Moving stops, scaling out and adding — the three interventions that most often turn a good trade into a poor one.
Key takeaways
- Move stops only in the direction of the trade, never away.
- Adding to winners requires a pre-planned scale-in, not improvisation.
- Most in-trade decisions should already have been made before entry.
The best trade management is usually the least. An entry, a stop and an exit rule decided in advance leaves little to do while the position is open, which is exactly the point — in-trade decisions are made under the influence of the position.
Moving a stop closer once the trade has moved meaningfully in your favour is legitimate. Moving it further away because price is approaching it is not risk management; it is a new, larger, unplanned trade.
Scaling in can be rational if planned: a defined second entry level, a defined total risk, and no averaging into a position that has already invalidated the thesis. Improvised additions on a whim are how a one-unit loss becomes a three-unit one.
Scaling out reduces variance and regret at the cost of some expectancy. Decide the policy in advance and apply it consistently; alternating between running full size and taking quick profits based on mood makes your statistics meaningless.
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