Pyramiding

tomorton

Legendary member
8,137 1,226
Can't find much mention of people pyramiding winning positions, I confess I usually overlook these opportunities, usually only too glad to get out with the profit initially targeted.

But surely, if you can pyramid but don't, aren't you giving away free money?


Maybe we can share experiences -

* How big was your best pyramid, i.e. how many times your original risk capital?

* What are your best pyramid signals?

* How many times do you pyramid a successful position?

* If you're doing this successfully, what's your timeframe?
 
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0007

Senior member
2,376 660
Can't find much mention of people pyramiding winning positions, I confess I usually overlook these opportunities, usually only too glad to get out with the profit initially targeted.

But surely, if you can pyramid but don't, aren't you giving away free money?


Your approach sounds rather like mine. Pyramiding always sounds good in textbooks but I find that by the time I'm confident that my stock is on a good run I'm thinking about getting out with the money. My approach is to re-enter if I feel there's still mileage to be had. Also, you can argue that pyramiding is concentrating risk. Mine may well be a flawed psychological approach but that's not what my bank account tells me. Perhaps it's symptomatic of being a fairly short term swing trader – I wonder if pyramiding is better suited to longer timescales?

I'm very interested to hear what other people have got to say on this.
 
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MajorMagnuM

Legendary member
9,284 888
Your approach sounds rather like mine. Pyramiding always sounds good in textbooks but I find that by the time I'm confident that my stock is on a good run I'm thinking about getting out with the money. My approach is to re-enter if I feel there's still mileage to be had. Also, you can argue that pyramiding is concentrating risk. Mine may well be a flawed psychological approach but that's not what my bank account tells me. Perhaps it's symptomatic of being a fairly short term swing trader – I wonder if pyramiding is better suited to longer timescales?

I'm very interested to hear what other people have got to say on this.

im sure i have a p.mIner text on pyramiding somewhere. if i cacn find it i will post it
 

Jason101

Experienced member
1,372 215
My time frame is the dailies. When I pyramid I only add one single unit, so I could pyramid up to five times before getting to nervous. I look at each pyramid as if it is a new trade that just so happens to be in the same stock, with no connection to the original trade/s other than that earlier trades must already be “safe”.

Pyramiding is especially hard after a loss or two because psychologically after a loss I am desperate to bank profits to make up the unrealised profits I thought I had.

The way I trade is that I always take some profit off the table before the trade is “safe” so when I pyramid I have already made money.
Today I closed down all parts of a trade when I should have left some on, ready to pyramid on the next available opportunity. I messed up. I didn’t follow my rules. I think this is because I recently had unrealised profits go against me, which saw a landmark big round figure in account balance crumble away in front of me. So by closing all parts and neglecting the pyramid I could go into the weekend with the account balance I wanted. What an idiot! I wanted to feel good rather than trade well. I have had great problems lately in trend trading (therefore pyramiding) and have tended to take short term swing exits instead. I need to work out why.
 

tomorton

Legendary member
8,137 1,226
Hi Jason101 - Well I think we've all traded to feel better rather than be better traders. Good insight though and useful pointer towards self-awareness. This is such a mental game.
 

NVP

Legendary member
37,534 1,988
excellent thread and a great question.........

most traders never get anywhere near making money - let alone considering pyramiding and other more advanced trading methodologies to maximise returns ......

as primarily a scalper in forex I don't pyramid in the traditional context .........eg increasing positions in a pair ..........what I do however is pyramid trades based on the usd's direction

so if the usd is rolling bull or bear over perhaps an extended 30min - 2 hour period (like happens most weeks)........I will not hesitate to load in additional/different usd pair trades that will profit from the usd's extended bias.......and let them all run using more traditional trailing stop loss methodologies to cover myself

so technically if the usd went on the rampage I could theoretically have 7 usd pair trades on at any one time ..............GBP,EUR,CHF,YEN,AUD,NZD,CAD ......mainly because currencies (in relative index terms) cycle just the same as any other market so you need to be riding the fastest horses at the best times in the lifecycle of the usd move.....

looking back ive had perhaps 4 max as other dynamics do come into play ..........for example riding all 3 of the European currencies for me in a usd move may be a little excessively overcorrelated re risk/return

cheers
N
 
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tomorton

Legendary member
8,137 1,226
Thanks NVP, totally legitimate way to take advantage of the opportunity in my opinion. I also track the major pairs using dailies and weeklies but in the USD case can also SB (Capital Spreads) a "Minor" and 4 "Exotics" - NOK, CZK, HUF, MXN, PLN.

Is your first pyramid opened only after the original trade has broken even (so no added capital risk) or would you load up on the USD capital risk because the probability of reversal had reduced?
 

