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Why scaling out properly is important

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Hello fellow members!

Yesterday i had some discussion with a friend and i tried to explain him some trading basics and we came to a point when i needed to explain to him why the scaling out properly plays an important part in the whole mechanism and can make the difference between a GREEN and a RED trader in long term.

So here i am providing it to you for further discussion.

Lets say we do 5 trades of a stock which costs $100 and we take 100 shares with the stop loss on $99.5 and possible target on $101 and above. So a 1/2 Risk/Reward.

Here are some example set of trades you do, the first one being a 1R loss, just to make it more visible and make the point


So you do various methods of scaling out and make $300, while risking $250. At least you are green! Right?


Now lets take into consideration some bad or good habbits. If you do it once, then you do it twice...


You would think that things will get much better if you start scaling out on 1R at least but still the risk and reward turns out to be 1:1 in total.


So you start to scale out according to the trade plan - by reaching the 2R


Things change dramatically in your favor if you start to do the right thing and trade the plan



And this is the case some traders tend to do - take some profit at least to be safe...


As you can see, it has no ratio to do this and even with 80% accuracy of your trades you do not get the scale on your side. So just do it right! 🙂

The above examples counted with 4 of 5 trades to be green which is 80% accuracy and that is quite unrealistic. If you count it with 3 RED trades, the numbers are even worse!

See below


And the requirement of scaling out properly to keep the green numbers is even more obvious! Even 3 RED vs 2 GREEN  (40% accuracy) makes you a profitable trader.


If you struggle with it, ask your self: Why can you wait for the stop loss of 1R and not the profit of 2R (at least) you planned in your trade?

I hope this helps to understand someone the importance of scaling out properly and not too soon.

Now go to see your trading journal and see what you did 🙂





Edited by peterB
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Thanks for posting this. I used to scale out before reaching 2R and now i only take 50% off when i reach 2Rs and then scale when I reach an additional R, similar to what Kurt and Aiman do.

The reason I was scaling out earlier than 2R is because I was taking too big of a size, I am now risking 1/3 of my max loss in every trade and looking for opportunities with 3:1. 

The only times I get out before my stop loss or profit target are when the stock is not moving, the tape gets slow or it gets choppy and i feel i am not using my time wisely.

Scaling out at 2Rs is important as you will be able to:
1) take smaller size
2) git it more room on stop loss
3) make more money

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