Scale In

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DEFINITION of 'Scale In'

The process of purchasing shares as the price decreases. To scale in (or scaling in) means to set a target price and then invest in increments as the stock falls below that price. This buying continues until the price stops falling or the intended trade size is reached. Scaling in will, ideally, lower the average purchase price. If the stock does not come back to the target price, however, the investor ends up purchasing a losing stock.

BREAKING DOWN 'Scale In'

Scaling in gives an investor the option of buying additional stock as the price drops. For example, if a stock is worth $20 and an investor wants 1,000 shares, he or she can scale in, rather than purchasing all the shares at once. When the price reaches $20, the investor could buy 250 shares right away, then 250 shares at $19.90, 250 at $19.80 and 250 at $19.70. If the stock price stops falling, the investor would stop scaling in. The average purchase price would then be $19.85, rather than $20.

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