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2014issue C0437

Written size and exit scripts for scaling and risk

The archive keeps scale-in and scale-out as separate procedures inside a written-plan: a default full-size entry from the working-lot, a scale-out that protects the remaining stub, and a risk-reward-bound that can force an earlier exit when conditions change.

  • Scale-in and scale-out are separate procedures, not one interchangeable add-or-reduce habit.
  • If a working-lot is already in use, the documented default is a full-size entry, with share size reset to actual account equity after a broad advance.
  • A documented scale-out pairs a partial sale near the target with a nearby protective level so the remaining stub cannot erase that target.
  • The risk-reward-bound matches the largest tolerated loss to the planned dollar gain before the trade is live, and a change in conditions is a reason to exit before that full loss is used.
Entries in this reading3 entries
Current trackScale-out position reduction22 readingsScale-in position adding34 readingsRisk-reward ratio78 readings

Size and exit as one written script

The archive treats scale-in and scale-out as separate procedures, not as one interchangeable add-or-reduce habit.

Entry, exit, and size rules are to be written while the trader is calm, then reviewed and adjusted, with adherence treated as the binding part of the procedure.

Full-size entry from the working lot

When a trader already uses a habitual working-lot, the documented default is a full-size entry rather than a staged scale-in. Scale-in is adding to a position after the first fill instead of taking the full planned size at entry.

After a broad market advance, share size is supposed to follow actual account equity, not the larger size that would be justified only if the account itself had grown. The working-lot stays tied to current account equity rather than to a market-wide advance.

A protected scale-out and a same-dollar bound

A documented scale-out pairs a partial sale near the planned target with a nearby protective level so the remaining stub cannot erase the purpose of that target. Scale-out reduces a working position in parts after a favorable move, while that nearby protective level remains in force.

Risk and reward are reduced to a risk-reward-bound. The planned gain amount also caps the loss the plan will tolerate, and that match is set before the trade is live.

A change in market conditions after entry is treated as a reason to exit before the full planned loss is used, leaving room to re-enter at a better price.

Write the plan before a third layer

Adding a third layer to a losing name is the point where averaging-down is called out as especially costly, because a sale would have freed cash for a later, lower entry.

The written-plan holds the entry, exit, and size rules recorded in calm conditions. Those rules may be reviewed and adjusted. They are not meant to be abandoned in the middle of the procedure.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
11 of 18 in the Scale-out position reduction track
201760-66 pp.Next on Scale-out position reductionConstructing livable scale-out exit rulesEditorial reading: treat opportunity-loss pain as a construction constraint, not a character flaw, so the same rules can enter, reduce, hold a remainder, or abstain.
All readings on this track · 18 readings
  1. 1989One add option sizing with a scale-out and a trail
  2. 1991Precommit scale-outs and puts to replace impulse
  3. 1991A written game plan for checklist, scale-out and staggered stops
  4. 2004Name the stop, require a 1:3 reward, then scale out half
  5. 2005Why pre-target scale-outs lower expected value
  6. 2008Preplanned butterfly exits with stops and scale-outs
  7. 2010Qualified trend, volume breaks, and a staged scale-out
  8. 2011Gated entry and scale-out after a climactic selloff
  9. 2011First-target review: scale out or flatten
  10. 2012Tiny scale-out as a systems decision test
  11. 2014Written size and exit scripts for scaling and risk
  12. 2017Constructing livable scale-out exit rules
  13. 2017Why the simpler looking system is harder to run
  14. 2018Prewritten scale-out and exponential moving-average exit procedure
  15. 2019A dual-career swing procedure that must output entry, scale-out, or abstention
  16. 2019A same-session opening-range breakout with a whole-number stop and scale-out
  17. 2019Grade the first seasonal long-put gain as a maintenance exam
  18. 2019Failed candlestick fades with breakout permission and scale-out
By fieldDecision process416 readingsBy year2014163 readings
All 22 readings tagged Scale-out position reduction
Also on Scale-out position reduction5 readings
1989One add option sizing with a scale-out and a trail1989Shorter series need fewer recovery hits and raise scale-in cash1998Cash recovery grids for residual share construction2014Equal-dollar staging versus lump-sum and residual scaling2004Name the stop, require a 1:3 reward, then scale out half