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1991issue C011-3

Precommit scale-outs and puts to replace impulse

Editorial view: hope, fear and greed remain unwritten overrides until scale-out-position cuts and a protective-put bound sit in the same procedure that also says when not to act. The archive locates a workable process in matching a written plan to the trader's own emotional profile and then refining those habits.

  • Hope-mode delays a risk limit on a troubled position and is described as often producing a larger later loss.
  • Fear is mixed in effect, yet fear-as-manual-rule is not to be written into the trading manual. Greed is presented as the strongest of the three named pitfalls.
  • Surprise-move-scale-out and a predetermined losing-side scale-out-position cut both reduce size before the next decision.
  • Partial gains, small-loss reduction and a protective-put hedge are one trading-psychology-process. An emotion-consistent-plan is refined through use, not impulse.
Entries in this reading3 entries
Current trackScale-out position reduction22 readingsProtective put53 readingsTrading psychology process376 readings

Hope, fear and greed as named pitfalls

A trading-psychology-process is a written procedure that converts hope, fear and greed from unnamed pitfalls into testable entry, exit and abstention rules.

Hope after a troubled position is described as delaying risk-limiting action and often producing a larger later loss. Hope-mode is keeping that position open to avoid realizing a loss or to reach breakeven instead of applying a risk limit.

Fear is framed as mixed. Some caution can help large accounts last, while excess fear can hinder smaller accounts. Fear-based choices should not be written into the trading manual. Fear-as-manual-rule is writing those choices into the procedure rather than keeping caution outside the rule set.

Greed is presented as the strongest of the three named emotional pitfalls that defeat a trader.

Scale-out-position on winners and losers

Scale-out-position is a preplanned partial liquidation of a winning or losing holding so remaining size is smaller before the next decision.

One specified rule is surprise-move-scale-out: selling part of a profitable holding when the move exceeds the size expected for the elapsed time, with the remaining size set by conviction.

After a winning partial sale, attention is said to shift from hoping for continuation toward watching for a retracement at which size can be restored.

A second scale-out-position rule is to liquidate a predetermined fraction of a losing trade so remaining exposure is lower and later decisions are less fear-driven.

A protective-put bound on a large long book

A protective-put is a purchased put overlay used to bound downside on a large long futures book at the cost of some upside.

The overlay on a large long futures position is offered as a hedge that surrenders some upside in exchange for a defined offset if direction is wrong.

One written process, then refine the habits

Partial gains, small-loss reduction and hedging are presented as one trading-psychology-process that restores clearer decisions at the cost of some profit potential.

A workable process is located in matching a written plan to the trader's own emotional profile and then refining those habits, rather than acting on impulse. That is an emotion-consistent-plan: a rule set sized to the trader's own impulses, then refined through repeated use rather than through ad hoc overrides.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
2 of 18 in the Scale-out position reduction track
19911-13 pp.Next on Scale-out position reductionA written game plan for checklist, scale-out and staggered stopsA written game plan reused in every cycle is presented as the device that restores focus when information flow and social pressure make the market emotionally noisy.
All readings on this track · 18 readings
  1. 1989One add option sizing with a scale-out and a trail
  2. 1991Precommit scale-outs and puts to replace impulse
  3. 1991A written game plan for checklist, scale-out and staggered stops
  4. 2004Name the stop, require a 1:3 reward, then scale out half
  5. 2005Why pre-target scale-outs lower expected value
  6. 2008Preplanned butterfly exits with stops and scale-outs
  7. 2010Qualified trend, volume breaks, and a staged scale-out
  8. 2011Gated entry and scale-out after a climactic selloff
  9. 2011First-target review: scale out or flatten
  10. 2012Tiny scale-out as a systems decision test
  11. 2014Written size and exit scripts for scaling and risk
  12. 2017Constructing livable scale-out exit rules
  13. 2017Why the simpler looking system is harder to run
  14. 2018Prewritten scale-out and exponential moving-average exit procedure
  15. 2019A dual-career swing procedure that must output entry, scale-out, or abstention
  16. 2019A same-session opening-range breakout with a whole-number stop and scale-out
  17. 2019Grade the first seasonal long-put gain as a maintenance exam
  18. 2019Failed candlestick fades with breakout permission and scale-out
By fieldDecision process416 readingsBy year1991166 readings
All 22 readings tagged Scale-out position reduction
Also on Scale-out position reduction5 readings
2012Tiny scale-out as a systems decision test2017Constructing livable scale-out exit rules2017Why the simpler looking system is harder to run2018Prewritten scale-out and exponential moving-average exit procedure1989One add option sizing with a scale-out and a trail