Tackling Trading Conflicts

The Power of Scaling

Closing Partials

Scaling is inferior, no one should scale out of a trade. You are either all in or all out”

I’ve heard this several times before. And logically you could argue that’s correct… But in the real trading world, logic often doesn’t apply.

You’ve got to trade both the market and your mind.

Eg: If you are long and the price has run strongly up to a heavy resistance level, your internal dialogue looks something like this:

“Well that’s a nice profit, it’s hit resistance, I should close it”

“Yeah but look how strong it is, this thing could do another huge leg. Hold the trade”

“It could, but I’m up a decent amount here, I don’t want to lose it”

“You are, but you can’t trade your unrealised P&L. The market is strong, don’t touch it”

And so you wait.

The market starts to pull back and you start to see the unrealised profit drop. You panic and close the trade. It’s bittersweet. Yes, it’s a profitable trade, but you know it wasn’t traded well.

You neither closed at P&L highs nor held, you just kind of wobbled at the last minute. Worst of both worlds.

Now textbooks will tell us to stick to the plan, hold or don’t depending on what your plan says. All 100% correct. But in the real world as a developing trader, your chimp brain is having a big heated argument. And that’s exhausting.

One way for both sides to ‘win’ is by scaling.

Part of you wants to hold and part of you wants to close. So scale some. Take some profit and leave some to run. It soothes the conflict in your mind.

If the price continues on you still have a portion. If it falls back, you have locked some in.

Then as you improve, you can use scaling as a “chimp soother”! Feed it just enough to keep the internal conflict voice at bay, and hold the rest of the trade to maturity.

Today, think about how you could incorporate strategic scaling in your trading.

Plan out your scaling strategy, what % will you scale and under what conditions?

Have a think and make a plan.

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The Chimp Paradox

This won’t be new to many of you, but if the whole “chimp” thing doesn’t mean anything, I highly recommend this book:

The Chimp Paradox: The Acclaimed Mind Management Programme to Help You Achieve Success, Confidence and Happiness

It helps you to understand why you think the way you do..