≈ Scaling Away ≈
Want to increase the likelihood that your sum of winners exceeds the sum of your losers? Increase your average gain. How you do this depends in large part on your type of strategy. Milking profits from a cash flow trade like naked puts and covered calls is entirely different than doing so with long stock or a long call option. This is because one has a limited reward, and the other has an unlimited reward.
For brevity’s sake, we’re focusing on those with unlimited reward.
You buy a stock for $50, and it quickly moves to $55. Now you’re faced with the happy dilemma of when to take profits. Rather than holding pat or going all out, how about doing a little bit of both. Scale out, in other words.
Taking partial profits is the ultimate compromise. It’s psychologically pleasing because it allows you to sate both your fear and greed simultaneously.
Chart of the Day
Canopy Growth Corporation
Canopy Growth Corporation (Ticker: CGC) was a recent bullish trading candidate from our Options Report. The stock broke out of its high base pattern at $35 and has made a nice move to the upside. If you bought it at $35, then you are sitting on a tidy profit. Instead of staying all in or going all out, traders might scale out and sell some of their position to lock in some profit.
Video of the day
Trade Masters – Hot Trading Picks from Tackle Trading
If you missed last night’s Trade Masters webinar with Coach Greg and Tyler, catch the replay here.
Traders Lounge 11 AM EST
Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.
Halftime Report 12:30 PM EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day and fun in a way that only Matt and Tim can deliver.
Cash Flow Club 8:30 PM EST
Join our weekly Cash Flow Club to learn options strategies from one of the Coaches at Tackle Trading.
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