Pyramiding - A stratgey to increase the position as the postion moves in the investors favor. For example, rather than just letting a gaining position run adding to the holding at ever increasing prices. Livermore and Darvas both practiced this strategy. An aggresive stratgey used by some technical traders.
The additions to the positions are often made as the stocks continue to make new highs (since this style of investing is normally based on some sort of breakout system). It is a stratgey to maximize gains - to find big winners (going for "home runs"). With such a strategy, the decision to sell is not as easy to define but is usually recommended when the "stock shows weakness."
In the most aggressive form of pyramiding the increased margin buying power provided by gains is used to buy more. Obviously doing so is a very aggressive strategy that can have high rewards and high risks.Related Terms:
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