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Pyramiding is commonly used by trend followers, most notably the Turtles.
The way the Turtles do it is to set a max stop loss at 2 ATR below the
buyprice at trade initiation. As soon as the price advances by the
equivalent of a 1/2-ATR move upwards in price, they add another unit to
their position and move the original stoploss up to 2 ATR below the new
buyprice. Now the max loss on the original unit is 1.5 ATR while the max
loss on the new unit is 2 ATR. Then, if the price advances another 1/2
ATR, they add another unit to their position, moving all stoplosses up to 2
ATR below the newest buyprice. The max loss on the 1st unit is now 1 ATR,
the 2nd is 1.5 ATR, and the newest is 2 ATR. They do this a maximum of 5
times, each occurrring at 1/2-ATR advances in the price, and they never add
any more than that. So, they pyramid early in the trade, maximixing their
position after 2.5 ATR advance in price. If the price continues to trend,
their pyramided position makes lots and lots of money. They are willing to
give all that up if the price falls to the stoploss. If you wait too long
to pyramid (say, waiting until the price advances by 25 or 30% or so), then
the effect of pyramiding is greatly diminished. The trick is to add to your
position early.
The entire Turtle system and its money management approach have been
published for free by Curtis Faith, one of the original Turtles, in a pdf
file entitled Turtlerules.pdf (do a google search).
AV
Original Message:
-----------------
From: Michael.S.G. OzFalcon@xxxxxxxx
Date: Mon, 25 Aug 2003 21:39:55 +1000
To: amibroker@xxxxxxxxxxxxxxx
Subject: Re: [amibroker] Re: adding to positions in Stocks
<html><body>
<tt>
Well, You just described the way I trade. (Me being on a VERY limmited <BR>
Capital.)<BR>
<BR>
Granted I can ONLY do 3 trades......... But I usualy take the sequence you
<BR>
pointed out.<BR>
<BR>
I have a Gain of aprox 10% in 150 days. Not Very FAST but OK for a newb.<BR>
I try to turn over my entire capital each month. (Sofar I have only been
<BR>
able to turn half of it per month).<BR>
<BR>
<Michael><BR>
<BR>
<BR>
At 08:37 PM 24/08/2003 -0700, you wrote:<BR>
>Like everything else, it's all in the wrist.<BR>
><BR>
>Some like to buy 3 contracts (or multiples of) at the inital buy point.<BR>
>The first one is exited as soon as the margin, taxes, and broker costs are
<BR>
>gained.<BR>
>The second is exited as soon as a profit target is reached.<BR>
>The third is held until the trend is exhausted, or when a specific stop is
<BR>
>triggered.<BR>
>Obviously, if the price direction goes wrong, all three are exited at
once.<BR>
>If you get the price direction wrong often, its going to cost ya.<BR>
><BR>
>"Pyramiding" is a word that has gained a negative connotation by those who
<BR>
>tried it without adequate testing and crashed their accounts.<BR>
>Traditional pyramiding does, for the most part, fail.<BR>
>Many people pyramid without calling it that. It's really just adjusting a
<BR>
>previously opened trade.<BR>
>Done differently, under some conditions, it works.<BR>
><BR>
>-CS<BR>
>----- Original Message -----<BR>
>From: <mailto:Kevin243@xxxxxxx>Kevin243@xxxxxxx<BR>
>To: <mailto:amibroker@xxxxxxxxxxxxxxx>amibroker@xxxxxxxxxxxxxxx<BR>
>Sent: Sunday, August 24, 2003 7:36 PM<BR>
>Subject: Re: [amibroker] Re: adding to positions in Stocks<BR>
><BR>
>I've done pyramiding in terms of trading. After doing it, and getting
<BR>
>less than satisfactory returns, why would you want to? It is essentially
<BR>
>dollar cost averaging the wrong way. The reward/risk characteristic of
<BR>
>the position is getting worse as you approach the final position
close-out.<BR>
><BR>
>Granted, managing a fund may quite different, since money is always <BR>
>streaming in or out, whatever.<BR>
><BR>
>But, it seems to make more sense to find a stock/future that hasn't moved
<BR>
>yet, and invest new money there.<BR>
><BR>
>Kevin Campbell<BR>
><BR>
><BR>
><BR>
>In a message dated 8/24/03 4:29:34 PM Central Daylight Time, <BR>
>psytek@xxxxxxxx writes:<BR>
><BR>
>><BR>
>><BR>
