To scale out or not to scale out,

Discussion in 'Trading' started by Stockboy, Jan 18, 2021.

Do you even scale

  1. Yes,

    14 vote(s)
    73.7%
  2. No, all or nothing

    5 vote(s)
    26.3%
  1. padutrader

    padutrader

    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
     
    #21     Jan 19, 2021
  2. 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
     
    #22     Jan 19, 2021
  3. tomorton

    tomorton

    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.
     
    #23     Jan 19, 2021
    comagnum likes this.
  4. KCalhoun

    KCalhoun

    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.
     
    #24     Jan 19, 2021
    comagnum likes this.
  5. VEGASDESERT

    VEGASDESERT

    its a loaded question but generally speaking i'd say over the long term it
    would probably be about the same profit wise.
     
    #25     Jan 19, 2021
  6. deaddog

    deaddog

    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.
     
    #26     Jan 19, 2021
    KCalhoun likes this.
  7. bluelou

    bluelou

    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
     
    Last edited: Jan 19, 2021
    #27     Jan 19, 2021
  8. KCalhoun

    KCalhoun

    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 :D
     
    #28     Jan 19, 2021
  9. padutrader

    padutrader

    yeah..does not matter what you call it

    advise caution with that strategy
     
    #29     Jan 19, 2021
  10. padutrader

    padutrader

    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
     
    #30     Jan 19, 2021
    KCalhoun likes this.