Scaling In And Out of Trading Positions | CFI
Scaling in and out of positions

Scaling in and out of positions


If any trader is sure the next deal will be a winner, he will use all his capital to enter this transaction, but because trading is based on the probabilities, it is impossible to say whether the next position will be a winner or loss, so professional traders use small trading volumes at the beginning of the deal and the more confident they will be in the success of this trade, they decide to buy more contracts or shares to increase the expected profits and take advantage of the validity of their expectation. The trader sells some quantities to book some of the profits and reduce the risk. This method is widespread among professional traders, especially what is known as Trend Following Trader.


What are scale-in and scale-out?

Scaling in trade means opening a position with a fraction of the capital you intended for yourself to enter more positions when the trade moves in your favor. 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 prices move higher in the trend direction to improve their dollar cost average. 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 willin