Open trading account 
As mentioned earlier, scaling out has the obvious benefit of reducing your risk as you are taking away exposure to the market…whether you are in a winning or losing position.
When used with trailing stops, there is also the benefit of locking in profits and creating a “nearly” risk-free trade. We’ll go through a trade example to show you how this can be done.
Scaling Out Example:Let’s say you have a $10,000 account and you shorted 10k units of EUR/USD at 1.3000. You placed your stop at 1.3100 and your profit target is 300 pips below your entry at 1.2700.
With 10k units of EUR/USD (pip value of this position is $1) and a stop of 100 pips, your total risk is $100, or 1% of your account.
A few days later, the EUR/USD has moved lower to 1.2900, or 100 pips in your favor. This means you have a total profit of $100, or 1% gain.
All of a sudden, the Fed releases dovish comments that may weaken the USD in the short term.
[img class=alignnone src=http://www.babypips.com/images/school/images/senior/safe.png]You think to yourself, “This may bring dollar sellers back into the market, and I don’t know if EUR/USD will keep going down… I should lock in some profits.”
You decide to close half of your position by buying 5k units of EUR/USD at the current exchange rate of 1.2900.
This locks in $50 of profit into your account [at 5k units of EUR/USD, 1 pip is valued at $0.50…. you have closed a profit of 100 pips (100 pips x $0.50 = $50)]
This leaves you with an open position of 5k units short EUR/USD at 1.3000. From here, you can adjust your stop to breakeven (1.3000) to create a “risk-free” trade.
If the pair moves back higher and triggers your adjusted stop at 1.3000, then you close out the remaining position with no loss, and if it moves lower then you can just ride the trade to more profits.
Obviously, the trade-off for “taking some off the table” is that your original max profit is reduced.
Now, if EUR/USD ended up falling to 1.2700 and you had caught the 300-pip move with a 10k unit position of EUR/USD, then your profit would be $300.
Instead, you closed 5k units at a 100-pip gain for $50, and then you closed your remaining 5k at a 300-pip gain for a $150 gain ($0.50 per pip * 300 pips = $150). Together, this makes a $200 gain versus your original $300 max profit.
The decision to take some profit off the table is always up to you… you just have to weigh the pros and cons.
When used with trailing stops, there is also the benefit of locking in profits and creating a “nearly” risk-free trade. We’ll go through a trade example to show you how this can be done.
Scaling Out Example:Let’s say you have a $10,000 account and you shorted 10k units of EUR/USD at 1.3000. You placed your stop at 1.3100 and your profit target is 300 pips below your entry at 1.2700.
With 10k units of EUR/USD (pip value of this position is $1) and a stop of 100 pips, your total risk is $100, or 1% of your account.
A few days later, the EUR/USD has moved lower to 1.2900, or 100 pips in your favor. This means you have a total profit of $100, or 1% gain.
All of a sudden, the Fed releases dovish comments that may weaken the USD in the short term.
[img class=alignnone src=http://www.babypips.com/images/school/images/senior/safe.png]You think to yourself, “This may bring dollar sellers back into the market, and I don’t know if EUR/USD will keep going down… I should lock in some profits.”
You decide to close half of your position by buying 5k units of EUR/USD at the current exchange rate of 1.2900.
This locks in $50 of profit into your account [at 5k units of EUR/USD, 1 pip is valued at $0.50…. you have closed a profit of 100 pips (100 pips x $0.50 = $50)]
This leaves you with an open position of 5k units short EUR/USD at 1.3000. From here, you can adjust your stop to breakeven (1.3000) to create a “risk-free” trade.
If the pair moves back higher and triggers your adjusted stop at 1.3000, then you close out the remaining position with no loss, and if it moves lower then you can just ride the trade to more profits.
Obviously, the trade-off for “taking some off the table” is that your original max profit is reduced.
Now, if EUR/USD ended up falling to 1.2700 and you had caught the 300-pip move with a 10k unit position of EUR/USD, then your profit would be $300.
Instead, you closed 5k units at a 100-pip gain for $50, and then you closed your remaining 5k at a 300-pip gain for a $150 gain ($0.50 per pip * 300 pips = $150). Together, this makes a $200 gain versus your original $300 max profit.
The decision to take some profit off the table is always up to you… you just have to weigh the pros and cons.
