Pyramid or Stack Trend Trade
PYRAMID or STACK TRADE is a very common type of trend trade, while stacking at different break points, very effective way to make 20%-60% on trade without increasing risk.
- Make Entry on Your best trade signal
- 2nd Entry ½ lot size of initial entry once clear by 80 pips buy more or sell depending on short or long.
- Adjust stop to break even on first entry not to increase risk but decrease and make it riskless transaction.
- 3rd Entry on break over 50 pips, 30% of 1st entry position on last entry to create pyramid, while looking for a target.
- Adjust stop on 1st and 2nd entry to break even and pick a 50 pip target for entire position.
EXAMPLE: Eur/Usd $10,000 Account Buy or Long Position
Risk/Reward Ratio 1.5%/28.10%
1st Entry 1.0 lot @ 1.16
2nd Entry 0.5 lot @ 1.1680
3rd Entry 0.3 lot @ 1.1730
Target 1.18 Stop 1.1680
Risk $150 (50 pip x $3)
Reward $2,810 (200 pip x $10, 120 pip x $5, 70 x $3)
This trade requires good risk management, discipline, and patience, in order for market to hit target. It keeps your initial entry well below market, controlling your risk by adjusting stop to original entry which reduces risk on that position and strives to increase returns for next directional break within trend channel. This trade reduces your downside to a minimum due to partial entry while at the same time maximizing your return and rewarding you for correct trend identified.
Pyramid or Stacking, is purchasing another position to keep average entry well below market, adjusting stop to break even, expecting a further break to hit target. This is NOT averaging a position because your entry will stay 50% below your first entry that is why it’s stacking and not averaging. Holding the position is key for this strategy so the farther away from market price to your first entry the lower the risk higher reward. You just risk what was made already for larger gains.