Post
I have to agree. There is too much zen philosophy, good ole sayings, nursery rhymes, and sports analogies from posters when talking about trading. If we want to illustrate our points or perspectives, we need to do it with actual trading examples. I have learned a lot from posters on this thread, and have done my best to impart on others some of the things that I've learned, otherwise, forums like these would be a waste of time. If everyone makes the effort to share concrete trade ideas rather then lofty prose, we will all be better for it.

So glad you're advocating for concrete communication and examples. Certainly some truths must be communicated with metaphor but rarely in the technical/execution aspects of trading!

People always say that AIAO is "mathematically superior" and I have even said this myself. Scaling in and scaling out essentially amounts to placing several independent trades rather than one trade. If you're using a lot of discretion (ie, judgment rather than mechanical rules) then scaling in and out should smooth your results (assuming you are actually profitable at all). Smoothing of returns is "psychologically easier" but it also improves your sharpe ratio (right?) - and if you improve your sharpe ratio then theoretically you can handle increasing your size while maintaining an acceptable risk of ruin or max drawdown. However when you increase your size, you make trading psychologically more difficult.

Thus it may be that scaling in/out is a bit of a catch 22. Over the course of 100 trades, if you simply choose (via rules, discretion, setups, etc) the best single trade rather than scaling in and out, you may do just as well as scaling in/out for a given sharpe ratio (which, in general, assumes that your AIAO method is carried out with smaller size than that with scaling in/out to keep the sharpe ratio constant).

As far as I can tell, when you scale out you're just exchanging risk:reward for %win. Is that what others think?

Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
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  #53 (permalink)
Elite Member
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Are we playing miniature golf or are we playing a full 18 - 36 holes?



Surly View Post
So glad you're advocating for concrete communication and examples. Certainly some truths must be communicated with metaphor but rarely in the technical/execution aspects of trading!

People always say that AIAO is "mathematically superior" and I have even said this myself. Scaling in and scaling out essentially amounts to placing several independent trades rather than one trade. If you're using a lot of discretion (ie, judgment rather than mechanical rules) then scaling in and out should smooth your results (assuming you are actually profitable at all). Smoothing of returns is "psychologically easier" but it also improves your sharpe ratio (right?) - and if you improve your sharpe ratio then theoretically you can handle increasing your size while maintaining an acceptable risk of ruin or max drawdown. However when you increase your size, you make trading psychologically more difficult.

Thus it may be that scaling in/out is a bit of a catch 22. Over the course of 100 trades, if you simply choose (via rules, discretion, setups, etc) the best single trade rather than scaling in and out, you may do just as well as scaling in/out for a given sharpe ratio (which, in general, assumes that your AIAO method is carried out with smaller size than that with scaling in/out to keep the sharpe ratio constant).

As far as I can tell, when you scale out you're just exchanging risk:reward for %win. Is that what others think?

It appears that what many are comparing to here is who makes the most money in their trade when in reality we should be asking who handles risk the most efficiently in a trade. I guess we need to define what we're doing here first. Are we scalping for a few ticks/points/pips? Or are we trading to get the most out of a move? Which can still be intra-day but a longer holding period.

The AIAO method seems to cater towards those that are looking to mainly scalp. For longer term targets, your AIAO target better be right or you can easily turn a winner into a loser unless you're trailing your stop or something. But if you trail your stop, you aren't taking advantage of the positive move the trade offered by not booking any of the profits.

Personally, I don't scalp trade, I look to get the most out of a move. As the trade moves in my favor, I want to book profits while taking off risk. I can add risk if needed on retracements or whatever provided the move is still valid but I'll want to take risk off again as the trade moves back into my favor. I also trade various markets differently. For example, when trading the ES, I'll establish a core position and add to it on retracements until my trade begins to have a nice positive skew. At that point, I'll begin to take risk off and book some profits. Alternatively, when trading a fast moving market like CL, I'll establish a full position right away and scale out as the trade moves in my favor. The reason for the differences vary but one of the top reasons is the speed and volatility of the markets cater to different approaches.

So again, I guess it depends on what your trading style is. But risk management should be at the forefront of any comparison. Retail traders are usually the big proponents of scalp trading while professional traders typically work a position throughout the entire move.

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  #54 (permalink)
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Thanks for the great insight. Iam one of those new traders!

