To PYRAMID into STRENGTH

K-Pia

K-Pia

What do you have to say about that ?
How would you define Strength ?

I view strength as being conditional on reactions.
We have to design tests that tell us how strong is the market.
Such tests are : Support & Resistance, Path of Least Resistance,
Reactions to News, Intermarket Analysis ....

I think it's the way to go,
It produce asymmetric outcomes.
Lose small exploratory bets, win big when "rights".

Everytime the market shows strength,
We add to out position (Pyramid).
Otherwise we get flat.
 
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If we want to increase the Asymmetry:
Then we need Time, Strength and to Pyramid.

To foresee and quantify Strength is the problem.
 
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If you can find a way to make it work with your system then I'm all for it.

This a topic I heard in a podcast from Adam Grimes, " trade management and trade offs".

The reverse pyramid does have some issues. First I'm assuming your looking at getting into a trend with this idea. The issue is that you will have your largest position right when the trend changes direction. This can be a big issue of the trend goes parabolic and goes into a quick reversal, wouldn't take much to turn a winning trade into a loser with the reverse pyramid.

Any type of scaling in or out has trade offs. Like when using a scaling out system, you kind of start locking your PnL when you start taking some off the trade.
 
I always add to positions, both winners and losers. Time is probably the most important component. I never make a move based on price. Classic pyramid usually starts with 3 units, add two to a winner and then finally one. Add 4 to a loser. It's a beautiful thing when that whole pyramid moves in your favor. But too risky for me now in my old age. I just build skyscrapers, one floor at time.
 
What sucks is when you're loaded up with a big unrealized gain and then it comes back to break even. It's sweet when it hits though.
 
Zr1Trader said:
What sucks is when you're loaded up with a big unrealized gain and then it comes back to break even. It's sweet when it hits though.
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that's why I hate adding to winners. Just when you get a decent average price way down there, you add and it's right back into the fire. But I know of no way to add to winners without also adding to losers. It's been proven to my satisfaction that no adding improves performance. But I'm a human, and I have my weaknesses. I see these guys every winter jumping into that cold water. Nope, not me. Even on the hottest day in summer it's just a few steps deeper and deeper.
 
so for instance, I added to a winner today, but not because of it's price, it just happened to be the one moving the most against me today, and I needed to add to something. I had a loser I could have added to, but it wasn't moving as much. Maybe Monday my loser will move hard against me and I can add to it.
 
Mentally break out the "adding to a position" as "would it be sane to enter the trend here with a new trade?" If it is sane, then it's irrational to think adding to the position is something that should result in worse performance.

To put it another way, if you had no position but were interested in putting one on due to observing a solid sustaining trend, you'd initiate it on some kind of pullback and trade it as normal, right? Therefore it's not any different from adding to the position as long as you're leaving enough buffer p/l and managing stops accordingly. It's the same general trading problem of "how to know when the trade is over or the trend is done?"

Also, I'd try not to think of profit as "realized" or "unrealized" - particularly if you're trading futures which are MTM each day. All profits and losses should basically be considered live and real.
 
i960 said:
Mentally break out the "adding to a position" as "would it be sane to enter the trend here with a new trade?" If it is sane, then it's irrational to think adding to the position is something that should result in worse performance.

To put it another way, if you had no position but were interested in putting one on due to observing a solid sustaining trend, you'd initiate it on some kind of pullback and trade it as normal, right? Therefore it's not any different from adding to the position as long as you're leaving enough buffer p/l and managing stops accordingly. It's the same general trading problem of "how to know when the trade is over or the trend is done?"

Also, I'd try not to think of profit as "realized" or "unrealized" - particularly if you're trading futures which are MTM each day. All profits and losses should basically be considered live and real.
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yes, with the first part. That pretty much sums it up. That position doesn't know or care if you are long or short or in deep or flat. It's going to behave the same way no matter what you do.

an unrealized profit is about like the value of your house. It doesn't mean much on a peaceful night. The only difference between a realized profit and an unrealized profit is one is realized and the other is unrealized. I'm not that into realizing new things. Once you realize something new, then you have to also realize something even newer. It just goes on and on. As long as they are unrealized I always know where to go to find them.
 
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