Summary on Scaling In & Out Trades in Forex is an overview of what we covered in previous lessons.
To scale in positions is to open several position with a fraction of the amount you intend to risk on the same currency pair.
You open the first position with a small size. Then keep adding more positions as price continues to advance into your predicted direction.
On the other hand, scaling out, you reduce the number of lots in a position. You close out some of the open positions as price momentum fades.
With a trailing stop, you can move your stop loss in the direction of your trade. This helps you to lock in some of your already made profits as you exploit the entire trend.
Alternatively, you can reduce on the size of your position size to partially close trade
Entering the market in fractions or exiting trades in fractions does not only increase on your profits but also reduces on losses.
Why you should use scaling in and out trades in forex
- In case price goes against you after your entry, you will lose less money than risking the whole amount at once
- Scaling in also allows you to choose the best entry level for your trades.
- Closing out trades in fraction helps you to reduce on risk exposure and limit losses while saving some of your profits.
- Scaling out also protects you from sudden price reversals that are may wipe out your entire profits being made.
However, scaling in and out has its own short comings. Summary on scaling in and out trades in forex risks.
Disadvantages of scaling – summary
- In case you trade out side your trading plan, scaling in can increase the overall exposure of your account to risk. A sudden price reversal can wipe out your whole risked money.
- Having more positions on the same pair, increases trade size which is high risk for your account.
- Last but not least, scaling out on trades, reduces your overall profit.
For proper risk management on you trades, use stop loss target to limit your losses.
You can also trail your stop loss. This helps you to lock in already made profits to avoid unpredictable price reversal.
Why you make small profits and take big losses?
Major Reason why You make Small profits and take Big Losses in Forex is because you have lost market objectivity. This is due the influence of greed, fear, regret and revenge. You trade what you are thinking instead of what you see! The problem is that traders want to...
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