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  #55 (permalink)
Trading for Fun
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kronie View Post
why would I?
why should I?,
because you asked?,
these are professional boards, used to entertain, in-between serious sessions of trading and making / losing money.

attitude?
well, its clear just how much attitude is coming out both ways, but arrogance, in demanding or challenging one to look at something and prove something to YOU.

last time I looked, my paycheck was signed by me and the CME,

hope you're better than an apprentice, or you update your own self selected moniker appropriately, so we all can have a better, more professional opinion, as you demand, of you, and you certainly deserve all the respect,

just like the rest of us

tread lightly....

My goodness Kronie, are you seriously attempting to pass THAT off as a response ?

If I remember correctly, you made the original statement/claim regarding "scaling-out" in the capacity of advising others on how to trade and/or be successful ? So your G-damned right I expect you to provide some substance to back -up what you wrote.

And you respond with the above ? Just look at the first couple of lines you wrote to me above !

Thanks very much to Private Banker, Mono, BM and others for actually attempting to participate in this discussion intelligently.

Kronie...Go ahead and have your last word with me. Free shot. Then....bye, bye. You have less than no credability from this point forward --- as far as I'm concerned, anyway.

Peace,
Paige

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  #56 (permalink)
Banned: trolling
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Surly View Post
So glad you're advocating for concrete communication and examples. Certainly some truths must be communicated with metaphor but rarely in the technical/execution aspects of trading!

People always say that AIAO is "mathematically superior" and I have even said this myself. Scaling in and scaling out essentially amounts to placing several independent trades rather than one trade. If you're using a lot of discretion (ie, judgment rather than mechanical rules) then scaling in and out should smooth your results (assuming you are actually profitable at all). Smoothing of returns is "psychologically easier" but it also improves your sharpe ratio (right?) - and if you improve your sharpe ratio then theoretically you can handle increasing your size while maintaining an acceptable risk of ruin or max drawdown. However when you increase your size, you make trading psychologically more difficult.

Thus it may be that scaling in/out is a bit of a catch 22. Over the course of 100 trades, if you simply choose (via rules, discretion, setups, etc) the best single trade rather than scaling in and out, you may do just as well as scaling in/out for a given sharpe ratio (which, in general, assumes that your AIAO method is carried out with smaller size than that with scaling in/out to keep the sharpe ratio constant).

As far as I can tell, when you scale out you're just exchanging risk:reward for %win. Is that what others think?


This discussion is so highly subjective,

the battle between scaling in/out in contrast to AIAO (all in all out).

What I have seen, was those starting, or protecting their relatively small grub stake comprehend AIAO better than scaling.

Auto traders almost always advocate scaling, which lessens risk (you were accurate in your observation) in an attempt to preserve capital, not so much for winning percentages and the associated bragging rights, but the right to exist (i.e. have a positive balance in your trading account and still able to trade).

Beginners are admonished by vendors to practice a minimum 3 cars using scaling to mitigate risk, maximize potential gains from moves, and participate without too much risk exposure.

Experienced traders don't even think, nor refuse to stay in one camp over the other, just whatever feels appropriate to the situation and opportunity.

Floor and Size traders teach scale, by doing something that retail traders can't conceive, that is adding to a winning position, and the opposite, which everyone understands, lessening a losing position.

Simply put, one's experience, risk tolerance and balance dictates which style is appropriate.

Now, for those expecting a detailed explanation, here's an attempt:
a) trader has $10,000
b) trader takes position totalling $8,000 of his balance in 16 cars long AIAO
c) others are barfing on the floor, but the trader is happy with his $.50 per car gain
d) trader closes position with $1.125 per car gain, AIAO and is no longer at risk for 16 of his potential 20 cars / account

e) market moves around, and he's able to compare how trading would have turned out using scaling and would have had significantly less gain; his experience and risk tolerance cements his allegianc to AIAO approach

f) the opposite occurs, trader realizes he could have preserved his gains by using a scaling approach instead of an AIAO; his observation cements his allegiance to a scaling approach

that's how it usually happens, just listen to some of the narrators on those paid sites (vendors)


cheers

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  #57 (permalink)
Elite Member
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Private Banker View Post
It appears that what many are comparing to here is who makes the most money in their trade when in reality we should be asking who handles risk the most efficiently in a trade. I guess we need to define what we're doing here first. Are we scalping for a few ticks/points/pips? Or are we trading to get the most out of a move? Which can still be intra-day but a longer holding period.

The AIAO method seems to cater towards those that are looking to mainly scalp. For longer term targets, your AIAO target better be right or you can easily turn a winner into a loser unless you're trailing your stop or something. But if you trail your stop, you aren't taking advantage of the positive move the trade offered by not booking any of the profits.

Personally, I don't scalp trade, I look to get the most out of a move. As the trade moves in my favor, I want to book profits while taking off risk. I can add risk if needed on retracements or whatever provided the move is still valid but I'll want to take risk off again as the trade moves back into my favor. I also trade various markets differently. For example, when trading the ES, I'll establish a core position and add to it on retracements until my trade begins to have a nice positive skew. At that point, I'll begin to take risk off and book some profits. Alternatively, when trading a fast moving market like CL, I'll establish a full position right away and scale out as the trade moves in my favor. The reason for the differences vary but one of the top reasons is the speed and volatility of the markets cater to different approaches.

So again, I guess it depends on what your trading style is. But risk management should be at the forefront of any comparison. Retail traders are usually the big proponents of scalp trading while professional traders typically work a position throughout the entire move.

I wouldn't say that AIAO only caters to scalpers although I see your point. Also - it is not true that you can't lower your risk and book profits during the trade using AIAO - a trailing stop does both. Again, my point was that the difference between scaling and AIAO is that with AIAO you are placing one trade with its associated expectation while when you scale you are placing multiple trades with multiple independent expectancies.

Your description of how you use scaling in managing risk and managing the volatility of a move is helpful - the way it relates to my point is that I would say that you are trading by placing multiple, independent, shorter term trades all centered around a longer term understanding of what a market is doing (trending up, e.g.).

Maybe one thing we can say is that AIAO is better for more mechanical, statistically based trading methods while scaling is better for discretionary methods where the risk vs reward is being evaluated on a more continuous basis. Anyway - thanks for the followup!

Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
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  #58 (permalink)
Elite Member
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Surly View Post
I wouldn't say that AIAO only caters to scalpers although I see your point. Also - it is not true that you can't lower your risk and book profits during the trade using AIAO - a trailing stop does both. Again, my point was that the difference between scaling and AIAO is that with AIAO you are placing one trade with its associated expectation while when you scale you are placing multiple trades with multiple independent expectancies.

Your description of how you use scaling in managing risk and managing the volatility of a move is helpful - the way it relates to my point is that I would say that you are trading by placing multiple, independent, shorter term trades all centered around a longer term understanding of what a market is doing (trending up, e.g.).

Maybe one thing we can say is that AIAO is better for more mechanical, statistically based trading methods while scaling is better for discretionary methods where the risk vs reward is being evaluated on a more continuous basis. Anyway - thanks for the followup!

Can some of y'all give some marked up hypothetical examples of each perspective? For discussion purposes, the following generic chart shows an AIAO hypothetical short trade, lets say with 3 contracts. How would some of the scale in/out traders ideally trade that to reduce risk, improve profits, etc. in a best case hypothetical scenario. I'm not advocating one way or another, just trying to get more concrete conversation going. (Albeit, this may not be the best thread for it)

Attached Thumbnails
Advice from traders with 5+years experience-chart.jpg  

Last edited by monpere; March 20th, 2012 at 02:07 PM.
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  #59 (permalink)
 Vendor: tradingcode.net 
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I don't mean this disrespectful to the contributors in this thread, but I have to ask:
Is a subjective, and at times personal and verbal-aggressive, discussion about AIAO really the "best advice" experienced traders would give to beginners?
I really liked this thread, but the last few pages are going further and further from the original question from the topic starter:


jsd45 View Post
(..)
For the more experience traders, what are somethings you did as rookie trader that you look back on and wish you hadn't? Any other advice would be greatly appreciated to...

Shall we go back on topic?

As a beginner myself, I know I can use all of the advice experienced traders are willing to share here, so please let's continue.

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  #60 (permalink)
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Support/res looking left


support/resistance going for pts not ticks. I struggle with this one the most. What is most relevant to the next point of concern?

1) ma 20/50/200
2)yest h/l/c/CP
3)pivots
4)fibs

1-4are a given now 5 is the one that I search for
5)long term res/support off time charts 30/60/240/daily, i know the more points touching stronger it is. What i'm asking is if you drew nothing but sup/res lines looking left and traded off of only these lines for that day which one would u reference to looking left?bc we all know a 30 lines for one session wont wrk... and last would u use the bodies or wicks

Please enlighten me

Thx for your time guys,
R

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