Pyramiding

[newstart]

Can anyone give me a clue as to what pyramiding is in stock trading

 

[Pippppin]

Pyramids

When in a profitable trade, "reinvesting" paper profits by adding to an existing position...eg if long a market, buying more....and vice versa. Advisable for experienced traders only. Can produce very highly leveraged profits, but also can lead to large losses if the market "reverses". Tread carefully

 

[newstart]

Hi Pipppin,
Thanks for your speedy and helpful reply much appreciated.

 

[-oo0(GoldTrader)]

"reinvesting" paper profits

Hybrid Thread

In the US you cannot reinvest paper profits in stocks.

When in a profitable trade, "reinvesting" paper profits by adding to an existing position...

So, in that case, pyramiding profits is not normally allowed. You can borrow against your share certificates. Maybe those funds can be used to buy stock. But pyramiding profits like we do with futures is not going to happen.

 

[oatman]

Disagree......not advisable at all!

 

[welsh_guy]

If you are going to Pyramid - calculate you lost as a % of your orginal profit - so that you have a strick stop

gud luck

 

[Grey1]

Can anyone give me a clue as to what pyramiding is in stock trading

Pyramiding is the process of adding to your position once you are in a trade..

Two ways of pyramiding :--

1) Adding to a losing position ( Traders gets the Trade direction wrong )
2) Adding to a winning position ( Trader gets the Trade direction right )

Case 1 ):-- Trader gets the trade direction wrong >> He counts on reversal ...

strategy 1 ( best strategy ) ;-- don't pyramid .. high risk specially if you are a novice trader
strategy 2 :-- You are an experienced trader and your oscillator signals a reversal shortly but you don't know when .. under such a circumstances add position @ support and Resistance of higher order time frames .. lets say you are using a 5 min chart for entry and the trade has gone against you then do a 15 min chart and find the Support and resistance on the higher time frame , that give you an entry level for your next trade..

Case 2 :-- Trader gets the trade direction right .. That is good news but don't turn it in to a bad news.. Do not add simply because the trade is gone your way .. ADD ONLY AND ONLY IF YOU HAVE DONE A HIGHER ORDER TIME FRAME ANALYSIS BEFORE YOU GOT INO THE TRADE.. UNDER SUCH A CIRCUMSTANCES ONLY ADD TO WINNING POSITION AT HIGHER ORDER TIME FRAMES SHOULD THE TRADE BREAKS THROUGH RESISTANCE..

POSTION SIZE :-- ( how much to add to a new position ) .. you need to read about this concept but is pretty simple..

Good luck

 

[z3davis]

adding to a position would be an upside down pyramid - so a true pyramid if trading futures for example would be first trade 10 contracts and on the next trade buy 8 and on down the list - this way you lock in profits if the trade before was profitable.

 

[Tuffty]

I just thought pyramiding was not buying all your stock at one time; ie multipe entry into a position.

 

[commanderco]

Can anyone give me a clue as to what pyramiding is in stock trading

I trade forex futures and I pyramid by taking a multiple position and clearing 50% of the contracts for a points target while the remainder are left to run to be cleared out ( hopefully) on a upswing or downswing.


I cannot add contracts to my original entry because I am too dumb to figure out how long the trend will run for.

The job of the points target is to cover losses, brokerage & beer, whilst the brave little runners
bring home the unencumbered bacon.

 

[-oo0(GoldTrader)]

The true Martingale

Hybrid Thread

Sounds like a The Martingale system.

I pyramid by taking a multiple position and clearing 50% of the contracts for a points target.

You take your loss on full positions, profits on reduced positions. That type of betting is often used to show off entry systems that led to reliable small spouts. I have heard of traders who take profits a few days after entry on runs that go for weeks.

I cannot add contracts to my original entry

As far as averaging up is concerned. There is nothing easier than adding too an established trend.

 

[commanderco]

Hybrid Thread

Sounds like a The Martingale system.You take your loss on full positions, profits on reduced positions. That type of betting is often used to show off entry systems that led to reliable small spouts. I have heard of traders who take profits a few days after entry on runs that go for weeks.As far as averaging up is concerned. There is nothing easier than adding too an established trend.

oo0(GoldTrader)

Can you expand on what you mean .... I dont quite understand.

 

[-oo0(GoldTrader)]

Martingale

Hybrid Thread

Tharp teaches us to use anti-Martingale systems trading commodities. Livermore is anti-Martingale.

Ross and Bressert on the other hand use a 3 level system similar to yours.

Can you expand on what you mean ....

For now, click on the “The Martingale system,” weblink in the above post. Hit my links, I will put links in my posts for you.

 

[commanderco]

Hybrid Thread

Tharp teaches us to use anti-Martingale systems trading commodities. Livermore is anti-Martingale.

Ross and Bressert on the other hand use a 3 level system similar to yours.For now, click on the “The Martingale system,” weblink in the above post. Hit my links, I will put links in my posts for you.

-oo0(GoldTrader)

My understanding of "Martingale" is that you double up when you lose.
My system of trading Fx futures could not be further from this, that is why I asked you
to expand on your statement since you seemed to completely misunderstand what I wrote.


Firstly, let me address the concept of "established trend" in fx futures.
ie Euro.
In the last 768 days, the EC has been in an Up trend 25% of the time and 11%
in a Down Trend.
The odds of 2 Up days in a row are 44%; of 3 days 22%; of 4 days 11% and of 5 days 5%.
The Down days are even worse.

I do not trade breakouts since the protective stop would need to be at least one day´s range deep and the average daily range of EC is 114 points.
I enter the market by fading the turning points with an accuracy better than 77% and
a protective stop around 24 points.
Even if the TP turns out to be a fake there is a spike in my direction of ´n´pts better than
70% of the time. This spike is sufficent to cover my losses etc, by clearing out 50%
of my contracts for a target of n-1

So you see, my safest position is engineered to be my entry. Each day after that
the odds against me increase enormously.
I cannot afford the luxury of an "established trend" since I will not take a loss across
the daily range of 114 pts and therefore I cannot use a trailing stop for anything
other than emergencies.
I started trading the conventional way ( as per the books), but I could never get used to the losses and therefore never got beyond 1 contract.
It was not until I sat on a beautiful Brazilian beach one day and thought that if 100% of the people read the books and 90% of the people loss money, my approach needs to be in the opposite direction.

Back to "Martingale" I do not change my pattern or trading after a loss.
The idea of doubling up after a loss would break me out in a cold sweat.

-oo0(GoldTrader) Your thoughts would be appreciated