How scaling out of a position works

What the instruction actually does 

Closing a position in full means writing the equal and opposite contract for the whole of its size, so the two net to nothing and the difference settles. A partial close is the same operation performed on part of the size. The opposite contract covers a portion, that portion nets away, and what is left is a smaller position at the price the original one opened at. Nothing is divided into two positions: there is one closed deal for the portion that went, and one remaining position for the portion that stayed.

The remaining part is not a newly opened position, and the distinction carries most of the arithmetic in this lesson. Its opening price is the original opening price, not the price at which the portion was closed, so the distance from it to the stop level is exactly what it was before. Any financing adjustment that applies to positions held past the daily cut off continues to apply to it, now calculated on the smaller size. A stop order resting against the position remains where it was placed unless a separate instruction moves it, and the platform reduces the size that order covers to match what is left.

Closing in parts as a price moves in a position's favour is conventionally called scaling out, and the phrase describes the sequence rather than any rule for choosing the levels. A partial close is not the same thing as a partial fill, which is not a decision at all: a partial fill is one instruction executed in more than one piece, and at more than one price, because the size available at the first price did not cover it. That mechanism is set out in the guide to partial fills.

Remaining exposure and remaining risk 

Two quantities change the moment the portion closes, and they are not the same quantity. Remaining exposure is a number of units: what is left of the contract after the portion has netted away. Remaining risk is a money amount: the difference the remaining units would settle if the level at which the position closes against the account were reached. Exposure is measured in the instrument. Risk is measured in the account's currency, and it exists only because a level has been specified to measure it to.

The link between them is proportionality. The value of one unit of price movement is calculated on the size of the contract, so a size reduced by half produces a value per pip, per point or per share reduced by half, and every money amount derived from a distance halves with it. That is the whole mechanism. Closing part of a position does not change any distance on the chart; it changes what each of those distances is worth.

Remaining risk is then quoted in two different ways, and the two answer genuinely different questions. Measured from the original opening price to the stop level, it states what the remaining part would settle against the account if that level traded, which is the figure that combines with the amount already realised to give the position's result. Measured from the current price to the stop level, it states how much of what is currently unrealised on the remaining part would be given back on the way there. Both are in circulation, both are correct, and the second is the larger of the two whenever the price has moved in the position's favour since it opened.

The last row is the one most often stated loosely. The two amounts are equal and opposite only because the portion happened to be closed the same distance above the opening price as the stop level sits below it, which is a coincidence of the numbers chosen rather than a property of closing in parts. A closing price nearer the opening price makes the sum a debit. Nothing about the arrangement makes a debit impossible, and the block excludes cost, which is charged either way.

The stop level itself carries the qualification it always carries. It is an instruction to close once a level is reached, not an agreement about the price at which the closing happens, so a market that gaps through it closes the remaining part at the first price available beyond it. The realised loss on that part can therefore be larger than the remaining risk figure implied, and is not limited to the amount deposited. A partial close reduces the size that exposure is measured on. It does not convert the remainder into something whose closing price is assured.

What moves from unrealised to realised 

An open position carries an amount recalculated on every tick: the difference between the opening price and the current price, multiplied by the size. It is unrealised, meaning computed but not settled. A closed deal carries a realised amount, the same multiplication performed once at the price the deal closed at and settled into the balance. The two are reported separately because they behave differently.

A partial close moves a proportion of one into the other. The realised amount that results does not change again with price, for the simple reason that there is no longer a position for price to be measured against. The remainder continues exactly as before, recalculated on every tick and now on the smaller size. This is a statement about the arithmetic and nothing more: it says what the account records, not what happens next, and the remaining part can still settle for more or for less than the amount already realised.

Two further things follow at the account level. Margin is required in proportion to the size of an open contract, so the margin held against the closed portion is released. And the financing adjustment applied past the daily cut off now accrues on the remaining size only, falling in the same proportion as the exposure did.

• Changed by a partial close: the number of units remaining, the money value of every distance measured on it, the margin held, the daily financing amount, and the balance, which now includes a realised amount that no longer moves.
• Unchanged by a partial close: the opening price of the remaining part, the stop level unless a separate instruction moves it, the distances on the chart, and the fact that a stop is an instruction rather than a guarantee of the closing price.

