Online trading is an activity where chance has no place. It is important to put in place a well thought-out strategy to increase the chances of winning. In particular, it is essential to adopt a money management technique. The pyramid method is one of them.This strategy involves optimizing gains by consolidating in a position when the market trend is favourable. At the same time, the trader protects himself with a move of the stop… How to use pyramid schemes in money management?
Understanding pyramid schemes
Pyramidage is a money management technique used by many traders. The principle is quite simple and above all effective, provided that you respect a few rules. The point here is to strengthen a position as long as you keep making profits, without ever reselling. In this way, we give ourselves a chance to increase incomes exponentially. The trader thus ensures that he optimizes his resources without necessarily taking more risks. Be careful, the decision is only made when the bullish trend is prolonged.
In practice, this means
Pyramidage is a fairly simple technique to understand. When profits are made on a position, the trader increases the size of the position, taking advantage of a trend that continues over a fairly long period of time. One would then tend to think that with a larger position, the risk and therefore the possible loss is also greater. However, the pyramid scheme also provides that the loss is controlled by moving the stop (in the jargon, it is also called a protective stop). In practice, the stop must be set taking into account the overall cost price. We must ensure that the maximum loss is respected. Or make sure that the latter becomes null and void. Or better still, act in such a way that the maximum loss becomes a minimum income.
In short, the pyramid technique involves gradually increasing the size of positions, depending on market developments. When the trends are in the same direction as the trades, the investor can continue his speculations and open positions similar to the previous ones, thus having the possibility to multiply his profits. This technique is applicable to both binary option brokers‘ platforms and those specialized in Forex.