Scaling-in and Scaling-out
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
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
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📧 Coding/Consulting Inquiries: dave@best-trading-indicator
Telegram: Daveatt
⏩ Course: best-trading-indicator.com
Twitter: twitter.com/bti_trading
📧 Coding/Consulting Inquiries: dave@best-trading-indicator
Telegram: Daveatt
⏩ Course: best-trading-indicator.com
Twitter: twitter.com/bti_trading
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