Scaling in on a Trade


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Video Transcription:

Hello, traders and welcome to the Pro Trading Course and the Third Module, Think Trade: Follow Global Market Trends. In this lesson we are going to learn how to scale in on a trade. And remember that we are swing trading. So we are going to be extremely patient when it comes to scaling in. And sometimes you’re not going to be able to scale in, all right. For example, if you remember the GBP/Japanese Yen trade that I showed you on this module, well once we got in on the trade, well let me show it to you again. Once we got in on the trade, well price moved extremely fast to the down side, all right. Not giving us any opportunity to scale in on it. We hit our targets, but we could haven’t possibly scaled in on this trade.

So what we’re going to do, I’m going to show you how you’re going to be able to scale in sometimes on your swing trades by using the method of trailing your stops with it, all right. And these two method go hand in hand. And I’m going to be completely honest. Some traders don’t trail their stops using this method. But they only use it to scale in on trades. Now you can do both, all right. Now let’s look at price action right here, okay. And let’s say that we are already in the trade and then we break the downside. And price starts to move in on us, all right, or move against us. What we’re going to do is we’re going to move our stops just above the last low that we broke, all right. And we are going to wait for a retest.

Scaling in on Trades

But this can also be used to scale in on a trade. Meaning that you’re going to put a pending order right here, all right. Just below the broken level, waiting for a retest on it, all right. Just here. And this green line at $46.59 is your second entry level, okay. You are going to put the stops on your second entry level, also right here. And the reasoning is that if you’re going to be taking on your first entry you’re also going to be taking out on your second entry because your trade idea is no longer valued. But in this case, you can see that we tested the area. We have the two stop losses right here, you can see them both right here. And well what happens is that we tested the area, we got in, or we got filled on our second entry, or the way we scaled in on the trade, and then we hit our targets, all right.

Now, you need to understand one simple thing. You are not going to be doing this every single time. For example, you have another new low right here, okay, which can also be used for a retest. But, I mean, it’s very close to your target, and you don’t want for price to turn on you and take you out on a losing position while you still have two positions in the money, all right. So what you’re going to do here, you are going to use this method only on big retracements, all right. Because if you use it on small retracements, just like this one, or just like this one, all right, you might get in and win some trades, but you are not being logical in the order or scaling in. You need a big retracement in order for you to be able to move forward. If you have a small retracement, you’re not even trading a retracement, you might only be trading noise in the market.

Scaling in on Trades1

So, to recapitulate, we need a break of the previous low. We need a substantial move to the down side. In this case, the down side because we are trading the short side. A big retracement back for us to be able to put our pending order as a second entry, all right. Right here, we do break with this low, but the retracement is just not deep enough, all right. And if we continue to look at this previous low, or at this broken previous low, we do have some kind of a move to the downside. Where you can see that the retracement is just not big enough. Even though we retested the level before moving back, but by putting a pending order right here, we are not trading high probability set ups and we are just trading on a wishful thinking kind of way.

So, three things. First of all, the break of the previous low in a down move, or the previous high in an up move. Then, a substantial move in our favor and a deep retracement, all right. These are the three things we need in order for us to be able to scale in on a a trade. And profit even more off a high probability set up or a trend that we are already in.

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