What it does to the reward to risk of the whole position 

A position closed in one instruction has one reward distance: the gap between the opening price and the single price it closed at. A position closed in parts has one distance per part, and the position as a whole has none of them. What it has is their average, weighted by the size closed at each. That weighted average is the figure that divides by the risk distance to give the realised ratio of the position, and because it is an average it always sits between the nearest exit and the furthest one.

The denominator does not move in sympathy. The risk distance was fixed when the position opened, on the full size, and the first portion is closed after that decision has already been made. So the realised ratio of a position closed in parts is below the ratio the furthest exit alone would have produced, by construction, whenever any part was closed nearer than that furthest price. The arithmetic is not a judgement about the practice. It is a consequence of averaging.

Reading the four outcome rows together is the point of the block, and the pattern in them is symmetrical. The arrangement that closes in parts records less than the single instruction in the favourable case and less than it in the adverse case. Closing in parts narrows the range of results at both ends. It removes neither end, it does not make the adverse end unreachable, and it does not make the favourable end larger.

Which arrangement records more across a sequence of positions therefore depends entirely on how the two ends are distributed, and that is a question about a market and a method rather than about arithmetic. This page carries no figure for it, for any instrument or any approach, because no such figure exists here in a verifiable form. A comparison of two arrangements on one set of illustrative prices cannot supply one.

The cost of closing in parts 

The round turn is the cost of opening and closing, and a position closed in parts pays its opening side once and its closing side once per closing deal. The point most often got wrong comes first: where the closing charge is strictly proportional to the volume closed, the parts sum to the whole and nothing additional is charged at all. Two halves cross a spread of the same width the whole contract would have crossed, on half the size each, and a commission quoted per unit of volume totals the same whether it is billed in one line or two.

The additional cost arises where the charge is not purely proportional, and there are three ordinary places it does. A minimum charge applied per deal is met once by a single closing deal and twice by two. A charge rounded up to the smallest currency unit on each deal rounds up more often when there are more deals. And the spread is whatever the spread happens to be at the moment each part closes, so parts closed at different times cross different widths, and one closed in a thinner or more volatile moment crosses a wider one than the single instruction might have.

The financing adjustment moves in two directions at once and does not resolve into a rule. The portion closed early stops accruing it, which reduces the total, while the remaining part is held beyond the moment a single closing instruction would have ended the position, which increases it. Which effect is larger depends on the sizes and on how much longer the remainder is held, so it is calculated position by position.

The additional amount is small in absolute terms and its significance is a question of proportion, exactly as the costs module established. A fixed charge is a negligible fraction of a result measured over a wide distance and a substantial fraction of one measured over a narrow one, so closing in parts costs proportionally most where the distances are shortest. More parts multiply whichever non-proportional component applies, which makes the number of parts a cost question as well as an arithmetic one.

Where practitioners disagree 

The first argument is about what closing in parts is for. One tradition describes it as a risk operation: remaining exposure falls at a moment chosen in advance rather than under pressure. The criticism is precise and is not answered by that description. Reducing size after a favourable move removes units from the positions that travel furthest while leaving full size on the ones that reverse, so where a method's larger results come from a minority of its positions, the average result per position falls by construction. Nothing distinguishes the two cases while a position is open, and this page carries no figure for how often either occurs.

The second argument is whether the stop level on the remaining part should be moved once a portion has closed, and one convention moves it to the original opening price. Its supporters note that the whole position's arithmetic then nets to the amount already realised less cost, whatever the remaining part does. Its critics answer that the opening price is a fact about the account's history and not about the instrument, that the stop placement lessons earlier in this module treated the instrument's ordinary movement as the relevant input, and that a level closer to price is reached by ordinary movement more often. Moving a stop also does nothing to make its closing price assured.

The third argument is how a position closed in parts should be recorded once it is over. One practice records it as a single position with the size weighted exit, which keeps it comparable with positions closed in one instruction. Another records each part as its own result, which reflects the deals actually done but multiplies the count of results and produces distance figures comparable with nothing. The two give different answers to the same question about the same trading, and the disagreement matters mostly for what is written down afterwards, a subject later in this module.