Showing posts with label Trade Management. Show all posts
Showing posts with label Trade Management. Show all posts

Wednesday, March 23, 2016

Stop Scale Out Method

Additionally to the Tactical Risk Management with the scale out method discussion, I thought about the possibility to scale out of a losing trade and how this would look in a potential trade scenario. So, I've added a third column to our known figure that compares a normal Scale Out Method, No Scale Out Method (All-In/All-Out) and the additionally Stop Scale Out Method.

The trade scenario: 3 Contracts, Target: 5 Points, Stop: 3 Points. The Stop Scale Method scales out of a losing trade at 1 Point, 2 Points and the final third contract at 3 Points with a static (All-Out) 5 Point profit target. One thing to make clear: This is one possible trade scenario, so preferably avoid thinking we want to trade always with a 5 Point Target and 3 Point Stop. It depends on the trade situation and the situation adjusts the risk parameters (Stop/Target) higher or lower. Anyway, here the figure with the additionally Stop Scale Method: