Beginning day traders usually trade 1 futures contract (or 1 group of 100 shares, or 1 forex lot), so their trading is all in all out (meaning there is one entry and one exit). More experienced and professional day traders trade multiple futures contracts (or groups of shares, or lots of forex), so they have some flexibility with their entries and exits (such as one entry and several exits, or several entries and one exit).
What is Scaling In?
Scaling in is the process of using multiple separate entries to enter a trade. For example, a trader that is trading 4 futures contracts might enter their trade using three different entries of 1 contract, 1 contract, and 2 contracts. These entries would most likely be at different prices, and may be in response to different entry signals, or even different trading systems.
Reducing Risk
When it is used correctly, scaling in can be used to reduce the overall risk of the trade. For example, if a 4 contract trade is initially entered using 1 contract, and the price moved in favor of the trade, the remaining 3 contracts would be entered, and all 4 contracts would be profitable. However, if the price moved against the trade, the remaining 3 contracts might not be entered, thereby taking a loss of only 1 contract instead of 4 contracts. This type of scaling in strategy, significantly improves the risk to reward ratio, thereby reducing the overall risk of the trade.
