Pyramiding
How Turtle-style pyramiding adds to winning positions without turning risk into uncontrolled leverage.
Pyramiding means adding to a position after it moves in the intended direction. It is not averaging down and it is not a reason to ignore total risk.
Why add to winners?
Trend following depends on large moves. If the market confirms the direction, the system may add Units at predefined intervals so that strong trends can matter more to the portfolio.
Required limits
Pyramiding needs clear limits:
- maximum Units per market;
- maximum exposure per market group;
- total portfolio risk;
- rules for stop adjustment;
- rules for correlated signals.
Without limits, pyramiding can turn a controlled system into a leverage problem.