It's hard to start/continue trading discussions in ET when people without a clue start giving their opinions as if they were long time profitable traders.
Pyramiding implies that your position grows over time as your trade works in your favor, this by definition means you add to the winning trade using lesser size than the previous one as it goes along.
It's a handy positioning management system because your losers are always small and winners, well, big, some even gigantic.
The problem lies in that many times the trader witnesses a winning trade retrace and become a scratch or even a small loss and this creates a psychological hit on the trader. Aside from this the location of every new add is paramount to the success of the trade. ie Just because the trade is working does not mean you will add a long at a higher high.
However, the quintessential question then becomes when does one stop ? Surely one must have an end plan or the whole pyramid system can well, collapse wasting all those unrealized profits.
Yet over the course of time if you can spot the birth of great trends the payouts make up for the vast majority of the hassle (watching winners turn into scratches time after time); when at the same time it's particularly hard to blow up from too many bad calls because the losses are small (although they could be numerous) and the winners have no real limits.
In hindsight pyramiding works best on the strongest of trends, add a little choppiness and you could get faked out just like the newbie next to you; therefore the whole concept of adding to winners is probably only suggested to the traders that are fluent in the language of price.
Pyramiding just so happens to be my position management of choice and for the curious most of my winning days are scratches or small losses but once in a while I make that 90 yard pass that makes up for all the hard work.
As the saying goes, don't add to losers, add to winners, but as we all know, that's easier said than done. Everything in trading is easier said than done.
Hope the info was of service.
Pyramiding implies that your position grows over time as your trade works in your favor, this by definition means you add to the winning trade using lesser size than the previous one as it goes along.
It's a handy positioning management system because your losers are always small and winners, well, big, some even gigantic.
The problem lies in that many times the trader witnesses a winning trade retrace and become a scratch or even a small loss and this creates a psychological hit on the trader. Aside from this the location of every new add is paramount to the success of the trade. ie Just because the trade is working does not mean you will add a long at a higher high.
However, the quintessential question then becomes when does one stop ? Surely one must have an end plan or the whole pyramid system can well, collapse wasting all those unrealized profits.
Yet over the course of time if you can spot the birth of great trends the payouts make up for the vast majority of the hassle (watching winners turn into scratches time after time); when at the same time it's particularly hard to blow up from too many bad calls because the losses are small (although they could be numerous) and the winners have no real limits.
In hindsight pyramiding works best on the strongest of trends, add a little choppiness and you could get faked out just like the newbie next to you; therefore the whole concept of adding to winners is probably only suggested to the traders that are fluent in the language of price.
Pyramiding just so happens to be my position management of choice and for the curious most of my winning days are scratches or small losses but once in a while I make that 90 yard pass that makes up for all the hard work.
As the saying goes, don't add to losers, add to winners, but as we all know, that's easier said than done. Everything in trading is easier said than done.
Hope the info was of service.
