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Nial Fuller

NIAL FULLER
Professional Trader, Author & Trading Coach

Pyramid Trading Strategy – How To Turn Small Trades into Huge Trades

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By in Forex Trading Strategies By Nial Fuller Last updated on | 42 Comments

pyramid-up“Let your winners run” they always say. Great! But, HOW do I do that? How do I turn small trades into big winners? You’ve probably asked yourself this many times. As great as all these old trading aphorisms are, they do seem a bit vague and don’t really give us any specifics or details on how exactly one accomplishes the wonderful things they imply.

Today, we are going to discuss how you can turn small trades into big winners, it’s called pyramiding. You’ve probably heard of pyramiding before, generally it tends to have a negative connotation to it, but that’s just because most traders don’t understand how to pyramid properly.

Not every trade is a candidate for pyramiding, in fact most aren’t, but the ones that are can make you a lot of money, quickly. One pyramid trade that nets you a 10 to 1 winner might be the only winning trade you need for three or four months, that’s why it’s so important you understand how to pyramid properly…

Pyramiding: Playing with the market’s money

The main concept to understand behind pyramiding, is that it allows you to ‘play with the market’s money’ because as a trade moves in your favor you trail your stop loss down (or up) to lock in profit when you add another position. This basically means your overall risk on the trade stays the same or decreases as you lock in profit, but your potential profit increases, assuming you do it properly (more on this later).

However, you need to be aware that whilst the upside benefit to pyramiding is large, the risks can also be large if you don’t pyramid properly. If you do not properly trail your stop to keep the overall risk the same or less each time you add a position, you’ll be dangerously cranking up your risk to a level that could blow out your account. Also, since you’ll be trailing your stop loss perhaps tighter than you would on a non-pyramid trade, as the trade moves in your favor it increases the chances of the market snapping back against you and stopping you out of the entire position.

We only try to pyramid into a trade if we are confident that the market is in a strong ‘one way move’ with momentum. It doesn’t have to be a breakout, it just has to be a substantial move that you expect will have strong momentum behind it.

Now that we’ve discussed what it means to ‘play with the markets money’ and the potential risks in pyramiding, let’s talk about how to pyramid properly, so that you can avoid the major risks of pyramiding but still having a chance at large gains…

How to Pyramid into a position properly

The basic concept of pyramiding into a position is that you add to the position as the market moves in your favor. Your stop loss moves up or down (depending on trade direction of course) to lock in profit as you add lots / contracts. This is how you keep your overall risk at 1R whilst increasing your position size on the trade.

Thus, as you add contracts / lots, the potential profit on the trade increases exponentially, whilst initial risk (1R) remains constant. Our hope, as traders in a pyramided position, is that the market won’t then snap back and stop us out before it falls or rises further in our favor.

Think about it like this: The market makes an initial burst in your favor, perhaps to the 1R or 2R reward point, you then add another position whilst trailing the original stop loss on the first position to break even or to 1R to lock in profit. You are still exposed to a 1R risk on the second / pyramided position, but you now have double the position size because your first lot is still live.

Let’s look at an example of what a properly pyramided trade might look like, this will also give you a better idea of the math behind proper pyramiding:

Let’s assume the EURUSD is trending lower like it has been recently. You see a solid pin bar sell signal that formed showing rejection of the 1.3670 resistance level. You decide that since price has respected this level and it’s obviously a key chart level, it’s a good place to set your stop loss just above. So you decide to put your stop loss for the trade at 1.3700, stop loss placement is very important and it’s something you should not take lightly.

Next, there is no obvious / significant support that you can see until about 1.3200, so you decide to aim for a larger profit on this trade and see if the trend won’t run in your favor a bit. Your pre-defined risk on the trade is going to be $200, to keep the math simple let’s say you sold 2 mini-lots at 1.3600; 100 pip stop loss x 2 mini-lots (1 mini-lot = $1 per pip) = $200 risk.

You decide to aim for a risk reward of 1:3 on this trade, so you set your initial target at 1.3300 and you plan on adding two positions to this trade, one when you are up 100 pips and another when you’re up 200 pips. You plan on doing this because the market is trending strongly and you have a strong gut feeling that there’s a good chance the trend will continue without a large pullback.

