I was just reading in the latest Your Trading Edge magazine about a 'system' for pyramiding into a winning trade. It is based on a weekly chart, in which you determine the trend (in my example a downtrend) and put in a conditional order to 'enter' more into the trade every time the SP moves past the low of the previous week (short in my example. Opposite for long trades). You also move your trailing stop to the high of the previous week. The author suggests to pyramid only 2 or 3 times into the trade and my opinion would be to only pyramid into the trade once the original is at breakeven including commissions (to effectively give you a "free" trade). Obviously each new entry would be treated as a whole different trade and obey the 2% (or whatever u choose) position sizing rule.
For Example on this chart (weekly AIO):
After the retracement, your entry $ would be at '1' with the initial stop at 'A'
You would then set your next entry at when SP moves below '2' and move the stop to the top of that large red candle (oops forgot to put a line in!).
The week after you move your trailing stop down to 'B' with your next entry at '3' and so on and so forth.
I know I've presented a pretty basic explanation but I'm sure you all understand what I'm getting at.
What I ask is - what are your opinions about that sort of pyramiding and close trailing stops?
- Do you think that it is tradeable with a daily chart?
- Plus feel free to chuck in other ideas about this.
Yeah, thats about it, whadda ya reckon aboudit?