Scaling in and scaling out...
There are a number of effective strategies that can be employed to hedge (reduce) risk. One strategy which has been proven highly effective is scaling in and scaling out. In the past, I was one of those traders/investors that was either all in or all out of a security. I can't really tell you why that was my approach in the past. I can only tell you that was the way it was for me, for a very long time.
That approach (buying all of the shares I would ever own in one transaction, and exiting from all shares in one transaction) proved to be difficult mentally, and undoubtedly hurt my overall portfolio performance. For example, I would own an OTC stock that would be up 10 to 15x, but would be very hesitant to sell because I knew that if/when I sold it all, if it continued to climb, I would have severe regrets. Conversely, when I would establish a position in an OTC security, I would take a huge hit if my timing was off because I bought all of my shares at that one price.
Over the past couple of years, I have learned that a much better approach (and one that is also recommended by portfolio mgr extraordinaire Jim Cramer of 'Mad Money' fame) is to divide your buys or sells into steps, at various prices. And better yet, to dollar cost average at each of those steps (meaning a fixed dollar amount rather than a fixed share amount). This allows for a lower cost per share, and cumulative avg share cost (and a greater quantity of shares), should the security decline in price after your initial purchase. And should the security begin to increase after the initial purchase, you probably won't mind too much spending a bit more on the subsequent purchases, because paper gains have been realized on the earlier (and cheaper) purchases of that security.
Exiting a security, in the same step-like fashion, makes it easier mentally to let go of shares while the security price still has upside (because you have not made an all-or-nothing gamble at the singular price).
It is for these reasons that I now use the scaling in and scaling out approach, rather than a complete entry into a security or exit out of a security. I feel that overall, it works well, and that is why I used this approach while initially accumulating my BTZO shares.
As always, simply my opinion.
BTZO
**Although I know that many are already using this approach, there are probably others that are not, and it is for the benefit of those people that I have posted this info.