NVP

Legendary member
37,534 1,988
Thanks NVP, totally legitimate way to take advantage of the opportunity in my opinion. I also track the major pairs using dailies and weeklies but in the USD case can also SB (Capital Spreads) a "Minor" and 4 "Exotics" - NOK, CZK, HUF, MXN, PLN.

Is your first pyramid opened only after the original trade has broken even (so no added capital risk) or would you load up on the USD capital risk because the probability of reversal had reduced?

most I take is 2 separate usd pairs at inception..........I certainly wouldn't be adding more trades to the run unless at least 1 of those was already running a good (locked) pip profit and I was trailing..........

heres yesterday for example ...........the top chart is the usd index .......the London session was awesome for usd .........it ran solid bull for over 4 hours

so GU was a sell from early doors and (dependent on scalping parameters) it could have been traded multiple times or simply left to run with a trailer .......then other currencies would have been added to the portfolio when opportunities arose......

NO single currency move will generally 100% dominate a usd trend run..........although gbp did a damn good job yesterday of dominating the proceedings............normally I expect to see 3-4 currencies taking turns to share the moves

the only currency that did not participate yesterday was the yen that does has a tendency to run with usd when its on fire...........but again I am nervous of ever offering exact formulas and patterns in strengthmeter trading ................its pretty fuzzy most of the time and you have to go with the flow through practice and experience..........

its never ever black and white (what in trading is ?)

N
 

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MajorMagnuM

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most I take is 2 separate usd pairs at inception..........I certainly wouldn't be adding more trades to the run unless at least 1 of those was already running a good (locked) pip profit and I was trailing..........

heres yesterday for example ...........the top chart is the usd index .......the London session was awesome for usd .........it ran solid bull for over 4 hours

so GU was a sell from early doors and (dependent on scalping parameters) it could have been traded multiple times or simply left to run with a trailer .......then other currencies would have been added to the portfolio when opportunities arose......

NO single currency move will generally 100% dominate a usd trend run..........although gbp did a damn good job yesterday of dominating the proceedings............normally I expect to see 3-4 currencies taking turns to share the moves

the only currency that did not participate yesterday was the yen that does has a tendency to run with usd when its on fire...........but again I am nervous of ever offering exact formulas and patterns in strengthmeter trading ................its pretty fuzzy most of the time and you have to go with the flow through practice and experience..........

its never ever black and white (what in trading is ?)

N

Good morning N. looking at the first red arrow, the gbp line is going up. confused?
red arrow 3, would the sell have been taken earlier when the red line broke under the bunch?
 

globalarbtrader

Junior member
24 9
The continous trend following rules (mostly EWMAC, nothing fancy) I use do implicit pyramiding. If a trend strengthens, and you think there is a relationship between how strong a trend is and how confident you are of your forecast, then it is logical that you should buy more as the market rallies. Naturally this means you have some room to buy more and you don't go all in with your maximum position at the faintest sign of a trend.
 

tomorton

Legendary member
8,137 1,226
Hi globalarbtrader - I could say the same thing for my own trend-following criteria, though I hadn't absorbed this at the time I wrote them.

In practive though, how far do you take pyramiding? Do you pyramid just once or twice or as often as the entry rules dictate?
 

globalarbtrader

Junior member
24 9
Hi globalarbtrader - I could say the same thing for my own trend-following criteria, though I hadn't absorbed this at the time I wrote them.

In practive though, how far do you take pyramiding? Do you pyramid just once or twice or as often as the entry rules dictate?

I don't have entry rules, just a continous signal. If the lot size is relatively small (eg VXX) I could be gradually buying for several weeks as a trend strengthens.
 

tomorton

Legendary member
8,137 1,226
Seeing that as a legitimate approach - the continuing strong trend controlling risk.

I am aiming to identify pyramid entry points on just as strong TA basis as original entry - but the upshot of that is I usually find the position hits either target or trailing stop before I can add to my position - yes, that delivers a profit, but obviously only in proportion to the original trade size. Maybe I am being over-cautious and should just pyramid with the trend as soon as the original postion breaks even?
 

globalarbtrader

Junior member
24 9
Seeing that as a legitimate approach - the continuing strong trend controlling risk.

I am aiming to identify pyramid entry points on just as strong TA basis as original entry - but the upshot of that is I usually find the position hits either target or trailing stop before I can add to my position - yes, that delivers a profit, but obviously only in proportion to the original trade size. Maybe I am being over-cautious and should just pyramid with the trend as soon as the original postion breaks even?

I'd strongly advocate not using profit targets. If you're trend following, you don't know how long the trend will last. Stay with it until you hit a trailing stop.
 
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