Pyramiding

[oldtime]

Quote from macrotrader:

If the stock follows a random walk in the sense that my scenario doesn't change, pyramiding doesn't make sense, because I can simply risk my initial capital and leave the position unchanged. However, if the probability of an upward move goes down it makes sense to add to the position. As I understand martingale means adding to the position if it goes against you (because the probability of a reversal increases). No infinite wealth required for my approach. I am not sure, but I think Soros reflexivity theory refers to the evolution of the market. As soon as the perception changes and a structural break occurs, a reversal is very unlikely. Which means, if you stand on the right side, you should increase your position, and if you're on the wrong side get out. The rule let your winners run and cut your losses short only makes sense if one makes assumptions about conditional probabilities. I did a gazillion backtests and not ounce tested pyramiding, because for a statistical trader it doesn't make sense IMO. Same is true for stop-losses, a concept which seems to confuse a lot of people.

no kidding, stop losses (and taking profits) can really kill you. What you call pyramiding may just be a shotgun approach. You know you want to get short but not exactly where, so you put it on a little at a time. Sometimes you add to winners, sometimes you add to losers, but you are always mindful that you might be on the wrong side of a trend, and for that you need some kind of stop loss program.

otherwise, for every one Soros there are thousands of losers. They don't write books about the losers.

as a matter of fact I'm not a big lottery ticket buyer, but I have bought a few powerballs in my life (no longer now that the price went up to $2.) And they have never interviewed me, yet they have a whole tv show about those that hit the numbers.

Not so sure I would be comfortable doing it the Soros way, not so sure I am that lucky.

 

[oldtime]

Quote from Brass:

If you are relying on prediction for your trades, then I suggest you wear your lucky charms. The only trading that I personally know to work involves reacting to events (price action) that you can actually see developing in the present. Compare that to knowing where prices will turn, by how much and when.

luck is a very important aspect to my trading. I try to position myself so if I have bad luck I won't get hurt too bad, and if I have good luck I will finally start making some money to atone for all the losses.

I'm not afraid to guess what price will do, and always seem to have better luck when I am positioned according to my guess.

But I agree, I wouldn't want to have to make a living by guessing, since I am only right about 50% of the time, and that doesn't cover the spread or commissions.

 

[FreakofNature]

Some of you need some serious lessons in reading comprehensions.

The OP is talking about adding to a winner not a loser.

 

[oldtime]

Quote from FreakofNature:

Some of you need some serious lessons in reading comprehensions.

The OP is talking about adding to a winner not a loser.

can't do one without the other, market turns on you and you will get hurt really bad, got to bet both ways

 

[RedTankEra]

Quote from oldtime:

can't do one without the other, market turns on you and you will get hurt really bad, got to bet both ways

That is true if you do it like most amateurs do, do it right and this will rarely occur.

 

[oilfxpro]

The way I pyramid is by starting with small stop strategy , if market behaves in my direction , positions are added .More and more strategies and positions are added when price keeps going my way.
Stops are placed below previous troughs and above previous peaks.

The first strategy is the riskiest , after first entry all subsequent entries are risked with profit from first entries.

 

[oldtime]

Quote from RedTankEra:

That is true if you do it like most amateurs do, do it right and this will rarely occur.

well, then I must be doing it like most amateurs. Care to give me any insight in how to do it right?

 

[oldtime]

otherwise, wouldn't it be nice if all we had to do was cut losers and add to winners? Life would be so simple and we'd all be rich.

 

[bone]

Quote from oldtime:

otherwise, wouldn't it be nice if all we had to do was cut losers and add to winners? Life would be so simple and we'd all be rich.

Exactly. And markets never correct and consolidate and random walk and trends don't fail off and and trailing stops never get taken out until you feel comfy with all the profit you've accumulated with positive marks in your account on open positions.