Scale Trading | Reverse Scale Strategy |
Positions added only if stock declines. | Positions added only if stock increases. |
Your average cost per share is always above the current market price after second purchase. | Your average cost per share is always below the current market price after second purchase. |
Sacrifices large long-term gains for small short-term gains. | Sacrifices small short-term gains in order to realize large long-term gains. |
Unlimited potential for loss. | Unlimited potential for gain. |
Makes no attempt to cut losses. Adds to losing positions. | Cuts losses. Does not add to losing positions. |
In a portfolio, automatically allocates majority of capital to worst-performing issues. | In a portfolio, automatically allocates majority of capital to best-performing issues. |
Read more: Five Minute Investing: The Reverse Scale Strategy | Investopedia http://www.investopedia.com/university/fiveminute/fiveminute8.asp#ixzz3vOhW2Ms1
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