Bill Williams’ Reverse Pyramiding Method
I did return to consciousness and read BW’s paragraphs on Reverse Pyramiding. For the sake of anyone reading this thread, I’ll summarize it to round out the approaches to the pyramiding methods presented in this thread.
You begin by determining the TOTAL amount you’re willing to invest on a trade plus any pyramid levels you might add. His example:
When you open a trade, you open it with just a very small amount of the total you’re willing to invest, because, at the open of a trade, you’re just testing it to see if it will really go your way. Let’s say you’re willing to invest a TOTAL of 15 contracts in gold. When you open the trade, you open it with just one contract - your “toe in the water.” If it goes your way, and the trend gives you a second entry signal, open that with five contracts [yes, five as compared to the initial one], and so on. If the trend continues to give signals, the next should be four contracts, then three, then two. You’ve reached fifteen contracts, so no more investing in that trend. And, of course, bring up the rear on each addition with a trailing stop. He reports that those who adopted his Reverse Pyramiding method have, on the whole, more than doubled what they would have earned if they did not pyramid.
There! I just did my good deed for humanity for the year. As for me, I think I’ll still begin by adding, at each level, the amount I initially opened the trade with. How that works out will be my benchmark from where I’ll continue.
I would just like to add a word of caution for those who might need it. PROCEED WITH CAUTION, AND TEST! To use Bill’s example: If you profit one contract from before you move your trailing stop, great. But then, let’s say you add five contracts as he suggests - and it bombs out. You’re in the red four contracts. I’d say, get real good at pyramiding no more than your initial amount at each level before you bet the ranch - and make sure that, at each level, the trend and new signal are strong enough to carry you through to profit from that particular addition as if it were a stand-alone trade!