Scaling-in and Scaling-out

kazitanzib

Member
Hello traders,

All of the following are based on personal tastes; I don't sell any financial advice, and this article is not intended to be a sales pitch.

I'm sharing this information because I see many traders going bankrupt or at risk of doing so, and I don't want you to be one of them.


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Scaling-in

On occasion, I will scale into a position.
I usually gain 25% of my stake when the price dips into my Moving Average pullback zone.
If the price dips past that MA, I'll then add a full stake.


Don't add to the winners

I wouldn't suggest boosting winners.

If adding to losers is a part of your plan, I would suggest doing so.
However, statistically speaking, most traders who add to losers wind up losing more, therefore even I don't do it.

You should always plan a stop and exit at that stop (or preferably use our hard exit system)

NEVER increase your position after reaching your stop.
That is not what I recommend.

In case I miss the actual entry, I always make sure to secure a very small position early.

It enables me to still have a respectable entry even if the price declines AND it enables me to seize the opportunity if the price decides to soar.

Let's talk about exits now👇


Scaling-out

In the end, your departure strategy will be determined by your overall strategy.
However, I would advise AGAINST scaling for ANY and ALL tiny accounts.
Scaling exits should ideally only be used for accounts with enough money to buy five to ten contracts or more.


Otherwise, it's better off just take 100% off at your first target

I really really mean it.

Keep in mind that you accept a 100% loss if your Stop-Loss is hit.

Although many have many Take Profit levels and only one Stop Loss level, this should be evident.

And they question why they are losing, primarily due to elementary math (literally additions and subtractions).


A big loss is very hard to offset with multiple partial profits across multiple trades.

Here is how I would suggest putting up your exit strategy if you do have a larger account.

I think it's ideal to have no more than three targets or exits.

After 3, there is really no reason to continue to complicate your trading.

At first target, I'm pulling the MAJORITY of my profits out—more than 80% of your position.
If I don't, I frequently wind myself entering the transactions, having significant unrealized gains, but carrying nothing home with me. This is NOT ACCEPTABLE for me.
Earning a respectable sum of money and then letting everything go because I believed the trade should have progressed farther is UNFORGIVABLE.

After taking my initial partial, I prefer adjusting my stop to breakeven.

You can reserve 20% for runners once you've taken your first partial.

You can either remove all of the runners at your second target or remove half at your second target and save 10 to 15 percent for your final target.

More targets are advised the higher your account size.
Additionally, I enjoy raising my stops after each target to prevent the trade from ending in a loss.


Why do I use this scaling strategy?

If I move my stops to breakeven after hitting my first target, my strategy should maintain a respectable R/R ratio.

Since I now have less of a position on, trading is easier on me.

This allows me to get back to breaking even on the trade, and I've already sold off the majority of my position.

Twenty to thirty percent of my position is also set up as runners in case this stock suddenly takes off.

Rarely, although it has happened, the remaining 20% has brought in more money than the initial 80% had.


At the end of the day, it's up to you how you want to scale

Depending on the size of your account and the strategy you take, these are the methods I found to be most successful.

Once my trading account hit the six-figure mark, I authorized myself to have three take-profit (TP) levels and one stop-loss (SL) level, but I still took most of my profits at the first TP level and set my SL to break-even.
To explain why I don't think everyone should use the martingale strategy (a.k.a. the Dollar Cost Average approach), I'll write a separate essay.
 
 
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