Stacking vs. Scaling In Forex

Stacking vs. Scaling In Forex

Stacking and Scaling are not the same things in Forex trading. Scaling is a pretty common practice and has been around for quite a long time.

On the other hand, Stacking has been getting a bit more attention recently in Forex trading in South Africa, and I feel like we need to address it.

What is Scaling?

Scaling into or out of a trade is when you have an existing and preferably profitable position in the market. You continue to add positions on top of the original position.

When you scale in, you have to have predetermined increments by which to add new positions, and the sole purpose of adding to a winning position is to maximize your profits on winning trades and decrease the risk on trades that instantly go against you because you only lose on the one original position.

The power of scaling in is basically better risk management by helping you have smaller losses and bigger wins.

For example, you buy a standard lot of EURUSD at 1.1000 with a target of 150 pips and price goes in your favor 50 pips to 1.1050, you can start to think about adding an additional buy position and using the profit of the original position to decrease the risk of the second position.

If the trade goes against you, you only lose on the second position and not the first position, but if you win the trade, you get the profits of the two positions instead of one.

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What is the Difference?

On the other hand, Stacking is what you will have most likely seen on IG, where people take MULTIPLE positions around the same price area.

We’ve all seen that one post where a trader opened 10-20 positions, all within 5 pips.

That is stacking, and it is a one-way trip to blowing your account, at least as a beginner. It is dangerous and not sustainable.

Stacking only increases risk because it’s not spread across a profitable trade where your profits can absorb the losses if the trade turns back against you, such as when you SCALE into a trade.

Stacking a position gives you no chance to adjust if price moves quickly against your position.

On the flip side of scaling in, if you lose the trade while stacking, you lose on all of your positions, and the chances are you’re losing on 5-10 positions, and that will not be easy.

The possibility of making a lot of money off of one trade is tempting, but if you stack, you throw your risk management out of the window if you trade this way.

Don’t bet the farm.

Don’t lose your shirt.

Cut the L.

Keep the W.

Happy Trading.

Stacking FAQ

We’ve all seen that one post where a trader opened 10-20 positions, all within 5 pips. That is stacking, and it is a one-way trip to blowing your account, at least as a beginner. It is dangerous and not sustainable.

Stacking only increases risk because it’s not spread across a profitable trade where your profits can absorb the losses if the trade turns back against you, such as when you SCALE into a trade.

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Lunga Shabangu

Lunga Shabangu

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