Eliminate risk? How so? I would love to see someone show an example where pyramiding doesn't bring a great deal more risk. I believe pyramiding is only correct when we're presented with subsequent entries that we would have taken anyway. Even then risk is greater, due to the trades being heavily correlated.
Eliminate risk? How so? I would love to see someone show an example where pyramiding doesn't bring a great deal more risk. I believe pyramiding is only correct when we're presented with subsequent entries that we would have taken anyway. Even then risk is greater, due to the trades being heavily correlated.
tech/a
No Ordinary Duck
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You sure you dont want to take some time to REALLY think about it before I show a practical example?
No, please show a practical example. By entering again, you are naturally assuming risk. Pyramiding is often understood as simply adding to a winning position. This is simply a reverse martingale. The additional entries must be +ev themselves, or in other words, worthy of being independent trades.
tech/a
No Ordinary Duck
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Ok happy to do so.
I use 60 min charts in which to pyramid.
But you can use similar principals in any timeframe/s.
At no time do I pyramid into a trade where the addition of positions throws me lower than B/E on all trades.
Each trade is placed on its own merits and it is common for me to be stopped out of a pyramid position while the initial position remains in profit.
Its also common for me to close out a position whilst still holding other positions in the trade.
The end result is maximum result on $'s risked.
My increased position sizes range from 25% of the original trade to 300% of the original trade dependant on the trade being taken and the resultant maths with regard to risk.(Ie never exposing myself to risk beyond the initial trade risk---outlier moves accepted but not expected in taking positions).
I wont take pyramid trades if I cant trade all trades to B/E in the worst case scenario.If ever reached---and it does then all are closed out.
My live charts are at the office I dont trade from home so the example Id like to show is SFR---one Ive just traded.
I'll do it Monday night.
But I can show the principal on a daily chart sometime tommorow--(just about to jump on the Bike for 3 hrs then off to the footy!).
There are many creative ways you can jump on the rocket and belt the brains out of it without risking your house---infact more than your initial trade risk! To eliminate risk I ensure that I'm never below B/E on everything on the position.
Frankly if its flying I wouldnt care if most of my funds are in the one trade if the risk in the trade is no more than any other trade--on initial capital.
I use 60 min charts in which to pyramid.
But you can use similar principals in any timeframe/s.
At no time do I pyramid into a trade where the addition of positions throws me lower than B/E on all trades.
Each trade is placed on its own merits and it is common for me to be stopped out of a pyramid position while the initial position remains in profit.
Its also common for me to close out a position whilst still holding other positions in the trade.
The end result is maximum result on $'s risked.
My increased position sizes range from 25% of the original trade to 300% of the original trade dependant on the trade being taken and the resultant maths with regard to risk.(Ie never exposing myself to risk beyond the initial trade risk---outlier moves accepted but not expected in taking positions).
I wont take pyramid trades if I cant trade all trades to B/E in the worst case scenario.If ever reached---and it does then all are closed out.
My live charts are at the office I dont trade from home so the example Id like to show is SFR---one Ive just traded.
I'll do it Monday night.
But I can show the principal on a daily chart sometime tommorow--(just about to jump on the Bike for 3 hrs then off to the footy!).
There are many creative ways you can jump on the rocket and belt the brains out of it without risking your house---infact more than your initial trade risk! To eliminate risk I ensure that I'm never below B/E on everything on the position.
Frankly if its flying I wouldnt care if most of my funds are in the one trade if the risk in the trade is no more than any other trade--on initial capital.
Okay, we're on the same page, just looking at it different ways. You seem to agree that the additional trades are placed on their own merit (i.e. they'd be attractive trades on their own). Where we differ seems to be how we define risk.
You seem to define risk from the starting point - if it fails and ends up breakeven, you believe that we have risked nothing. My perspective is that we have risked our original profit. Had we not made additional trades, we would have profited. Each additional trade we make has a chance of losing, and adds that risk to the overall position. There is also the fact that each trade of the overall position is highly correlated, which means that we are effectively trading a much larger size. This increases our risk of ruin. Proper pyramiding is extremely effective, but it does come at a cost.
You seem to define risk from the starting point - if it fails and ends up breakeven, you believe that we have risked nothing. My perspective is that we have risked our original profit. Had we not made additional trades, we would have profited. Each additional trade we make has a chance of losing, and adds that risk to the overall position. There is also the fact that each trade of the overall position is highly correlated, which means that we are effectively trading a much larger size. This increases our risk of ruin. Proper pyramiding is extremely effective, but it does come at a cost.
tech/a
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Yes
Not interested in open profit.
Only interested in Open Risk.
Only interested in final R/R.
If Catasrophic stop is limited to B/E as a minimum then other than outliers or slippage---we are no more exposed to ruin than a spread of trades with the same risk management.
A $1,000,000 position has no more risk than $1000 position at a B/E stop.
Happy to disagree on "proper" and cost.
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Unless it gaps down 10% through your stop!
I doubt it, since by "proper" I mean each entry being +ev. As for cost, are you suggesting there are no trade-offs with pyramiding?
