Scaling out stops?

I was just reading this e-book –

Here is the quote from rule#21  – You should never scale out of your losers. If your trade size is more than a one lot and your trade is a loser, you must exit the entire position en masse.

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4 Responses to Scaling out stops?

  1. Ritwik says:

    Thanks for the link Larry.
    Pertinent point and classically correct advice. As is – do not add to losers.
    But practically I have found that for noisy and highly rotational instruments like ES, it helps to deviate from this withing reasonable boundaries – to ultimately improve your win percentage. Not exactly scale out of losers but set staggered (tighter or wider) stops on different units to get around the noise on high conviction trade. e.g. if my total defined risk is 6 points and I am trading 3 lots, I may have stops at 1.5, 2 and 2.5 points instead of 2*3 = 6. This applies esp to high conviction trades. Often times the last contract will rotate back and let you exit at breakeven or small profit even if you are wrong.

  2. larrysy says:

    That would be for the next major version, if implemented.
    How about scaling in? Start with 1 contract with stop at -3, add 1 if drop by 1 point, same stop (= -2), add 1 more if drop 2 points, same stop (= -1). If stopped out, same 6 pts but your wiggle room increased by 0.5 ( 3 instead of 2.5). And if rotate back, you will be holding the full 3 contracts at a lower cost, and higher payback if correct (high conviction trade). And your stop is not arbitrary but some predefined point (break of previous swing low, more than x ATR, cross MA, etc.)

  3. Breaket says:

    Not completely related, but I’ve been using “Exit Mode” set to 3-step, to accomplish a personal 2-Step method: T1 (exits 1/3 of total lot) to cover the tightened stop risk of the remaining 2/3. I set T3 to a sizable T2 + another tic (since BT does not permit T2 & T3 to be the same price point.) But this is cumbersome if I decide to exit at a less ambitious personal T2/T3 price in DOM — seems to require T3 manually tightened too (else the original T3 keeps final third position in the mkt) else ‘Close all.’

    But is there any way with 2-step, (or even 3-step) selection, to have the number of contracts in T1 and T2 be individually set? — So, user could exit (say) 3 @ T1, and exit 5 or the balance of position @ T2?

    • larrysy says:

      You can set T1 number by clicking T1, the rest will be assigned to T2 if using 2 exit, or distributed automatically to T2 and T3 if using 3 exit.

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