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>Does anyone have knowledge of, experience with and/or references to
>pyramiding? By pyramiding I mean the systematic increase in your position
>size as the price of your investment moves up (or down if you are short).
>I've seen many casual comments about pyramiding but no systematic, thorough
>studies.
>
>Tom Strickland
Hi Tom: Check Geo. Angell, Winning in the Futures Market, p. 37-38, 40,
130, 133. An example:
"The trading pyramid consists of a base, with decreasing increments added
to form the top of the structure. It is designed to keep the average price
of all the positions you acquire low and to protect you against a
subsequent reversal in the price trend. ....The normal pyramid is built
with a large initial position, or base, with smaller and smaller increments
added as follows.....
In an inverted pyramid, which many traders use to their ultimate regret,
greater and greater commitments are added to a small base. By buying more
contracts as the market progresses in your favor, you only serve to make
yourself more vulnerable to an adverse move. The average price is higher
and the risk is far greater............... Due to the large commitment
near the top, however, just a small reaction in prices would result in a
loss for the trader. This is because the average prie is always relatively
close to the last posiiton aded, due to the size of the commitment."
Hope this helps... jerry.....
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