Scale in or scale out

If you were given only two choices, would you elect to scale into a trade or out of a trade? i.e. Which of the two do you believe gives you more of an edge?

for me scaling in. I can't pick EXACT tops or bottoms with any degree of accuracy so as a fader I need to average in on many trades.

My bias is the same as yours for the same reason.

Oh absolutely scaling in, BruceM's strategy works 90% at the time for me and on the out I flatten all.

Hmmm, I guess because my methodology is trend trading (albeit intraday trend trading when doing 'daytrading') and I never use 'profit targets', it shouldn't be a surprise, I guess, that I love to scale out, and have never really found anything on the scale in side that seemed to give me an edge. I've worked on it for a long time, but just can't make it work for me. Very interesting, I was sure the answers would be the opposite of what they were.

The reason that I asked the question is that we often need to narrow down the number of variables involved in trading. When eliminating something that we don't have time or ability to address then we need to eliminate the one that's less effective. It's like asking if trading is black and white or shades of gray? The ideal is a balance between the two (i.e. shades of gray), so we would use both scaling in and out on some trades, just out on others, and just in on the rest. How we determine what we use is another question, the question here is if you have a limited amount of time to learn something then what do you learn? Your efforts are usually best rewarded by focusing on what produces the best results.

So the question I have for all traders is that given a choice between A and B, which will yield the best result? Say you're using 6 indicators, as an exercise compare each indicator to the other 5 and create a list of which you would keep if you were forced to eliminate one from your collection. Which indicator(s) would remain? Based on that you now know where to focus your efforts to generate more profit.

QUESTION: why scale in or out?...I've never scaled in or scaled out...for me it has always and only been..."all in" and trade "all out"...I would think that "all in" and "all out" is the "shortest distance to profits"...what am I missing?

IncreaseNow: Like BruceM mentioned, picking a top or bottom is very difficult if you're a counter-trend trader. If that's your style of trading then scaling in can give you a trade when the market doesn't get to your target entry and improve your price when it goes beyond your target entry. The downside is that you usually have to play with a larger stop.

If you're not a counter trend trader then scaling in might not make as much sense.

Any idea what the advantages of scaling out are and what type of trader would benefit from that?

This is a fairly small sample size so It would be interesting to find out what most people do...

For those who scale in I'd like to know if you sell when the market starts to move in your direction on your scales for short trades ? I'm usually selling as price is going up and usually don't wait until the market turns down...this has obvious advantages and disadvantages....

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Originally posted by jimkane

Very interesting, I was sure the answers would be the opposite of what they were.

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BruceM is like you said "can't pick EXACT tops or bottoms with any degree of accuracy so as a fad-er I need to average in on many trades" so what I do is sell the rally and buy the dip scaling in as long as it takes for the trend to revers and when my average is in the "+" and the set up permits staying in I do if not than I flatten all.

I haven't posted for awhile, but this is a subject that is important to me.
I scale in on trades.

Keep in mind that I am a newer trader and can not pick tops or bottoms.

However, I wouldn't call myself a fade trader. Instead I like to buy on dips when the ES is having good upward extension, and sell rallies when the market is extending down. The last two days have been just great for that
strategy. All though when there is a big counter trend I can easily get wiped out.

If I am wrong on my first trade I take another contract a few points down and then set the target as the original entry, which means the first contract will break even and the second will make the profit. So I am all out at that point.

If I am still wrong then I take two more contracts as my third add-ins and set my target at where I got the second contract. Again I would be all out if I make the target. This way I break even on all four positions.

If the market continues against me I am stopped out for a BIG loss on all four positions.

This strategy works about 90% of the time, but because of the huge loss occasionally it has not been as profitable as I had hoped.

My question to Daytrading and Bruce is - how do you scale in? Do you scale in over a narrow range i.e. when it moves even a point against you adding on a few more contracts? Or wait for a larger move against you before
starting to take additonals? And how do you use time, if at all? For example, if you've been in the trade for an hour and your positions are down would you just exit on market right then and look for a better entry?

I think this is really a good topic.

One strategy is to do "position improvement" which is best explained by an example. Say you go long and the market drops, you then double your position (say) 2 points below where you entered and put in a limit order to exit your original position at the entry with your stop 2 points below the second entry for a max loss of 4 points which is really a loss of 3 points against the whole position.