I just struggle with two concepts and I don’t know how to solve the conflict between them.
The pyramiding strategy as discribed by Darvas and Livermore calls for continually adding to my position on a scale-up – but at this time the price is normally far above the moving average (what we call at value). On the other side, the ‘greater fool theory’ by Alex prohibits to buy above value or the moving average…..’
I look forward to a fruitful discussion…
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Hi Gerald,
ReplyDeleteMaybe you should describe the strategy in a little more detail. I like to add to a position on a pull back to "value" or an EMA (as Alex has described) or at least an attempt to get there.
Check out the BRCD trade, assume I entered at just below 2.10, I actually posted a reentry at near 100% gain at $4. Now I think it is smacking its head. You can try to buy breakouts but you have to be confident of the underlying trend- (which I find extremely difficult) you are joining the amateurs and it is easy to get shaken out. I tell myself more often than not I need to be short at this position fading the breakout. Anyway just keep tight stops, good notes and keep trying.
Good Trading,
Eric
Gerald,
ReplyDeleteFor what it's worth. I find this market far too volatile for pyramiding positions. In fact, I'm trading small positions at this point with risk high and reward low.
Gerald:
ReplyDeleteFor me I have not pyramided any positions as of yet but to me they would be in a much slower uptrending stock market and not one with this volatility.
Trade well.
Gordy
Gerald,
ReplyDeletePyramiding was a concept that gained popularity during the Great Bull of the 80's and 90's. One must be very careful pyramiding into a stock that has a weak trend or is near a topping stage. One will have the most risk at the turn or breakdown and can give up profits quickly.
The turtle trading system was based on a breakout strategy and pyramiding positions. One must have the risk tolerance to sit thru huge drawdowns for this style of trading. I for one do not have the risk tolerance for pyramiding
I prefer to buy low volatility and sell high volatility. It is very important to trade a style you can truly embrace. The Turtle would sit thru 40% drawdowns of profits.