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How To Scale Out of Your Intraday Trading

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If you trade a stock intraday make sure to trade with at-least 5-6 lots to scale the position, or if you do not have that much money to buy so many lot futures, trade in cash. Here is how to scale out of your Intraday trading:

Decide your trade long or short by 11 am

Its not just about deciding the long or short its also about deciding the profit taking and stop loss for the day. Please note that stop loss/profits should be decided on the basis of how much you are willing to lose and take from a trade not what your system is saying. Your system does not know your worth or your financial situation, so do not leave it to the system.

This is unlike what the person who sold you a trading software must have told you – but this is for your benefit.

Now coming to how to scale out. It is one of the best ways to enter and exit positions for day trading in the stock market in my opinion. Scaling out is selling only a part of your intraday holding and keep the rest at entry point or next level.

By learning this way of taking out positions in a step by step manner you can make very good profits some days and small loss the other days.

You will never know when a big move is coming – so you must scale out partially. Once even a small profit is booked for rest of the trade you must move your stop loss to the original buy/sell position. Then if the second step is captured (means second step of profit booking) then move your stop loss to the first level of profit booking for the rest of the trade.

Please note that since you are keeping two levels of profit booking and stop loss in the system – you will need 2X (double) the margin.

Do not worry about the margin – worry about the profit or losses.

This way your loss will be fixed for every trade but you can make very big gains when the stock goes in your favor. I

Move Your Stop Up After Taking Partial Profits – Do Not Change Your Plan Whatsoever Happens

I have seen that some traders change their initial plan when they see Mark-to-market (MTM) losses in the trade. This is a trade – its not a FD (Fixed Deposit) – you may see a small loss or small profit from the very next second. Do not panic and close the trade. Let the system and your planning take care.

If you keep one stop loss and one profit booking level then sometimes you will see that the trade was in profit but the stock reversed and hits the stop loss. This problem can be solved by scaling out of positions at different levels.

One of the biggest benefits of scaling when you are doing intra day trading is that it allows you to realize profits when you have them while still keeping some of your position in the stock to capture a bigger move if they come.

When you get a good gain its always better to capture that gain instead of leaving it for a bigger gain.

Once you sell some shares, you can move your stop up and ensure that no matter what, you will have a green trade.

You Can Move Up Your Profit Taking Levels

After your first target is met and if the stock has crossed 50% path between the first target and second target then you can move your stop loss to slightly higher position than the first profit taking level to ensure more profits. However this is a very intelligent move and can be done only if the gap between the profit taking levels are big. In small gaps do not do this as it may soon hit the stop level.

On Strong Days Let The Stock Decide Profits

After capturing 2-3 levels of profit some days you will see that the stock is moving very strong then in that case you may only keep the stop loss at the first profit level or your average price and let the stock decide where it wants to be at the end of trading day. Let your RM (relationship manager) close the trade automatically just before the closing bell. However this can be done by experienced traders only – if you are not very experienced please ignore this step.

If Scaling Is A Problem Make A Good Exit Strategy

For some traders who are busy and cannot monitor the trades for them its is recommended to keep one stop loss and one profit taking level. Moving up and down the profit and stop levels needs your attention. So if you cannot monitor the trades full time because you have a job then just keep a stop loss and profit taking levels in the system and leave for your job. But please note that once a target is achieved you will have to cancel the other trade in the system, else it may get executed.

In this one stop loss and one profit taking level make sure to keep stop half or your profit taking level. For example you want to earn 10 points in a stock then keep 5 points as stop loss in the system. This way if you are profitable even 50% of the times you will gain not lose in intraday trading.


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About the author: I started trading stock markets since 2007. However my first 3 years were losses. Then I dedicated almost 1 year on studying, researching, paper trading options and learned a lot in that time. Since 2011 I am trading Nifty options profitably. Call me if you need any help trading options on 9051143004.

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