It depends. If we had closed each trade before entering the next one, our risk is less than if we had held through and pyramided. Our potential profit would be much smaller though. As I understand it, we're comparing two situations where the only difference is that one we ride each trade (pyramiding), and with the other we close each trade before opening the next?
tech/a
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Perhaps there should be a pyramiding thread?
Risk to open profit yes.
If your suggesting then that potential profit lost through pyramided trades which dont work out are not out weighed by realsied profits from pyramided trades which do succeed---then I dont have an answer---I simply dont have the reseach.
But there is much to this topic and an extremely important one which is NEVER visited.---well not that I have seen.
Are examples now required?
OH
I agree with Kam looks a very sus artical!
Risk to open profit yes.
If your suggesting then that potential profit lost through pyramided trades which dont work out are not out weighed by realsied profits from pyramided trades which do succeed---then I dont have an answer---I simply dont have the reseach.
But there is much to this topic and an extremely important one which is NEVER visited.---well not that I have seen.
Are examples now required?
OH
I agree with Kam looks a very sus artical!
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Why do you think its not real kam?
It reads like it's made up guys. Just stuff from Darvas' Book itself. Besides, Crisp was about 2 years old in 74 so he clearly could not have conducted the interview.
Now where the hell is that Time Magazine article.
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I haven't read through the entire thread yet, but I've just read the book for the second time (first time was one of the first things I ever looked at in relation to trading).
A number of his ideas resonate strongly with me and this is one of my favorite books. The one thing that really dawned on me is the fact that he was 'betting the farm' on one or two big trades. I know he had tight stops to limit risk, but this seems very risky to me and if there was some sort of catastrophic event could send him broke.
Is this an accurate observation? What are people's thoughts on this?
A number of his ideas resonate strongly with me and this is one of my favorite books. The one thing that really dawned on me is the fact that he was 'betting the farm' on one or two big trades. I know he had tight stops to limit risk, but this seems very risky to me and if there was some sort of catastrophic event could send him broke.
Is this an accurate observation? What are people's thoughts on this?
Well why not get the answer straight from the horses mouth? Nicolas Darvas did an interview in 1974 where he was asked this same question. Quote from the interview below:
Nick going through the book : “How I Made 2 million in the Stock Market.” It it's quite obvious that you took some enormous risks early on in your trading career. I mean, at one stage, you are trading your whole account, on 50% margin, and if it had have gone wrong. It's safe to say, you probably wouldn't be the position you are now. Some people might even call you a plunger and stock market got lucky. What would you say is that, how would you answer those critics?
NIC: Critics? You are talking about my trade in E.L Bruce..right? What can I say? Sure maybe in hindsight it was a bit a gamble but it sure paid off to the tune of $295,000 Everything seems so right at that time. The markets were strong. That stock price and volume action was fantastic. I had made enormous profits in Lorillard and Diners club just previous to this trade. I figured if I placed a tight initial stop loss I would only be losing a small percentage of these profits.
The gamblers are the people who buy and hope. Sure I traded big but ONLY WHEN all the right element pieced together. I could easily go months without a trade. I even went 2 years without making a trade. I have no “need” to lose money in the stock market trading any old stock. It either hits me right in the face as a great trade or I ignore it. AND when I am wrong I get out with a small loss. I never let my losses get out of control. How is that "gambling" or being reckless?
Nick going through the book : “How I Made 2 million in the Stock Market.” It it's quite obvious that you took some enormous risks early on in your trading career. I mean, at one stage, you are trading your whole account, on 50% margin, and if it had have gone wrong. It's safe to say, you probably wouldn't be the position you are now. Some people might even call you a plunger and stock market got lucky. What would you say is that, how would you answer those critics?
NIC: Critics? You are talking about my trade in E.L Bruce..right? What can I say? Sure maybe in hindsight it was a bit a gamble but it sure paid off to the tune of $295,000 Everything seems so right at that time. The markets were strong. That stock price and volume action was fantastic. I had made enormous profits in Lorillard and Diners club just previous to this trade. I figured if I placed a tight initial stop loss I would only be losing a small percentage of these profits.
The gamblers are the people who buy and hope. Sure I traded big but ONLY WHEN all the right element pieced together. I could easily go months without a trade. I even went 2 years without making a trade. I have no “need” to lose money in the stock market trading any old stock. It either hits me right in the face as a great trade or I ignore it. AND when I am wrong I get out with a small loss. I never let my losses get out of control. How is that "gambling" or being reckless?
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Fantastic. Couldn't have asked for more than to hear it directly from him. Thanks mate
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Yes it is a great read "How I made 2 mill", also got to agree with what TECH said about pyramiding about how it is not widely talked about or understood. Notice Nick Radge says in one of his talks that he personally doesnt do it. One thing for sure its not for the inexperienced for the obvious effect of turning a potential good trade into a break even or a lose. If i remember correctly how TECH outlined his approach sounds similar to what i read in one of Daryl Guppy's books.
