Thread by @stocksnipa

🧵 SCALING OUT THREAD 🧵

Day-trading is all about maximizing your winners and minimizing your losses. Here’s a strategy on how I lower my risk and increase my win percentage

👇

(1/11) Scaling out lowers risk in several ways, to start with there is less capital at risk after every scale. This also increases the chance of a net win by lowering the breakeven price.

(2/11) Example: If I had 10 contracts @ 1.00, I would have $1,000 at risk. If I sold 5 of them at 1.15, I would realize a $75 profit while returning $500 of previous capital back to cash. This means I would need more than $425 from the remaining 5 contracts to secure a net win

(3/11) I personally have 4 scaling points, I call them the Secure the win scale, Solid Win scale, Open runners, and free runners.

(4/11) The Secure the win scale is where I like to exit 50% of my contracts. I do this because it significantly increases my chance of having a net win on the trade. Generally, I like to do this around 15-20%.

(5/11) The Solid Win Scale is where I personally like to collect 25% of my total position size. This is 50% of my remaining contracts. The objective of this scale is to solidify a solid win based on percentages or a dollar figure I personally like.

(6/11) I like to call my next scaling point the Open Runner Scale. The objective of this scale is to secure profits (generally large gain) when the stock can be slowing down or showing signs of reversal. This scaling point sometimes can be skipped based on how much capital I gain

(7/11) My final scaling point is the free runner phase. The only difference between this scale and the open runner scale is it’s free. Hypothetically if the remaining contracts lost all of their value (.01) I would still have a net win on the trade.

(8/11) When I scale, I also raise my stop. When I secure the win I like to set my stop near the entry price, sometimes a little lower, sometimes a little higher, all dependent upon premiums. I want to set a stop that will ensure I have a net win.

(9/11) When I secure a solid win, my stop is normally half way between my initial scale and my initial entry. This significantly increases my chances of winning on all of the contracts.

(10/11) After I execute my open runner scale, I set my stop approximately halfway between my previous scales. This gives room to not be stopped easily and helps preserve more capital. I do this vise versa with the free runner scale.

(11/11) Let me know how you liked it! Dropping a few more threads this week stay tuned!🚨