>>Pyramiding has been commented on by Tomasz, and can be implemented by <BR>
>>closing and re-opening a position with a different position size. I also
<BR>
>>posted another method myself at the time. Do a search for Pyramid in the
<BR>
>>AB archive. Here is TJs example:<BR>
>><BR>
>>// the example system buys on monday, wednesday (increasing<BR>
>> >>>pos)<BR>
>> >>>// and sells on friday<BR>
>> >>><BR>
>> >>>BuyCond = DayOfWeek() == 1;<BR>
>> >>>Buy2Cond = DayOfWeek() == 3; // pyramid<BR>
>> >>><BR>
>> >>>Sell = DayOfWeek()==5;<BR>
>> >>><BR>
>> >>>Buy = BuyCond OR Buy2Cond;<BR>
>> >>>PositionSize = IIf( Buy2Cond, 2000, 1000 ); // 1000 is first<BR>
>> >>>trade<BR>
>> >>>2000 is pyramided<BR>
>> >>>Sell = Sell OR Buy2Cond;<BR>
>> >>><BR>
>> >>>/////////////////<BR>
>> >>>Please set trade delays to zero in the settings page.<BR>
>><BR>
>>>-----Original Message-----<BR>
>>>From: Chuck Rademacher [mailto:chuck_rademacher@xxxxxxxxxx]<BR>
>>>Sent: Sunday, August 24, 2003 4:37 PM<BR>
>>>To: amibroker@xxxxxxxxxxxxxxx<BR>
>>>Subject: RE: [amibroker] Re: adding to positions in Stocks<BR>
>>><BR>
>>><BR>
>>>The inability to add to positions in AB and MetaStock has been a <BR>
>>>frustration for a lot of us over the years.<BR>
>>><BR>
>>>After reading some of the posts on this recent thread, I had an idea <BR>
>>>that might help. If it was really important to me to be able to test
<BR>
>>>such an idea, I would try creating pseudo-instruments. For ease of <BR>
>>>describing what I'm talking about, I'll use IBM as an example. By the
<BR>
>>>way, this approach could be tedious for stocks, but I get the impression
<BR>
>>>that the original person raising the issue was interested in <BR>
>>>futures. Cotinuing with my example of IBM, I could create a new ticker
<BR>
>>>called "IBMx1" that I could use the first time that I wanted to add to a
<BR>
>>>position. I could have another (IBMx2) for the next addition, <BR>
>>>etc. You could even set commissions/slippage to zero within the AFL
<BR>
>>>for such tickers.<BR>
>>><BR>
>>>I haven't thought it all the way through and I don't really have time to
<BR>
>>>get into it right now. But perhaps someone else can take it from
here?<BR>
>>><BR>
>>>Have fun!<BR>
>>><BR>
>>>>-----Original Message-----<BR>
>>>>From: CS [mailto:res1wgwl@xxxxxxxxxxx]<BR>
>>>>Sent: Sunday, August 24, 2003 4:17 PM<BR>
>>>>To: amibroker@xxxxxxxxxxxxxxx<BR>
>>>>Subject: Re: [amibroker] Re: adding to positions in Stocks<BR>
>>>><BR>
>>>><BR>
>>>>You can increase or decrease the size of each position before it is <BR>
>>>>initiated, but not during a trade. For anything. Not yet.<BR>
>>>>You could write a dll for the capability but it would be difficult to
<BR>
>>>>keep the separate trades organized. After you decided to <BR>
>>>>increase/decrease a position while you were in a trade, which <BR>
>>>>contracts/equities would buy/sell first? When? In what order? According
<BR>
>>>>to what schedule?<BR>
>>>><BR>
>>>>-CS<BR>
>>>><BR>
>>>>>----- Original Message -----<BR>
>>>>>From: <mailto:rlb21079@xxxxxxxxxx>rlb21079<BR>
>>>>>To: <mailto:amibroker@xxxxxxxxxxxxxxx>amibroker@xxxxxxxxxxxxxxx<BR>
>>>>>Sent: Sunday, August 24, 2003 4:16 AM<BR>
>>>>>Subject: [amibroker] Re: adding to positions in Stocks<BR>
>>>>><BR>
>>>>><BR>
>>>>>Is this also true for equities/stocks?<BR>
>>>>><BR>
>>>>>--- In <mailto:amibroker@xxxxxxxxxxxxxxx>amibroker@xxxxxxxxxxxxxxx,
<BR>
>>>>>"CS" <<mailto:res1wgwl@x>res1wgwl@xxxx> wrote:<BR>
>>>>> >Can't.<BR>
>>>>> ><BR>
>>>>> >-CS<BR>
>>>>> > ----- Original Message -----<BR>
>>>>> > From: emarco<BR>
>>>>> > To: <mailto:amibroker@xxxxxxxxxxxxxxx>amibroker@xxxxxxxxxxxxxxx<BR>
>>>>> > Sent: Tuesday, July 15, 2003 9:37 AM<BR>
>>>>> > Subject: [amibroker] adding positions in futures<BR>
>>>>> ><BR>
>>>>> ><BR>
>>>>> > How can I add postions (contracts) if a condition is met.<BR>
>>>>> ><BR>
>>>>> > example:<BR>
>>>>> > I entered a buy position after signal.<BR>
>>>>> ><BR>
>>>>> > Add one more contract if profit (first trade >2%)<BR>
>>>>> ><BR>
>>>>> ><BR>
>>>>> > any idea how?<BR>
>>>>> > thanks<BR>
>>>>> ><BR>
>>>>> > juan<BR>
><BR>
><BR>
><BR>
><BR>
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