Scaling-in and Scaling-out

20 באוק׳ 2022

Hello traders,

All the below are based on my preferences, I don't give any financial recommendations and I have nothing to sell you with this article.
I'm sharing content because I see a lot of traders being/becoming broke and I don't want you to be one of them.

Scaling-in

There are times when I will scale into a position.
When the price dips into the my Moving Average pullback zone, I'll typically get 25% of my position there.
I'll then add a full position if the price dips past that MA

Don't add to winners

I wouldn't advise adding to winners

I would advise adding to losers IF it's part of your plan.
Though, most traders adding to losers end up losing more statistically.... then even I don't do it.

You should always have a stop in place and get out at your stop (or preferably use our hard exit system)

NEVER add to your position after your stop has been hit
That's not what I'm advising

I always make sure to get in a very small position early in case I miss the real entry.

It allows me to still have a decent entry if the price drops lower AND allows me to catch the move if the price decides to rip

Alright, let's talk about exits👇

Scaling-out

Your exit strategy will ultimately depend on your overall strategy
However, for ALL small accounts, I'd recommend NOT to scale.
Scaling exits should really only be for accounts that can afford to take multiple contracts (5-10+)

Otherwise, it's better off just take 100% off at your first target
And I really mean it

Remember, when your Stop-Loss hit you take 100% of a loss.

This should be obvious.... though I see plenty having multiple Take Profit levels and 1 Stop Loss level

And they wonder why they're losing.... mostly because of basic mathematics (literally additions and subtractions).

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

If you do have a larger account, here's how I'd recommend setting up your exit strategy

IMO, it's best to only have 3 targets/exits MAX.
After 3, there's really no need to complicate your trading anymore

I'm taking the MAJORITY of my profits out at first target...80+% of your position
Otherwise, I very often end up taking the trades, having a lot of unrealised gains but bringing back home nothing.... which is NOT ACCEPTABLE for me.
It's UNFORGIVABLE to earn a decent amount of $$ and letting everything go because I thought the trade should have gone further.

I like moving my stop to breakeven after I've taken my first partial

After you've taken your first partial, that's when you can leave 20% for runners.

You can either take the remaining runners out at your second target
or
Take half out at your second target and leave 10-15% for your last target

The larger your account size, the more targets I recommend you have
I also like moving my stops up after each target to make sure the trade doesn't go red

Why do I use this scaling strategy?

By taking the majority of my size off at my first target, it allows my strategy to keep a decent R/R rate, assuming I move stops to breakeven

It also leaves my trading more stress-free since I have less of a position on.

Allows for the trade to come back breakeven and I've already taken most off

On top of that, I have 20-30% of my position as runners in case this stock starts to explode

Doesn't happen often, but sometimes the remaining 20% ends up netting me more profit than the original 80% did.

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

These are the methods I found most effective, depending on your account size and your strategy.

Conclusion

- As a beginner, I used to stick with 1 TP/1 SL only and that's how I brought home gains
- Once my trading account reached the 6 figures threshold, I allowed myself to have 2-3 TPs but I was taking most off the table at the first TP level and automatically moved my SL to Breakeven
- Adding to losers (aka the Dollar Cost Average method) also called martingale is a solid way for most beginners to depart from their money quickly - I'll make another article on martingale and why I think it's not for everyone