Pyramiding into a trend

My favorite threads are ones that provoke thought. I will not lay this out step by step, just bits and pieces. Re-read my post as to possible uses of pyramiding and yes even averaging down.

Find YOUR way...

Thank you for all the posts from both the experienced and newer traders. I am always learning new ideas and gather Gems from various traders at various stages. Some of the freshest stuff comes from newer traders and their observation skills are keen.

Michael B.
 
I guess what you are saying is:
you can get bigger and bigger, while maintaining a zero-risk position if you add. This way, you can potentially get one trade over the course of say, a year, which could totally eclipse the trading you've done for the rest of the year (in terms of profits).

And so we are led to yet another poker/trading analogy. This is basically the "grinder" method vs. the "..." method. I don't believe it's been named yet. Let's call it the "catastrophic profit (CP)" method. The grinder method is the usual thing where you have some edge, you make a zillion trades and add up all your nickels and dimes at the end. And wow! It's a million bucks or whatever. This is what most SNG tourney poker players do. However, there was this guy a couple months ago who needed $2000 or something to go on this trip, and he had $500 or something to work with and like a day or two to make it. At his usual tourney level ($30) he figured he could not make enough in time. However, if each time he won, he played in a higher level tourney (which go up to $200 entry fee), he figured he could make it. When he lost that money he would move back down. He did some neat monte-carlo sims to show that it was indeed likely to make a wad of cash in a day. Sure enough, he did it in a day.
 
I post in waves as I am working a full time job from home. But I always find time to trade and post in between phone calls...lol.

By the way, apparantly USD has found some support. (yes I am trading Forex in between ET and work)

Michael B.

P.S. I will go over this thread tonight and reply
 
:) The big picture. There are many ways and this is just one. You got it Peter. Tighten up the example and the winrate increases.

There are so many examples and variables...no time got to go.

Lets end this thread positive...

Thanks Folks,

Michael B.


Quote from peterfigliozzi:

I guess what you are saying is:
you can get bigger and bigger, while maintaining a zero-risk position if you add. This way, you can potentially get one trade over the course of say, a year, which could totally eclipse the trading you've done for the rest of the year (in terms of profits).

And so we are led to yet another poker/trading analogy. This is basically the "grinder" method vs. the "..." method. I don't believe it's been named yet. Let's call it the "catastrophic profit (CP)" method. The grinder method is the usual thing where you have some edge, you make a zillion trades and add up all your nickels and dimes at the end. And wow! It's a million bucks or whatever. This is what most SNG tourney poker players do. However, there was this guy a couple months ago who needed $2000 or something to go on this trip, and he had $500 or something to work with and like a day or two to make it. At his usual tourney level ($30) he figured he could not make enough in time. However, if each time he won, he played in a higher level tourney (which go up to $200 entry fee), he figured he could make it. When he lost that money he would move back down. He did some neat monte-carlo sims to show that it was indeed likely to make a wad of cash in a day. Sure enough, he did it in a day.
More...
 
You set 2000$ long on forex with a 100pip loss/200 pip profit target. That means potential 20$ loss or 40$ profits, 2:1 ratio.

Instead you do the same trade with 1000$ initialy with same target of 100/200 pips, adding another 1000$ IF the trade goes your way, let say at +100 pip P/L. (you keep a 2:1 ratio on the "add-on" for the same target profit point, so it will be a -50pip loss/+100pip profit at this point for this half of the position)

That means if the trade doesn't goes your way at the start you lose 10$. If it goes all the way to target you make 30$, having a 3:1 ratio instead of 2:1.

I'd like to see the maths if you do the same, adding say 100$ every +10pips P/L, or 10$ every +1pips......

Yes absolute profit is lower with the same 2000$ position, but so is the risk.

If it goes to the 100 pip profit point where you add 1000$ then goes backward just after, then your fucked.

If it goes all the way down to the original stop, you lose 5$ on the "add-on" (stop @-50pips) and 10$ on the original 1000$, making it a 15$ total loss for a potential 30$ profit, making it back to a 2:1 ratio (worst case scenario). But with the use of trailing stops you can counter that.

So that's what it's used for, to reduce initial risk and to add when you get confirmation signals. But of course it does not increase ROI. The only way for this is to go all-in with maximum leverage right at the start. :D
 
Thanks for your thoughts and I like your style :) How could anybody buy into that crap that sounds good when posting. It's these kinds of posts from traders that actually do it that counts. The old wives tales just simply don't cut it here at ET .

Thanks again Max


Michael B.

P.S. Oh there is so much to talk about and not enough time. There are so many strategies that have nothing to do with pyramiding that I use that work too. I have learned so much here at ET, and I want to share.

So that's what it's used for, to reduce initial risk and to add when you get confirmation signals. But of course it does not increase ROI. The only way for this is to go all-in with maximum leverage right at the start.
 
He will certainly be missed. He had the best threads on price and volume, for me anyway.

I wonder what happened?



:confused:
 
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