averaging is not the same thing as scaling in..... scaling is usually referred to as 'adding to a winning position'. maybe some others refer to it as something else
true but sometimes people scale into their position and add it in chunks, regardless if they are losers or winners, think swing traders for example
My current forex game-plan involves a blend of scaling out and adding. The objective is to increase return while not increasing risk. For example, Trade 1 is opened in an uptrend with a capital risk to its initial stop-loss of 1%. when T1 reaches +1%, I close half of it and start looking for another buy opportunity. When a second buy opportunity prints I add Trade 2, also with a 1% risk. When T2 reaches +1%, I close half of it and look for an opportunity to open Trade 3 and so on. This continues until the uptrend weakens such that I would start ignoring buy signals.
I believe in never adding to losing positions. I start very small size for swingtrades and add gradually to winners. Unfortunately I sell too soon vs slowly scaling out during pullbacks.
its a loaded question but generally speaking i'd say over the long term it would probably be about the same profit wise.
Why is that? As an educator do you not teach the importance of having a trading plan and having the discipline of sticking to your plan? It would be interesting to see your plan for scaling out. I know a swing trader that scales out. 1/3 of a position at the initial target and move stop to just above break-even. (lock in a profit) Next 1/3 at the first sign of a reversal.(trend break or ma cross) Last 1/3 with a trailing stop. (1/2 way between high and break-even) The last 1/3 has the possibility of capturing the runaway moves and becoming a long term hold.
In utility space scaling in is analogous to widening a stop-loss. It's risk-affine (convex coefficient). At least that's how I think of it. Scaling out is consistent with risk-aversion (concave). It doesn't mean you have to do it, but it's consistent with maximizing terminal wealth. This link might help: https://en.wikipedia.org/wiki/Risk_aversion
Good points.. for example I'm long 200 UVXY from overnight, I'm stopping out 160 shares here soon since 2day low. I've got 3 orders in to rebuy if it goes up. Formerly I would have scaled out in thirds or halves. It's my 57th birthday today so I give myself the gift of tighter stops
happy birth day with this covid i am happy to see the sunrise everyday wanted to ask you a question since you seem to be a accomplished trader. if it is said that the market tests resistance....and the test fails ....does that mean the market [a] breaks through the resistance or the resistance holds.? i read my first book in 1994 but i still do not know this