Scaling in refers to a trading strategy in which a trader gradually increases their position size by adding to their existing position in a security. This is typically done by buying (or selling) additional shares or contracts at regular intervals or at specific price levels, with the goal of averaging down the overall cost of the position. Scaling in can be a useful strategy for traders who believe that a security is likely to continue moving in their favour but want to reduce their risk by not committing their entire capital to the trade at once. It can also be used to capitalise on the potential for increased profits if the security continues to move in the expected direction.
Scaling out is the opposite of scaling in and refers to a trading strategy in which a trader gradually reduces their position size by selling shares or contracts of a security that they have previously bought. This is typically done by selling a portion of the position at regular intervals or at specific price levels, with the goal of locking in profits or limiting potential losses. Scaling out can be a useful strategy for traders who want to take profits on a successful trade without having to sell their entire position at once. It can also be used to manage risk by reducing the size of a losing position or to allow for reinvestment of capital in other opportunities.
