Foreword
Scaling up positions is when we add on to more of a counter. I've previously heard about scaling up but didn't know how to execute it properly. So it was fortunate that one of the traders i follow, Rayner Teo ( see his Youtube channel) actually did a video and shared about it. I also discussed about it on investingnote ( see here) and there was a fair bit of comments on it. Perhaps I would like to do a post very specific to update the previous post (here), and share with
Emotions about 3 counters i scaled up on
I would like to share how i felt about my positions:
- Chip Eng Seng: Was anxious and i kept looking at the prices
- Mapletree GCC: indifferent
- OCBC: felt shiok!
Of course for Mapletree GCC and Chip Eng Seng which i scaled-up at XD didn't move much, the effect of profit and loss on me was apparent.
Counting the numbers
So i did a numerical exercise, it follows:
MapleTree GCC. This scale up was executed as per guidelines, buffered by some profits, and I bought lesser shares than my initial position, it was not as unsettling. There is also a "accelerator effect" where my profits grow "exponentially" because of the scale up.
Chip Eng Seng. On the basis that the counter gives good dividend each year, and that the XD presented a choice to add on at a reasonable price, I scaled up. it was in fact am average down. When price remained at my scaled-up price, i was affected negatively. My potential loss if price goes down further seems to be accelerated too. So retrospectively speaking, although there was nothing wrong with this trade, i would not have done it again because it was quite unsettling.
OCBC. This scale up was executed according to rules and plan, with a entry setup. done properly, the effect of "accelerated" profit becomes so apparent. My power to hold on had also widen.
Thoughts
Personally, i think it is indeed better to average up(correctly) than to average down, because of the psychology and emotions involved. Maybe i am more of a TA guy than a FA guy.
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