Chapter 4 How to Scale out of Positions
Scaling out is a similar concept to scaling in, but in reverse. Rather than letting a trade hit a profit target and close out the entire position, we instead partially close the trade, and let the rest have the opportunity to move further into profitable territory. This secures a profit but also leaves the door open for further gains.
It is also common to move your stop loss to break even or beyond when an initial profit target is hit. That way the remaining position you have open is almost “risk-free”. You can see an example of this in the chart below.
The chart above shows a winning trade was scaled out as part of the position was taken off at each stage of the upward move. The first exit was taken out of the market once the initial move upward had finished, leaving two further positions to take advantage of the continued upward trend.
This technique reduces your overall profit, because, of course, you would have made more if you had left the entire position open for the duration of the entire upward move. However, scaling out protects the profit you have. For scaling out to work well, the market needs to be trending.
How to scale out
Imagine that you trade NZD/USD. You have
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