Here is what your trade looks like at entry:

pyramid1

The trade falls in your favor and so you proceed as planned by adding another 2 mini-lots at 1.3500. So, your full position is now 4 mini-lots or $4 per pip, this means your potential reward on the trade is now $1,000 if price hits your target at 1.3300.

Important: Before you enter the second position, you trail down your stop loss on the first one to 1.3600, and that position is now a ‘free trade’ (at breakeven). The stop loss on your second position is also at 1.3600, thus you’re overall risk on both position is still just $200, but remember, you’ve now nearly doubled the potential profit on the trade…

pyramid2

The trade keeps moving in your favor so you decide to add your final position of 2 more mini-lots. You now have a $6 per pip overall position size. You have a potential profit of $1,200, double what it was when you first entered the trade, and the best part is, your overall risk is now at $0…

How’s that possible you’re asking? You’ve trailed down the stop loss on both previous positions to 1.3500, locking in a $200 profit on the first position you entered at 1.3600 and reducing the risk on the second position to breakeven. The $200 profit you locked in on the first position thus offsets the $200 risk you added on the last position, making it a totally ‘free’ trade; that’s how you ‘play with the market’s money’…

pyramid3

You have yet more good fortune and the trade continues falling and hits your target at 1.3300, all three positions are now closed and you’ve netted 6 times your risk, for a risk : reward of 1:6. You never had more than $200 (1R) at risk at any one time, yet you profited $1,200.

Now you understand how to pyramid your way to profits…

pyramid4-1

Final thoughts on pyramiding…

In the example above, we used a relatively low risk amount at $200 per trade for example’s sake. But, you can see how quickly pyramiding can build your profits. You have the potential to turn $1,000 risk on a trade into $10,000 in a short span of time, a 10 to 1 winner. These kinds of trades are very possible if you’re trading a clean move, that can be a large single-day move or a large move over the course of a week perhaps.

An important thing to understand is that it does take some experience to know when pyramiding into a trade may be a good idea and when it’s not. You also need to be prepared to get stopped out at breakeven, because when you’re trailing your stop loss down like we discussed above, it doesn’t take a very large retrace to knock you out of all your pyramided positions. But, if you get just one successful pyramided trade every 3 or 4 months, you’ll be doing quite well.

Another important point is to not let greed take over. You need to plan out how many positions you’ll add before you enter and when you will add them, etc. Don’t just totally ‘wing it’, or you’ll end up over-trading and possibly losing money. Each trade is unique and there are no clear and precise rules, but the concept of pyramiding and adding to winners is universal. Just BE SURE you are trailing your stop down (or up) to offset the new risk you acquire each time you add a position, or else you’ll be potentially pyramiding your losses, and you don’t want to do that.

Also, never add to a losing trade, traders often make this mistake and it’s a quick way to blow out your account. If a market is moving in your favor you can add to it as discussed above, but if it is coming back against you and moves back beyond the entries of your earlier positions, you should be getting out or your stop loss should automatically take you out.

I trust you’ve enjoyed today’s lesson on turning small trades into huge trades. To continue learning my various trading strategies and philosophies, checkout my trading course and members area for more information.

Good trading – Nial Fuller

About Nial Fuller

is a Professional Trader & Author who is considered ‘The Authority’ on Price Action Trading. He has a monthly readership of 250,000+ traders and has taught 20,000+ students since 2008. In 2016, Nial won the Million Dollar Trader Competition. Checkout Nial's Professional Trading Course here.
  1. Yakawonya Rutson September 16, 2019 at 4:44 am

    Always out with a winner post A teacher to cherish Thanks many thanks over

    Reply
  2. Nour September 15, 2019 at 11:45 am

    Nial, you are the godfather of the Forex trading.

    Reply
  3. NKAMA September 15, 2019 at 12:55 am

    You are too much sir. By this you have solved most of my problems.

    Reply
  4. Medi September 14, 2019 at 5:29 pm

    You tha God sent!

