Scaling in means entering a trade in pieces: half at the first signal and half on a pullback, or a starter position that grows as the trade proves itself. The position ends up with several fills and one average entry price.
Average entry
average entry = Σ (fill price × fill size) / Σ fill size
Example
You buy 1 lot of EUR/USD at 1.0850, then another 1 lot at 1.0830. Average entry is (1.0850 + 1.0830) / 2 = 1.0840 on 2 lots. With a stop at 1.0810, the risk is 30 pips × $10 × 2 = $600.
Had you planned for $300 of risk, this second fill doubled it. That is the main danger of scaling in: each addition must be counted against the risk you planned, measured from the average entry to the stop on the total size.
Two different ideas
- Pyramiding adds to a winner, usually with the stop moved up so the total risk stays the same or falls. Used by trend followers.
- Averaging down adds to a loser to improve the average price. It turns a planned −1R into −2R or −3R when the trade keeps going against you, and it is behind many blown accounts. Many traders tag it as a mistake.
Journaling scaled trades
Record each fill with its own price and size. A journal that only keeps one entry price will compute the wrong P&L and the wrong R as soon as the fills differ, which is one of the first places a spreadsheet breaks.
In SetupBook
The trade form takes any number of entry fills and exit fills on the same trade. The average entry, the risk from the average entry to the stop on the full size, the net P&L and the R are all computed from the fills. The trade opens at the first entry fill and stays open until the exit fills add up to the entry size.