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Hi everyone,
I love the idea of scaling in and how this can improve the probability of success if managed correctly.
The problem is that, in order to scale in, you have to trade, say, 1/3 or 1/2 of you regular position. That means that either you will be able to scale in and hopefully make a profit, or the market will go your way and you will profit with ease - but it will be only 1/3 or 1/2 of your potential profit.
So there is a big drawback in scaling in: if the market goes in your favor, your profit will be way smaller than it could.
Am I missing something here, or that's correct?
That being said, do you guys always trade small, planning to scale in if necessary, or perhaps there are specific situations where you decide to prepare for scaling in?
If there are specific situations, what would those be?
Thanks in advance,
Best,
I love the idea of scaling in and how this can improve the probability of success if managed correctly.
I highlighted the "If" in your sentence. This if has sent many accounts to the cemetery and will also happily take yours. This if is the last stage in learning PA. If you don't make money with stop orders you will not be able to read the chart well enough to make money with wide stops and scaling-in. Scale-in is tempting, but Al does not recommend beginners to try it.
The problem is that, in order to scale in, you have to trade, say, 1/3 or 1/2 of you regular position. That means that either you will be able to scale in and hopefully make a profit, or the market will go your way and you will profit with ease - but it will be only 1/3 or 1/2 of your potential profit.
I would say 1/5 or lower if you don't want to exceed your maximum allowed dollars at risk when you have to add to the position.
So there is a big drawback in scaling in: if the market goes in your favor, your profit will be way smaller than it could.
The really bad thing is that your losses will be really big so you really need a 90% to make it work. Not realistic if you don't make money with stops first.
That being said, do you guys always trade small, planning to scale in if necessary, or perhaps there are specific situations where you decide to prepare for scaling in?
I am profitable long ago and I very rarely do scale-in. The right beavior to do scale-in is TR PA. For instance, buying the lows in a bear broad channel, or at the bottom of a TR, and you need to trade really small to be able to leave emotions out and manage correctly.
Awesome insights, @ludopuig
I better stay away from scaling in for now, but really appreciate your help.
Best!
My thoughts on scaling in:
- For expert traders only, a trader who earns a living from trading
- Scaling in as a beginner interferes with learning to take a loss
- Beginners focus on money and losses, scaling in appears to make one a better trader, but it leads to poor market reading and trade management.
- An expert has excellent market reading and trade management skills, therefore scaling in is just another tool to help succeed
- To a beginner, scaling in might work 80% or so, because the market is usually in a range, however, the 20% during a trend or breakout will decimate an account and mental well being
