Pyramiding into a trend

[forex_king]

Quote from OddTrader:

Quite right, it's a very important factor to consider, for how much heat we can bear psychologically when encountering adverse movements.

I personally pyramid position, I won't say how many levels....but after backtesting I can safely say that the number of levels being pyramided has greatly lessened over the years...but I still pyramid, and I have created my own trading system that uses a pyramiding method that fits my personality....but I can say pyramiding does work for me...

 

[forex_king]

Quote from Maverick1:

The comment above might not hold across all styles, even when short term trading

Listen, you gotta ask yourself the following question:

To succeed at this given my trading personality, is it more important to my proper execution that I:

1) Be more right than wrong?

or

2) Be right more than wrong?

Maverick,


Successful trend followers in general are more wrong than right on their entries, what matters most in the end is their risk and moneyment strategies....

 

[Maverick1]

Quote from forex_king:

Maverick,


Successful trend followers in general are more wrong than right on their entries, what matters most in the end is their risk and moneyment strategies....

Agreed. It takes time and a lot of hard work to build a plan and then to learn how to follow it to develop the second nature kind of confidence that takes you to a totally new level. Learning where to place the stop, in and of itself is hard enough, now when you add the challenge of balancing wins and losses, drawdown, avg size of winners vs avg size of losers, etc etc, it gets real interesting to say the least.

 

[OddTrader]

Quote from bali_survivor:

Oddtrader,

We may be out of luck.

Me expects that ElectricSavant is honoring someone's PM and is not saying much more.

Maria

No worries, we can wait, patiently.

 

[forex_king]

Quote from Maverick1:

Agreed. It takes time and a lot of hard work to build a plan and then to learn how to follow it to develop the second nature kind of confidence that takes you to a totally new level. Learning where to place the stop, in and of itself is hard enough, now when you add the challenge of balancing wins and losses, drawdown, avg size of winners vs avg size of losers, etc etc, it gets real interesting to say the least.

Very true, that's why trend followers are very few and far between....that must explain why their account is up at the end of the year

But you are absolutely right about the second nature - and that is the Psychology aspect....being in tune with yourself....

We can't turn a gambling addict into a fund manager over night....and you are right it takes time and sometimes that time can span into years.....

 

[OddTrader]

Perhaps we need to separate/ distinguish a pyramiding (based upon any incremental and reasonable growth of capital curve) over a trend on top of the initial position, against a scaling-in/out to build up an initial position (without much growth of capital curve), based on our trading plan.

 

[jbt]

Quote from OddTrader:

Perhaps we need to separate/ distinguish a pyramiding (based upon any incremental and reasonable growth of capital curve) over a trend on top of the initial position, against a scaling-in/out to build up an initial position (without much growth of capital curve), based on our trading plan.

It sounds like everyone has different idea of what pyramiding is. In the sumplest terms is adding to your initial position in hopes of maximizing the continuation in price a good idea or bad one?

Ans. it depends lol

 

[MAESTRO]

Quote from jbt:

It sounds like everyone has different idea of what pyramiding is. In the sumplest terms is adding to your initial position in hopes of maximizing the continuation in price a good idea or bad one?

Ans. it depends lol

Look, if you buy additional shares (contracts) you make your average price worse. Therefore, you reduce your chances to lock the profits unless the security you are trading keeps on going in the same direction. The longer you are in the trend the greater is a chance of the trend's reversal. So, when it does reverse you might not have time to lock the profits and you might loose as your average price might be close to the current price of a security.

 

[forex_king]

Quote from MAESTRO:

Look, if you buy additional shares (contracts) you make your average price worse. Therefore, you reduce your chances to lock the profits unless the security you are trading keeps on going in the same direction. The longer you are in the trend the greater is a chance of the trend's reversal. So, when it does reverse you might not have time to lock the profits and you might loose as your average price might be close to the current price of a security.

How much do you put at risk?

10%
5%
3%
2.5%

How much do you put at risk on each pyramided position? Because this is the most important part of the trending process....

....Never risk more than you can afford.....I've heard this many times...but I guess it's a matter of doing.

 

[OddTrader]

Quote from jbt:

It sounds like everyone has different idea of what pyramiding is. In the sumplest terms is adding to your initial position in hopes of maximizing the continuation in price a good idea or bad one?

Ans. it depends lol

I would believe there are highly likely some mathematical/ statistical solutions that could reduce the uncertainty and degree of "It depends".