The way I've seen reverse scaling and the way I do it is pyramiding. A pyramid gets smaller as you go up, yes? Say the initial size is X. The next levels up would be some fraction of X, not a multiple of it. I also trail stops on each level independently, reducing risk as it progresses.
stevegee58, I'd rather make one entry after the pull back and only averageup.The problem is knowing where to get in.The scaling method does not require me to be so precise on the entry - which I have tried previously.I would enter and get wiggled out.
Is it considered averaging down if you focus on a zone to accumlate and do so at different prices?I've found scaling into a position has increased my odds of being right VS trying to choose one price to buy and then only buy above that price.
Just about every trading book I've read. Only add to winners, never to losers, cut your losses, let your winners run. That's how the trading game is won, don't ya know, yaw!?
The book Millionare Traders has more than one trader saying he scales into a position and will buy below the initial purchase price.
I understand what you're saying by building up a "full size" position in increments as price moves against you in a small zone. The problem is that you'll occasionally be hit with a full size stop-out anyway. Also, you'll occasionally have a 1/10 position take off in the right direction. This sounds good, but when you're right you want to have more skin in the game in order to balance out those full size stop-outs. Mathematically this still doesn't work out. BTW, this is a really old debate that crops up here periodically. The other great debate concerns whether scaling out is good or not.
Not according to successful traders like Scott Redler(T3, uses 3 tier buying), Jon/Pete Najarian, etc.