Pyramiding

Now this is something I researched multiple times and always avoided it afterwards because I could not find a way that suited my style of trading but recently I finally started using it. I have not found a resource that explains it all in one go. There are lots of ways to do this, my way of pyramiding is a combination of different books, articles, videos, my own findings and finding what fits my style.

The power of building a position

Pyramiding is a powerful tool because you will enter a trade and add if it works and only if it works. If it does not work you won't. That means your winners will be bigger positions and losers smaller positions. This helps making returns on winners stand out.

Core position

Based on the market environment I will use a different position size for a trade. If the market is in a correction or range and an A+ setup appears along with a nice rally attempt in the market, I tend to sometimes take those trades on half position size on the breakout. I only take full size positions when the market is having a clear trend.

Now when I take a 0.5R / half sized position during a ranging market or correction I simply do not add any until the market makes a trend. This way you don't become to heavily invested in a trade when conditions aren't great, controlling your exposure and open risk.

Splitting your core position in two can be a great way to test if the trade works and not immediately put on a full position. One way to do this for example is on the breakout to put on a 0.75R / 0.75% risk position on instead of your full 1R all at once. When the trade works and in the days after that it goes higher, that is where you add the rest (0.25R / 0.25% risk). This way you finetune your position size based on if the trade actually works. After that you can start pyramiding.

Guardrails for pyramiding

• Set a maximum amount of open risk.
• Set a maximum number of adds.
• Every add should be smaller than the core position.
• Every add should have it's own stop loss and move to break even point, for example 2R.
• Define on what conditions you will add.

Setting a maximum on amount of open risk will not let things get out of control and lose too much when the trade goes sideways.

Limiting the number of adds and using smaller positions on adds is a good way to not become top heavy. If you add half way through your trade at say 50% profits the same amount as your core position and that add goes into its stop loss. You are risking to lose all of your open profits. That is why you NEVER should become top heavy in a trade. Trust me I have made this mistake.

Every add should have their own stop loss and move to break even point because if your trade rolls over, the first positions that will be sold will be the most expensive ones, saving your cushion.

You need to define where you will add. Some traders like to wait for pullbacks to certain moving averages. I tend you use pure price action with volume. Pullbacks, flags, small bases, 2 weeks tight, cups, anything that looks like a short consolidation with a breakout from that on higher volume is a good place to add really.

Final thoughts

In the end, pyramiding isn't about being aggressive; it's about being smart with your risk. By starting small, testing the waters, and only feeding the winners, you protect your capital while maximizing your upside. This can transform your equity curve. Stick to the guardrails, don't become top-heavy and let the market prove you right before you size up.

Disclaimer: The content of this blog is for educational and informational purposes only and does not constitute financial advice. The author is not a certified financial advisor. All analysis is based on historical market data and technical methodologies. Trading stocks and cryptocurrencies involves significant risk. Always do your own due diligence and consult with a professional financial advisor before making investment decisions.