Risk and psychology
Pyramiding
Definition
Adding to a winning position in steps, usually each smaller than the last, with the stop raised before each add.
Example
Say you buy 300 shares at $20.00 with a stop at $19.00. At $21.00 you raise the stop to $20.00 and add 200 shares, then at $22.00 you raise it to $21.00 and add 100 more. If price then falls back to $21.00, the whole 600-share position still closes $200 ahead before costs, because the biggest block was bought lowest.
Hypothetical numbers, for illustration only.
Also defined in
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