Scaling Into Size: A Smarter Way to Build Concentrated Positions
You don't have to go 100% "all in" a single stock, but concentration is how you make silly amounts of money.
How to build really big positions *safely*:
I like to build exposure in different ways, even through different vehicles...while also allowing myself to comfortably hold through volatility.
1) scale in via shares (earn your size)
- take days/weeks/months to build a position
- add on weakness inside strength (pullbacks, consolidations, higher lows)
- avoid urgency...slow & steady is fine
2) trade around a core
- establish a core position (exmpl: 1000 shares)
- actively trade a smaller portion (100–300 shares)...lowers cost basis, generates cash flow
- don't touch the core unless thesis breaks
3) include adjacent exposure across vehicles
- via other equities in the same theme
- via second order ideas
optional:
- derivative exposure (options, leaps, etc.)
- sell puts against core position + collect premium
High conviction + concentrated bets in strong emerging themes + expanding timeframes = silly $$$.
And You don’t have a choice...the choice is made for you if you prepare the right way before entering a trade.
We're all discretionary traders, sure...but the "discretion" is in your process NOT the execution.
no “should I buy?” or “should I sell now?” ...you don’t have that choice...it was already made when you created your process/plan. THAT tells you what to do.
Part of my pre-trade process is knowing my:
- entry levels
- support/resistance
- price targets
- scale in areas
- scale out areas
- stop loss / full exit level
- thesis invalidation
- position sizing
- timeframe
- catalysts + context
- environement
If you feel like you are making a bunch of "tough" decisions off the cuff...you probably aren't preparing well.
The only question I have is "does this setup meet my criteria to make X decision?"
You can get away w shooting from the hip for awhile, but the only thing that works long term is having a process.
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