Scaling in/out whether it's because of a signal or a money management system (optimal f, martingale,etc. ) are hairs of the same dog, but done differently. Usually you'll hear of a trading system that has signals that suggest scaling in/out us a good idea, but most people have no idea what they're doing so they end up mashing money management and this type of scenario together. Once you understand this and why you'll be ahead of 99% of other market participants.
Martingale systems to have a time and a place where they exist optimally despite all that u hear. This whole realm of "money management" is better first addressed as an optimization problem given a trader's goals for there system. Optimal f is not distinct from classic asset allocation rather optimal f is a specific utility curve under that umbrella. Money management implementation is a nontrivial task and has more depth and relevance than you probably know. --- In [email protected], Howard B <howardba...@...> wrote: > > Greetings -- > > MK wrote: > > What is the benefit of scaling in and out vs. treating them as separate > systems? They basically are separate system. > > --------------------------------- > > I agree that entries made from secondary signals, or whatever you would call > the signals that trigger the scale in, are a separate system. Test them > separately. > > In my experience and research, neither scaling in nor scaling out often > improve a system. This is based on an understanding that risk is fully > assessed before the initial portion of the trade is entered, and that the > full amount of the trade as determined by the risk calculation is not taken > until the final scale in has been triggered. That is, if three scale ins > are perm itted, then the initial position must be taken with only 25% of the > amount permitted by the risk calculation. If the alternative is to take a > full position at the first signal, and then add as the trade is in progress > through scale in trades, the risk guidelines will have been violated. > > Thanks for listening, > Howard >
