Now that you know how to set proper stops and calculate the correct position size, here’s a lesson on how you can get a little creative in your trading.
For those trading multiple position sizes, you can get really flexible and creative on how you manage your risk by “scaling” in and out of your positions.
What is “scaling” and why would you use it?
Scaling in doesn’t mean weighing yourself before, during and after a trade (although it doesn’t hurt to monitor that too!).
Scaling basically means adding or removing units from your original open position.
This technique can be incorporated into your original trade plan OR for the more experienced trader, if the conditions of your trade changes then you can add or remove from your position in the middle of your trade.
Scaling can help you to adjust your overall risk, lock in profits, or maximize your profit potential. Of course, when you add or remove from your position, there are potential downsides to be aware of as well.
In the following lessons, we’ll teach you all about the benefits and drawbacks of scaling in and out of trades. We’ll teach you the CORRECT way to do this so that you don’t go crazy because you took on too much risk and blew out your account.
The biggest benefit is a psychological one.
Scaling in and out of your position takes away the need to be absolutely perfect in your entry or exit.