January 2012
Intermediate to advanced
624 pages
17h 49m
English
Chapter 31
Scaling Into and Out of a Trade
Scaling into a trade simply means that you are entering again once you are already in a position, and scaling out means that when you exit, you exit only part of your position and look to exit the rest later. More traders are willing to scale out than are willing to scale in; in fact, many traders regularly scale out of trades. For example, if you exit part of your position for a scalp and then exit the balance for a swing, you are scaling out of your trade.
Scaling into a trade means that you are adding to your position. Institutions like mutual funds have to scale into and out of positions constantly because they receive new money and requests for redemptions every day. Individual traders commonly use scaling in when they enter in the direction of the trend during a pullback and when fading the extremes of a trading range, and when they dollar cost average. Scaling into a potential reversal is very risky; it is usually better to exit if the market goes against you and then look for a second entry.
You can scale in either as the trade moves against you or as it moves in your direction. If you scale in after you already have a profit, this is also referred to as adding to your position, or pressing your trade. For example, if the market is in a bull channel, bulls will add to their positions on every pullback as the market goes higher. The same is true of a strong bull spike. Many traders quickly add to their longs as the spike rapidly ...
