Pyramide trading strategy

Hello,
i would like to share with you my strategy, which i called Pyramide trading strategy, because i don't open only one position, but up to 3 with one TP and SL level.

Why i share my strategy with you??
because i would like to get some feedback, i mean ideas how to make it better or how to little modify. Thanks for your feedback!

Pyramide trading strategy

Have a good trades.

Pyramide Trading Strategy
I would like to share with you one of my trading strategy, which i call pyramide. I open not only one but up to three positions. It depends on market situation. The advantage of this strategy is that every other position risk is less and less and can make more profit, so TP:SL ratio is increased. I will explain how to trade my strategy and my set up of money management and TP:SL ratio, its up to you how you will set up your money management and TP:SL of this trading strategy, this article should give you basic explanation and i think some good ideas.

My strategy is based at technical analysis, im looking for double top and double bottom. I trade these formations only at these pairs: EUR/USD, USD/CHF and USD/JPY, because i really like volatility at these pairs and low spread. I have three types of these formations. The best type are from H1 and H4 charts, second category M15 and lowest one M5. It is really important to divide these formations in to categories, because H1 and H4 are much more better than others, so why should i risk the same amount as in case M5 formation.

Money management – mainly is adviced to risk around 2 – 5% per trade, depends on your initial deposit and trading strategy, but for this strategy i have special set up, i RISK 10% of my equity at H4 and H1 double top, 5% of my equity at M15 double top and 2% of equity at M5 double top.

How to trade these formations? Wait for first top, find a high price of this top and wait for finding support after retracement. It is really important to trade only quality, that means than you should trade only double tops formations, where retracement will be more than 50 – 60 pips, because this double top formation can let you make better TP:SL ratio. Very good double top formations are after big bulls movement, very important is watch 50% Fib retracement level. After the market seems to go back to testing for second time the top, set up 3 pending orders at these levels: in case M15 double top → first 2 lots at 5 pips before first top level, second 4 lots at 5 pips upper than first top and third 6 lot position 15 pips upper the first top and SL setup for all these pending orders at 25 pips upper first top. TP set up 60 pips for first position, 70 pips for second position, 80 pips for third position and after 20 pips move in your direction move SL to zero loss level.


Example:

1) only first position will be executed:

TP → 1 200$ profit


2) only first and second position will be executed:

TP → 1 200$ + 2 800$ = 4 000$


3) all three positions will be executed:

TP → 1 200$ + 2 800$ + 5 600$ = 9 600$


4) in case SL hitted:

SL → - 600$ - 800$ - 600$ = 2000 $


As you can see from the example above, thanks to this set up, we can increase own TP:SL ratio, because first position have ratio 2:1, second 7:2 and third 8:1. Lets calculate, that at average, from 10 trades will be 5 with SL, 2 with 1 case, 1 with second case and 2 with third case.

5 * -2 000 = - 10 000$
2 * 1 200 = 2 400$
1 * 4 000 = 4 000$
2 * 9 600 = 19 200$

------------------------

sum = 15 600$ of profit
2.56 : 1, TP : SL




At this M15 graph you can see very good double top, market was bullish at EUR/USD from 1.4069 to 1.4217 and very important support level on retracement was 50% FIB, you can see that difference between top and 50% retracement is 74 pips, which is very good space for profit.

http://www.dukascopy.com/imageserver...00_2/photo.jpg


From my own experiences, the best results i have with H1 and H4 double tops, when in 70% im making profits, with M15 i have profit at average in 58% of trades and in case M5 in 47% i have profit. Its all about finding. For trading double bottom, you can use the same rules vice versa. If you have any question, feel free to write it to comment and i will try to answer as soon as possible.

I don't quite understand a couple of things..
Where would you set these orders? Let's say, after making the first top, price retraces to 50%. Would you set these orders below the first top, BEFORE price formed the second top? Also, are these orders buy/sell?

Finoli

HI Finoli, thank you for comment.

1) from first top market should fall at least 50 - 60 pips (enought space for profit from second top)
2) If the market fall more than 50 - 60 pips, i will set up three sell orders, first 5 pips before first top, second 5 pips above first top and third 15 pips upper first top

Thats all

you will be wiped clean if stop loss is hit.

I agree that double tops and double bottoms are good setups in general.
About your strategy, to check if it is profitable to scale-in the entry compared to enter all at the first price, you need to only to take into account the RR but also the probability of hitting the SL. For instance even if the last entry has a RR of 8:1 the SL is only at 10 pips so oyu need to consider if the probability to hit the SL is more or less than 1/8.
You mention 70% of winning trades on high TF but how this is split?
What is the percentage of wins when you hit the entry 1 alone, and when you hit E1+E2, and when you hit E1+E2+E3.
If you have these statistics on a large enough number of trades then you can determine what is optimal.

Im using this set up for six months, i traded with it about only 20 trades, so i think i would need more number to get better statistics, now at average is P1 hitted in 100%, P1 + P2 at 70% and P1 + P2 + P3 in 50%, SL is hitted in 30%.

Im stil working to master it, so time will tell

And why is that??

There are a lot of ways to pyramid or "stack" your trades. The pyramid is the most stable. The inverted pyramid is obviously not. The column is somewhat stable.

The pyramid is basically start with 2 or more lots. Then as profit accumulates add on with fewer lots. As profit accumulates add on fewer than the last batch. For example initial entry is 5 lots. 1st add on is 3 lots 2nd add on is 1 lot. Each add on is financed by the previous levels profits. As the pyramid grows, the risk per level is diminished significantly. If higher level addons turn to losses, the hit to profit should be easily absorbed.

The inverse is the opposite of that. The first level starts with 1 lot and when profit is sufficient finances 2 lots and so on. Less risk up front but profits get eaten up fast if the trade moves against you.

The column is basically start with x number of lots and every add-on level is that same x amount.

You can also combine structures. start with a pyramid and then move to a column.

I've stated this numerous times and probably sound like a broken record. Learning and understanding money and trade management strategies is how the account grows. Using an effective management strategy means you can even be profitable even with less than a 50% accuracy rate.

Ok so if P1 is hit, SL is hit 30%
What about
if P2 is hit , SL is hit ?? %
if P3 is hit , SL is hit ?? %