Introduction Scaling is adding or subtracting units from your open positions. Scaling allows traders to adjust overall risk, lock in profits or maximise your profit potential. Benefits and Drawbacks The main benefit is that scaling allows traders to enter positions gradually, which reduces the initial risk. It also allows you to take-off small parts of your position thus locking in profits. These two benefits have a huge psychological impact on traders, as traders don't need to get it right all of the time when scaling. The main drawback is when you add to a position, exposure and overall risk on capital increase. We'll explore the best way to scale-in later in this module. On the flip side, when you take money out of an open position (scale-out) you reduce your potential profit. Scaling Out
Scaling In You can scale in to losing and wining positions. New Traders should NOT scale in to losing positions. Scaling in to a losing position, can increase losses substantially if you don't know what you're doing. This is one for the Pro's, so we won't talk about scaling in to losing positions at this point. Scaling in to wining positions is done by trend traders and shouldn't be done if trading in a range. When scaling in traders should always take into account their total risk, calculate the position size on every trade and set a trailing stop. Let's look at an example where the traders total capital is $100 and the risk is 1% (or as near as damn it) throughout the total trade.
To Sum Up It's important to remember:
Technical analysis is not an exact science and although these ideas can increase the probability of making the correct trade, many will go against you and large losses can be incurred. Your own trading strategy needs to be formed and hopefully you'll be on your way to achieving this on completion of this course.
|
Comments
Comments
Comments
Comments
Introduction Scaling is adding or subtracting units from your open positions. Scaling allows traders to adjust overall risk, lock in profits or maximise your profit potential. Benefits and Drawbacks The main benefit is that scaling allows traders to enter positions gradually, which reduces the initial risk. It also allows you to take-off small parts of your position thus locking in profits. These two benefits have a huge psychological impact on traders, as traders don't need to get it right all of the time when scaling. The main drawback is when you add to a position, exposure and overall risk on capital increase. We'll explore the best way to scale-in later in this module. On the flip side, when you take money out of an open position (scale-out) you reduce your potential profit. Scaling Out
Scaling In You can scale in to losing and wining positions. New Traders should NOT scale in to losing positions. Scaling in to a losing position, can increase losses substantially if you don't know what you're doing. This is one for the Pro's, so we won't talk about scaling in to losing positions at this point. Scaling in to wining positions is done by trend traders and shouldn't be done if trading in a range. When scaling in traders should always take into account their total risk, calculate the position size on every trade and set a trailing stop. Let's look at an example where the traders total capital is $100 and the risk is 1% (or as near as damn it) throughout the total trade.
To Sum Up It's important to remember:
Technical analysis is not an exact science and although these ideas can increase the probability of making the correct trade, many will go against you and large losses can be incurred. Your own trading strategy needs to be formed and hopefully you'll be on your way to achieving this on completion of this course.
|
Comments
Comments
Comments
Comments