Finance:Pyramid trading
Pyramid trading, also known as pyramiding, is a trading strategy, which consists of adding to an existing trade or position as the price moves in the expected direction. Doing so reduces the risk levels of an investment, with traders using small increments to increase their holdings rather than betting big from the start.[1][2]
Pyramiding is popular among investors who are willing to play it safe by investing only a fraction of their intended full position and then waiting for the market to move before deciding to increase their hold on those equities that turned a profit.[3] The strategy may appear counter-intuitive initially, with each subsequent entry into the market costing the investor more money than the previous one. This, however, makes it easier to avoid losses in the long run if no new investments are made until the old ones turn a profit.[4]
Pyramid trading should not be confused with either pyramid trading points, which are data-based means to determine when a trend is nearing exhaustion,[5][6] or pyramid schemes, which are unsustainable, fraudulent and often illegal business models.[7][8]
References
- ↑ Diaz, Eva (2008) (in en). Real Traders II: How One CFO Trader Used the Power of Leverage to make $110k in 9 Weeks. Milton, Australia: John Wiley & Sons. pp. 51. ISBN 978-1-118-32039-6. https://books.google.com/books?id=lPodDAAAQBAJ&q=Pyramid+trading&pg=PA51.
- ↑ Fuller, Nial (28 September 2014). "Pyramid Trading Strategy – How To Turn Small Trades into Huge Trades" (in en-US). https://www.learntotradethemarket.com/forex-trading-strategies/pyramid-money-management-strategy.
- ↑ Connell, Steve (23 July 2018). "How to use Pyramid Trading to Build on Winners" (in en-US). https://forexop.com/strategy/pyramid-trading/.
- ↑ Roze, Gatis N.; Roze, Grayson D. (2016) (in en). Tensile Trading: The 10 Essential Stages of Stock Market Mastery. Hoboken, NJ: John Wiley & Sons. pp. 107–108. ISBN 978-1-119-22434-1. https://books.google.com/books?id=m5TNCwAAQBAJ&q=Pyramid+trading&pg=PT131.
- ↑ McDowell, Bennett A. (2008) (in en). The ART of Trading: Combining the Science of Technical Analysis with the Art of Reality-Based Trading. Hoboken, NJ: John Wiley & Sons. pp. 97–99. ISBN 978-1-118-03938-0. https://books.google.com/books?id=zTLJNhokjdwC&q=Pyramid+trading&pg=PA131.
- ↑ McDowell, Bennett A. (2012) (in en). Survival Guide for Traders: How to Set Up and Organize Your Trading Business. Hoboken, NJ: John Wiley & Sons. pp. 222. ISBN 978-0-470-43642-4. https://books.google.com/books?id=XglkDwAAQBAJ&q=Pyramid+trading&pg=PA222.
- ↑ Logue, Ann C.; Borzykowski, Bryan (2011) (in en). Day Trading For Canadians For Dummies. Mississauga, Ontario: John Wiley & Sons. pp. 156. ISBN 978-0-470-95199-6. https://books.google.com/books?id=dbYujCDpyjEC&q=Pyramid+trading&pg=PA156.
- ↑ Harris, Larry (2003) (in en). Trading and Exchanges: Market Microstructure for Practitioners. Oxford and New York: Oxford University Press. ISBN 978-0-19-979270-2. https://books.google.com/books?id=OB6rEzmG_WsC&q=pyramid+trading&pg=PT874.
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