Pyramiding is just a fancy term saying you increase your lot size throughout the trade, instead of putting your whole stack into the beginning of it. There are plenty of terms, such as averaging down fading in fading out etc etc, but they all mean something similar.
So this post will be dedicated to how much risk you should put yourself at, when you can add more, or take out from your position…
The most important rule is: When you are winning, guarantee that win. No matter what, you should not take a loss from a winning trade—> reduce your risk as soon as possible, within reason.
Please read about money management, as this is essentially what it boils down to- how you manage your money. I personally risk anywhere from 0.5-3% for a trade, and remove/add to positions during it. Here are some personal examples of how I manage my money:
If I have a 40 pip target- I will take away half my position at +20 and move stop to breakeven (if I end up getting punted from the trade, I will still be a winner)
If I have a 100 pip target- I will take away half my position at +50 and move my stop to breakeven at +30 (just an estimate, it depends on the strength of a move)
Take profit regions are AREAS, not a specific price- so UNDER NO CIRCUMSTANCES will I ever do nothing at +70 (to aim for +100), and end up getting stopped out at -30. Why? Because that means at that moment in time, I am risking 100 pips to catch the last 30! That is horrible risk management! Keeping track of how many pips you are risking to gain how much is NOT ONLY done at the beginning, but throughout your trade!
Here are some common ways for me to remove-add to my positions, both verbally and visually:
1) I enter in the trade while it is still consolidating, on the opposite edge of where I’m expecting a breakout (say if I was expecting a downward break, I would enter at the very top of my box). My stop would be outside of the box,
And I would remove half my position at the opposite end of the box+move to break even- If it breaks and a breakout is confirmed, I will re-enter the half I removed. If it doesn’t break and retrace, I might get stopped out, but either way I will be in the green. sometimes depending on the TIME and volatility of the current market, I would have another order (same size as what I removed) close to my stop loss, to try and catch a second win. The closer it is to SL, the less I have to lose.
2) A great way to increase your position size, is when you are in a trade, and price hits a freefall or freerise condition- You have to immediately without hesitation add to your position right at the start, because freefall and freerise conditions make price SKYROCKET in either direction, and you want to be at the beginning of it.
3) You can remove from your position if price appears to have halted and re-consolidated, but you are not sure which direction it will go (and you don’t want to exit the market yet). When this happens make sure you do what you need to cover yourself incase everything crashes against you, so you will exit the market in the green.
*NOTE* These are just examples of ways you can manage your money! Its not a concrete rule!