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Long Term Trading

Pyramiding

PyramidingPreface: This article has been designed and optimized for the The Chartist's Growth Portfolio. The principles contained herein are effective for any trend following strategy of any time frame, but all references will be directly related to the The Chartist's Growth Portfolio.

The term ‘pyramiding’ refers to the adding of positions to an existing holding as the share price moves in the direction of the current trend. For pyramiding in bullish market environments this means adding positions as the price continue to rise. It does not refer to adding to positions as price falls. Adding to losing positions is a quick way to the poor house. The simple concept of trend following is to buy strength; buy high and sell higher. The key benefit of pyramiding is that a clean and sustainable trend will allow excessive gains to be made with minimal additional risk taken. It could be argued that one single clean and sustainable trend can double or even triple a non-pyramided account return in any given year. Obviously there are downsides as well that we will discuss later in more depth.

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Big Trends in Big Stocks

big trends big stocksWith interest rates set to stay at lower levels for longer we expect more money to flow into risk assets such as equities. Over the last few years we've seen higher yielding stocks benefit from this, but there is a lot more upside to come as that money moves further into the smaller cap area of the market, as has been the case in the US markets over the last few years

Using an active trend following strategy, which is fully discussed in Unholy Grails and shown in real time via our very popular Growth Portfolio service, is an extremely time efficient way to manage your assets. Stay with stocks as they trend higher, and many times travel well above their so-called theoretical valuation levels.

Here's some examples that our clients are currently profiting from (the red line is our exit point should the trend reverse)¹.

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