Pyramiding — The Opposite of Averaging Down, Growing Only Winning Positions

Adding is for winning positions only

• Averaging down puts more money into a wrong position, while pyramiding adds to a right position after the trend is confirmed

• Principle: only after the existing size is in profit and breakeven is secured, add with a smaller size than the first

• Each addition makes the average price less favorable, so the stop-loss criterion must be raised along with it

Connection to our data

• MarketSurfer's Principle 11, 'add only when the trend becomes clear', is the safety latch of pyramiding — it presupposes a state of breakeven secured after partial profit-taking

Where people slip

• They do the opposite — they add to the losing position (averaging down) and sell the winning position all at once, early

The right to put in more money arises only when the market has proven my direction. Adding before proof is not a bet but stubbornness.