    Reply
  5. NGUYEN QUOC THANG September 14, 2019 at 1:28 pm

    Pls support me to explain more about ” Event area ” in the line ” Retrace Entry Back to an Event Area or Prior PA signal.

    Thank you
    THANG

    Reply
  6. Mahmudul Hasan September 14, 2019 at 1:32 am

    Super Nial bro…..

    Reply
  7. Diário de um Poupador March 5, 2018 at 1:32 am

    Hi, i am a brazilian guy who trades for years. I pause my trades during some years, and i came back about 2 months ago. I’ve been trying a strategy with short take, and it has given to me a lot of profits. I am trying to make my mind strong to ignore the market’s movement after i book profit. You have said a very right thing here: the market always makes a retraction.

    This article was very good, thanks. Keep it that way. God bless you.

    Reply
  8. Solomon Olusegun Oyeniyi December 13, 2017 at 9:24 am

    Thank you for this article.

    Reply
    • Liton khan September 16, 2019 at 12:14 am

      Very nice Boos.ok go forawd.

      Reply
  9. GANDUS December 4, 2017 at 6:10 am

    Great always to hear you big brooother Nail. God bless you. timely article for me. love

    Reply
  10. Noor Azman Abd Aziz November 26, 2017 at 2:10 am

    Nice and very interesting. This article answer the questions why i always close trades with losses while actually I have been profitting during the trading session.

    Reply
  11. Sboniso Malambule November 24, 2017 at 6:22 pm

    ive bee reading your lessons im impressed

    Reply
  12. Azmi Yusoff October 17, 2017 at 2:52 pm

    Interesting article. This happen everytime. The idea of wanting to wait a little more time may cause us to lose what is supposed to be a profit instead.

    Reply
  13. Ayanda Mabuza September 18, 2017 at 10:56 am

    reading such artecles really opens my mind.Thanks Nail

    Reply
  14. Roy Peters September 1, 2017 at 2:39 am

    This happened to me recently on Eurgbp. Up 200 pips and thought it’d go higher. Next day market came down and I booked only 40pips!
    I learn a big lesson.

    Reply
  15. Rafari July 31, 2017 at 1:29 am

    ok, its been almost 2 years since I start to learn how the market move. I can say most of your articles give me a vision about how to, what to do and don’t. It’s cool because I start move to learn draw some major snr, I got stuck on making it, but your articles show me some clever way to draw “a key level” and some short term. I’ll try my best to practice it everyday !!!

    Thanks Nial, You’re Awesome !

    Reply
  16. kgothatso July 28, 2017 at 6:00 pm

    U ar really a genus.sir u teached me that i should take a risk than to lose the chance **#great things come to those who hustle (lovely)$$$$$

    Reply
  17. Alan Gillanders June 25, 2017 at 3:25 am

    Hi Nial,
    Thanks for the lesson. This has been my problem for some time. Greed. Always waiting to take more with a small investment. My profits evaporate and majority of times end in a loss.
    In the last 6 weeks I have been taking the small profits. 100 – 200 points instead of trying to get 500-1000 points. seems to be working ok. Thanks again

    Reply
  18. oluwatosn Matthew June 23, 2017 at 5:50 pm

    That’s a good trading guide. Thanks nial.

    Reply
  19. Ages Justice June 22, 2017 at 5:40 am

    Keep it up Mentor. God bless you more!

    Reply
  20. Louis June 21, 2017 at 11:43 am

    This is exactly what was missing from my trading. Realistic exit plans. Thank you Nial.

    Reply
  21. endurance oki June 21, 2017 at 8:05 am

    thank you sir for your well prepared article. Im a victim of this very situation , i’ve almost hit my profit target then i said i should let the profit run but to my very face , the profits were evaporating until i closed the trade .

    Reply
  22. DAVID SHUBE June 20, 2017 at 7:48 pm

    Thanks Nial, booking profits on-time is right, cos too much emotional traits is involved when one realized that the trade is going to retrace unexpectedly.

    Reply
  23. PEERALLY June 20, 2017 at 6:21 pm

    Thank you, Nial.

