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Published On: Wed, Feb 20th, 2013

Pyramiding

Pyramiding is a trading strategy similar to the dollar cost averaging strategy of investing.

With the Pyramiding strategy, a trader will have a pre-determined number of shares or contracts that he would like to have in the overall position.  He will then divide the number of shares of his end goal by either three or five.  He will then buy into the trade in three or five small purchase points.  When the trade turns a profit, he will then dismantle the trade in the same three or five selling points.  The idea is that the trader will get the best price of the trade without risking entering into the trade with only one price.  He can enter the first trade, and then use this price as an established basis of a price, entering into each other part of the trade at a lower point than the first entry point.  Selling is done in the reverse, with each next sell trying to get a better price than the next.

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.

 

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