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c08 JWBK182-McDowell April 25, 2008 16:4 Printer: Yet to come

CHAPTER 8

Scaling Out and

Scaling In

T

he technique ofscaling outis a favorite of mine for reducing stress

when the market has a quick turn in my favor. By taking just a small

portion of my winning position off the table to lock in profit, I’m less

likely to panic out of a trend that may still have a long way to go. Here

again, the right side of the chart has an uncanny way of creating anxiety.

Looking for a signal of some sort that tells me that it is a good time to scale

out takes the randomness out of the decision process.

And of coursescaling inis a great way to generate additional profit

when your signals tell you that there is a strong trend in place. Here we’ll

talk about how to be sure you still keep your risk in line when you scale

in, or add on, to a position. You’ve got to calculate the proper trade size so

that you keep your risk percent in line.

SCALING OUT LOCKS IN PROFIT

AND RELIEVES ANXIETY

Scaling outof trades is a technique that can convert some losing trades

into profitable ones, reduce stress, and increase your bottom line. You can

usescaling outtechniques fortrend trading,scalping,andcountertrend

trading.Anditworksonalltime frames.

It is important to reduce stress while you’re in a trade. Then you can

focus on the trade and not be subject to emotions such as fear and greed.

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