Pyramiding

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?

tomorton said:

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?

Click to expand...

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.

0007 said:

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.

Click to expand...

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

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.

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.

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

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?

tomorton said:

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?

Click to expand...

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

NVP said:

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

Click to expand...

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?

bump

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.

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?

tomorton said:

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?

Click to expand...

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.

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?

tomorton said:

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?

Click to expand...

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.

MajorMagnuM said:

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?

Click to expand...

hey MM

its my FXCorrelator free indicator ...........think of each currency line like a macd .......one can trade signals like generic macd strategies

globalarbtrader said:

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.

Click to expand...

mmm, I don't really care how long a trend may last. Like a shopkeeper who knows how much he must charge for his goods to ensure a decent overall profit I know how much I need to take from a trade to keep my account ticking along satisfactorily. Targets make sure I get it when the trade's gone right.

My (present) mindset is that I'd rather make an obscene amounts of points (via pyramiding) or practically none at all.

As such I pyramid into pretty much every single trade I make, as long as momentum is carrying my positions in the right direction I will continue to add more positions. I move my aggregate stop to breakeven or sometimes slighter better to compensate for the time I've spent building up a worthy position size.

I have learnt that jumping in for a few points ("retail trader scalping" if you will) just doesn't float my boat - mainly because my timing is plain awful and my chart reading skills are amateur at best. So I concentrate more on getting on-board early for reversals and/or strong momentum plays. I have a larger than average account and as such use wide stops, and often hedge against my position if I've got my timing even more wrong than normal.

I am a coder and have spent some time building my own auto-pyramiding functions using the IG REST API - however this work is mainly for auto-stop management which is essential during a fast momentum play, however most of my pyramiding is done simply by manually adding working orders.

So far I've 'honed' my pyramiding 'skills' on EURUSD and GBPUSD this year. And am now presently running [my version of] a pyramid on the ftse, hoping for that magical 7k today or tomorrow.

The most detailed information I've found to date on types of pyramiding is on http://www.robertwcolby.com/leverage.html

NB: My style of "trading" will no doubt be pure gambling in other peoples eyes, I acknowledge that and I'm perfectly happy with the way I do things thank you very much

In short, pyramiding, why wouldn't you?

Pyramiding is also discussed here. It's not a new concept but be aware I have not tried these approaches so read the post with due diligence.
Good luck.
http://www.forexfactory.com/showthread.php?t=499732

http://www.forexfactory.com/showthread.php?t=245149

Thanks both for links, will review over weekend. I'm so far very drawn to pyramiding my trend-following trades, though eventually that leads to the should I / shouldn't I question of pyramiding a chart that just made a new all-time high. Nevertheless, I'd rather be long at any point in an uptrend.