    Reply
  24. Kate M June 20, 2017 at 6:49 am

    Thanks Nial, way to go. You keep writing evolving lessons like these, Ill always have something to learn. And again an opportune time to write this particular article, I think you are the Yoda of trading:)

    Reply
  25. Lucas Obiora June 19, 2017 at 9:07 am

    Thanks Nial, that’s an eye opener to me, I have that problem of letting profits run into losses, thank you very much for the article.

    Reply
  26. Kay June 19, 2017 at 8:49 am

    Thank you Nial, well explained and organized article. Definitively help me to prepare my Profit plan. Regards

    Reply
  27. smg June 19, 2017 at 3:17 am

    Thank you

    Reply
  28. richadi36 June 19, 2017 at 2:07 am

    Thanks Nial. I really got immense knowledge about booking profits.

    Reply
  29. Suleiman Bhadmus June 18, 2017 at 11:14 pm

    Amazing,am definitely going to include all this point in my trading plan. Though am still on demo, but what have learned from this article in very key to a successful trading.
    Thanks a lot Mr.Nail Fuller.

    Reply
  30. Matt June 18, 2017 at 5:25 pm

    This happened to me last week. Was up 700 proffit and closed with 700 loss because i had such an attachment to what i thought was a fullproof longterm move in one direction so i wanted to ride the waves but it looks like it wasnt the long term move in that direction i thouht it was.

    Reply
  31. akhtar butt June 18, 2017 at 4:44 pm

    Hi, Dear Nial Fuller, , excellent, well-explained with reality and experience. Thank, cheer

    Reply
    • Bebe April 30, 2019 at 7:57 pm

      Excellent article,Thanks Nail

      Reply
  32. Akpos June 17, 2017 at 6:46 pm

    Nice….this has been my bane in trading. Not booking profit….

    Reply
  33. John Promise June 17, 2017 at 6:02 pm

    Thanks Nial. My mentor.
    Remain blessed.

    Reply
  34. Thendo June 17, 2017 at 4:58 pm

    Thanks Nial.. great advise. Am looking forward to not closing or closing when the trade goes against you but hasn’t hit your stop loss…

    Reply
  35. Luis June 17, 2017 at 12:20 pm

    Thanks so much Neil as always, great article!, mm please i have a question, what about the case that all the other trading books and gurus says about let profits run until at least 1:2 Risk reward ratio? , because they say if i close before that 1:2 im cutting my profits and that can damage me in the long run! , but in the real life im bored to wait sometimes for a 1:2 and when im at 90% to achieve that profit target the markets turns down eliminating all my profits and making a loss for me, but when i book the profits i see my account growing, what you can reccomend me about that?.

    Reply
  36. Bruno June 17, 2017 at 10:48 am

    Before reading the whole article, I’m writing this! Just the header alone struck the cord. Toy, Nial, are a mind reading mentor! I’m at that stage in my trading where my edge is consistently delivering profits! But, yes, most times, these profits evaporate. Alot is happening around the political and business world and price is fluctuating between these events. Yes, price still does was it’ll do, but the whipsawing is alarming! I can’t say enough how soothing this article is to me because I make sizeable % of my Acct only to watch some diminish or disappear, even into losers.

    Thank you for this article.

    Reply
  37. Mavhungu Lufuno June 17, 2017 at 9:14 am

    Amen

    Reply
  38. Elpadrino June 17, 2017 at 4:54 am

    Thanks Nial #Legendary

    Reply
  39. Alin June 17, 2017 at 4:20 am

    I am one of those loosers who do not book much profits on the trades, because I’m setting
    way too large TPs. Thanks for the posting!

    Reply
  40. Shankara Motay June 17, 2017 at 3:59 am

    Thank you very much

    Reply
  41. Rongsquare June 17, 2017 at 12:44 am

    Amazing thank you Nail

    Reply
  42. Mike Coe June 16, 2017 at 11:27 pm

    Your articles just keep getting better and better, Nial! Great stuff! Thank you very much.

    Reply
  43. Siyabonga Mkhize June 16, 2017 at 11:10 pm

    Powerful thank you sir

    Reply
  44. KRISTOFA OKENTA June 16, 2017 at 9:37 pm

    Good Teaching As Always.
    Thank you For Sharing Your
    Heart With Us.

    Reply

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