What Is Scale In?
Scale In is a trading strategy that involves buying shares as the price decreases. To scale in (or scaling in) means to set a target price and then invest in volumes as the stock falls below that price. This buying continues until the price stops falling or the intended trade size is reached.
Scaling in will, ideally, lower the average purchase price, as the trader is paying less each time the price drops. If the stock does not come back to the target price, however, the investor ends up purchasing a losing stock.
Here is my scale in strategy, and it works!
It works so much that I can say that my success rate is over 90% in any type of trade.
Step 1: You must understand the direction! This is where the TT Blackbox comes in.
Step 2: Have a plan! If my plan is to take a total of 1,000 shares, I want this trade to be successful on less than that. The reason, I don’t want to be MAXED out.
Example: I want 1,000 shares total. I will split that trade up 8-10 times for entries.
I’ll enter with 100 shares at a time and then WAIT.
Once my profits go green, I’ll let it run until I take profits.
If I only scale in with a total of 500 shares out of the intended 1,000 that I originally wanted, I don’t care! I’m making money and that leftover money is now my buffer in case it goes bad.
This logic is true for options contracts as well.
What are the benefits of “scale in”?
Scaling into and out of trades allows you to get in the game without worrying if “I’m getting this stock at the absolute bottom”.
You go in knowing you may buy some shares at a higher price, and you may buy some at a lower price – but what’s important is that you own the shares if that’s part of your strategy and that you get in the game and off the sidelines. You can use this same strategy with options trading as well.