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I am not opposed to scaling in and out as a general matter. The only thing I'd caution about is inadvertently creating a system that feels better psychologically but is in fact designed to lose.
I think this is an area where backtesting can give you a better sense of what you might expect, especially if you're careful to test periods when your usual scalping approach was profitable as well as periods when the scalping approach didn't work so well. Have you conducted much backtesting yet?
Visual backtesting is ultra-importante in my opinion.
The issues that I have to becoming consistently profitable is that market conditions change. What range(s) were working will update, change and mutate into something that could either work better or not work at all. It is up to the trader to decide to mutate and how.
I do not believe scaling out is a viable option for profitability but it sure feels better. It all comes down to the stats win ratio %, MFE, MAE etc...
Broker: Advantage, Trading Technologies, OptionsCity, IQ Feed
Trading: CL, NG
Posts: 1,038 since Jul 2010
Thanks Given: 1,713
Thanks Received: 3,863
As an avid CL trader, I'm a firm believer in utilizing a trailing stop. CL as I'm sure you know, will run like crazy. If you're having difficulty identifying where the runners will be, continue to educate yourself on how and where these moves originate from. I'd much rather take 1 - 3 trades per day max than multiple scalp trades. With every trade you take, you're assuming additional risk and transaction costs. With scalping, you can end up having multiple losers in a row which is obviously an account/confidence crusher. Your back will always be against the wall scalping this market. There's no game plan in scalping CL other than your entry criteria. The problem with this is you're ignoring the big picture market context and opportunity. CL usually provides 1 - 3 good swings throughout the day and I feel it is meant to be traded vs. scalped. Over time and experience, you'll learn to be in tune with those entry areas. Sure, all in all out sounds great on paper/calculator but what's your winning percentage and your R:R? Taking a calculated entry based on the big picture and seeing it through just makes more sense IMO. If you're wrong, obviously the context is/has changed and you would then adjust your game plan accordingly.
If you're starting with a smaller account however, building your trading system makes sense which means creating a target based strategy until you have enough equity to allow for several scale out areas while having a runner. So maybe start off with 1 target. As your account grows, add additional contracts and another target area. And then finally add more contracts which will serve as your trailing stop. Your entries should still be based on the market's context vs. trading the noise. Sure, you'll be limiting the number of trades per day but the idea would be is to learn good entries and habits. Trading is not a race, it truly is a marathon. Of course this is just my opinion but I've been trading CL long enough to have experienced both philosophies.
I to am leaning toward fewer trades per day. It just seems reasonable to expect 1-3 good swings and trade it expecting to see a swing of 30-100 ticks, try to squeeze as much out of it as I can and let it go after that.
I know this is an area of intense debate and I can argue both sides just as well as the next guy. A funny thing happened over the last couple weeks....
One of my trading buddies works for an energy trading firm but not in the role of trader...more of an analyst/risk manager guy....anyway, he was telling me about how the guys in the firm trade. They are all in all out and often wrong. But they can't see the enormity of how wrong they are and how frequently they are. They won't stop out. But as a risk manager, he can see the equity curves, helps them hedge their out right positions with options, and in general can make far more rational decisions about their trades than they can.....
The same is often true of us individual retail traders. We can't make rational decisions about the trade once we are in it. Unless there is no pressure....and risk off early in the trade with at least some of the position is one way to provide a way to think rationally about the remaining position/s.
I dont think anyone would argue against entering with a position and holding it for whatever comes....the math works out better in the long run...but nearly all successful traders I've ever read about take risk off at some point and let the rest run with the house money so to speak.
I want to join the ranks of the successful so I think I'll start doing what they do.....
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris
I think at least two is the best choice.....three if one can handle it....The third one is the moon shot.....if we can hold it that long.....some one I read, I think it was Mark Douglas said that one can often make as much on the runner as on the first two positions combined......
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris
PW - I like Ur chart capture software, particularly the ability to easily add comments, different arrows etc. I use Jing as BM suggested, but find it a bit limited. What is the name of the chart capture S/W that you use?
I had a good day today. Missed the first run up by not being at the computer...much to early for me....I passed on the reentry trades and just waited. I got a continuation entry, got filled on the first position and after some backing and filling, got out at BE.
Next trade was passed on due to larger risk. I am ok with that even though it worked perfectly....sigh.....
Next trade was basically the same as the first trade.....backing and filling and a BE.
Fourth trade was a sucker punch. I figured it would break the wedge to the upside, it did and I got taken out.
Once that happened, I figured it was short and so waited for a break of support and trendlines and got my ticks.
Ended +50 ticks and pretty happy about it. There was a long that I passed on due to me wanting a pull back to the MA stack but I never got it. Had I taken it, I may have had a 100 tick day.....but we will never know since I passed.
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris