Need some help with pyramiding

I get your point, me too, even I've spent approximately 1000 or more hours designing this trading system
I'm comfortable with, was just having this one issue for which I started the thread.
I'm willing to hold for more than months actually, and I wouldn't exit on pullbacks. Idk if that's the right thing to do, it just suits me better.
Good luck to you too mate, and thanks for your advice :)
 
Smeet Shah said:
Thanks all of you for your great answers, really appreciate it.

@eganon69 , I think yours was the answer I was looking for, thank you so much. I'd just like to confirm if this is what you meant:
1. Risk 0.75% on your first entry.
2. 0.25% on your second, if you have a signal.
3. Keep trailing stops as price moves in your favor, this is going to reduce risk on your positions as you're locking in some rise in price from your initial position. Use THIS decrease in risk to add more in case of an entry signal. The amount to be added (in terms of risk per trade) must not be more than the reduction in risk from your earlier positions.
4. Continue till you're completely profitable?

Have I got it right?
And by the way, how much do you make in terms of % with this method? I mean, let's say you managed to catch a 40% uptrend, how much (in %) are you likely to make with this type of risk management and pyramiding in terms of your equity?
I'm asking since I aim to have a concentrated portfolio, and I'm naturally looking to maximize my investment in each stock to maximize profits while minimizing risk. I understand that this method gives me a high risk:reward, but it should also translate in terms of a good portfolio gain, don't you think? :)



Yes, this is how I thought of it at first. And you're spot on, it just minimized my profits. For eg: I backtested this on a stock which ran up 37% based on my entries and exits, but if I had employed this pyramiding strategy it would've netted me only some 5%. I tend to give a lot of importance on how much a trade is netting me in terms of overall portfolio, since I want to compound at 20% a year. Not an easy target, but not too far fetched as well.
More...

You are mostly right in how I do it. But I am NOT the end all of how to do this. This is just how I FOUND it worked for me. I have set rules that I NEVER add more than 3 total positions on a trade. !st is the 0.75% Initial entry. 2nd is the 0.25% IF AND ONLY IF I get a price drop from initial entry price AND another buy signal. If that never happens then I wait. If the trade on the Initial 0.75% is profitable I MAY (I may be out of cash at his point if my $$ is tied up in other trades) add 0.25% more IF I get another buy signal. No signal then I dont buy. If I already added the 0.25% when price dropped I may not even add this 0.25%. But I allow myself a MAXIMUM of 3 entries. MOST (~80%) trades have a single Initial entry. Fewer have 2 entries but even fewer have 3 entries. BUT NEVER MORE THAN 3.The 2nd entry is one or the other 0.25% allowances but rarely both. This is how I do it. Makes sense to me and it works for me. It allows for a lot of all in at initial entry while minimizing overall risk and adding early to a winner. If you keep piling on more and more as it goes higher you are reducing your overall profit by dollar cost averaging your start price higher and higher.

How much I make in % with this method is all related to how much capital you are trading with, which is my case is determined by my stop loss and of course how profitable that individual trade was which is up to the market,... not me. I ride the wave, but I can never be sure of how good a ride it will be. Some are losers and some are smaller wins and some are large wins.
 
I like using weekly charts and some dailies as well for stocks. But I trade in relationship to extremes, meaning in 2008/2009 was major bottom and I was taking "core" positions then and using much more weekly positions in Dividend stocks as they would be held years, thereafter using variation of weekly/daily. I risk approx. 1-2% whether I buy or sell short. So after the Core is bought, I look for positions where I Buy and have a target where I exit 75-90% of my shares, cause too many times price would stop me out on retrace. Then system produces more trade, I keep doing the same, put on amount based on 1-2% risk which is usually more shares, and hopefully trend keeps going up and can enter dozen times, selling short is much different as don't have enough retracements to add to position.
 
I have always based my risk on what I can handle mentally. I find that maintaining a high mental capital is more profitable in the long run than just trading by the numbers.
 
@eganon69 , yes I do understand that what works for you may not work for me. But after I read how you do it I find that it does suit my trading style.
For the second part, I meant to ask, if I have a capital of 100,000; do you think that with this method, I'll be able to put more than 50,000 in a stock (concentrated portfolio), if even I intend to add max. 3 times?
 
That depends on your risk tolerance, stop loss placement and capital you wish to devote to each trade. Yes there are times where I may have my entire account in 2 or three trades but more frequently I have them in 6-7 at a time. I don't know how you do it but I set my stop loss price, then subtract that from the entry price. That is loss per share. Then divide 0.75% in this case $750 by loss per share to give number of shares to buy. If stop loss is $0.50 away you can buy 750/0.50 = 1500 shares.
 
I'd like to bump this thread.

I've been in a chat room lately where a guy claims to have added to winners on an automated basis yesterday (Big crude sell off, 1.3.16)

I can grasp a discretionary approach, but automated? I don't get it.

FWIW, I used to be a mean reversion stock guy. And now i am trend following crude. It has beautiful, predictable moves if you are patient. But it is quite the adjustment from adding to a loser.

But I just don't get the automated part of adding to winners. I try it, and I tend to mess it up. And no, I didn't catch that big move yesterday. Just part of it. And I didn't add.

My entries are spectacular. Holding time for winners honestly quite suck.

A kick in the balls for a veteran who is new to trend following is appreciated.
 
You must log in or register to reply here.
Back
Top