What Is a Pyramiding Strategy, and How Does It Work in Trading?

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Summary:

Pyramiding is a trading strategy where traders gradually increase their position size as the market moves in their favour. Instead of committing full capital upfront, they add to winning positions at key levels. This article explains how pyramiding works, common strategies, potential risks, and key considerations for traders looking to add it to their trading approach.

What Is Pyramiding?

Pyramiding is a strategy where traders gradually add to an effective position instead of going all in from the start. It’s used in trending markets, where traders look to take advantage of sustained price movements by expanding their exposure as the trend develops. The key difference between pyramiding and simply increasing position size at the outset is that pyramiding limits initial risk. Instead of committing full capital upfront, traders build up their position only when the market moves in their favour.

Applying a pyramid to a position is particularly common in markets with strong momentum. A trader, for example, might start with one unit of an asset and, if the price moves favourably, add another half-unit at a predefined level. If the trend continues, they might add another quarter-unit. This gradual scaling means more capital is committed only when conditions confirm the trend.

The logic behind pyramiding in trading is straightforward: when the market is moving in the right direction, the strategy compounds potential returns without significantly increasing initial risk. It also allows traders to adjust their exposure based on market conditions rather than relying on a single entry.However, pyramiding only works well when executed with clear rules on when to add positions, how much to increase by, and where to adjust risk parameters. Without a structured approach, adding to positions can lead to overexposure, especially if the market reverses. Understanding how to manage this risk is essential, which is why different pyramiding methods exist—each with its own risk-reward profile.

Is Pyramiding the Same as a Forex Pyramid Scheme?

No, pyramiding is a legitimate trading strategy, while a forex trading pyramid scheme is a fraudulent investment model. Pyramiding involves adding to winning trades in a structured manner, whereas pyramid schemes rely on recruiting new investors, often with unrealistic return promises and no genuine market activity.

Common Types of the Pyramiding Strategy

Traders use different types of pyramiding strategies depending on their risk tolerance, market conditions, and trading style. The core idea remains the same—adding to a position as the market moves favourably—but the way additional positions are sized can significantly impact potential risk and returns.

Fixed-Percentage Pyramiding

With this approach, traders add a set percentage of their initial position each time they scale in. For example, if the first position is 1 lot, the next might be 50% of it (0.5 lots), and the next 50% of it (0.25 lots). This method reduces sequential risk exposure with each additional entry, preventing the position from growing too aggressively. It is popular in markets where trends can extend for long periods but aren’t always smooth.

Fixed-Size Pyramiding

Here, traders add the same amount to their position at each entry point. If they start with 1 lot, they continue adding 1 lot at each predetermined level. This method increases exposure more quickly than fixed-percentage pyramiding and is commonly used by traders confident in strong, sustained trends. However, it also carries more risk—if the trend reverses, a larger position is at stake.

Scaled Pyramiding

In this strategy, the size of each additional position decreases as the trade progresses. A trader might start with 1 lot, then add 0.75 lots, then 0.5 lots, and so on. The idea is to lock in potential returns while still participating in the trend, limiting risk as the position grows. This approach is useful when traders want to take advantage of strong momentum but remain cautious about overexposure.

Aggressive Pyramiding

Aggressive traders may add increasingly larger positions as the trade moves in their favour. For example, starting with 1 lot, then adding 1.5 lots, then 2 lots. This approach amplifies potential returns quickly but also significantly increases risk. If the market reverses, the largest position is the most vulnerable.

How Pyramiding Works in Practice

Pyramiding isn’t just about adding to a trade—it requires a structured approach. Traders who use this strategy typically follow a clear set of conditions to determine when and how to scale into a position. These conditions revolve around trend identification, entry levels, risk control, and adjustments based on price action.

1. Identifying a Strong Trend

Pyramiding is used in clear trends, where the price moves consistently in one direction without frequent reversals. Traders often use moving averages, trendlines, or higher highs and higher lows to confirm momentum before considering additional positions. A market that chops sideways or lacks volume makes pyramiding riskier, as price movements can be inconsistent.

2. Setting Initial Risk and Position Size

Before adding to a position, traders determine how much of their total risk they’re willing to allocate. Many use a percentage of their account size to calculate exposure, so they don’t take on too much risk too soon. For example, a trader might start with 1% of their capital at risk and adjust as the trade progresses.

3. Choosing Levels to Add Positions

Entries are usually added at logical technical levels, such as:

Breakouts of key resistance levels (for long positions) or support levels (for short positions).Fibonacci retracements, where price temporarily pulls back before continuing in the trend direction.Pullbacks to moving averages, such as the 50-day or 200-day moving average.

4. Adjusting Stop Losses and Managing Risk

As new positions are added, traders adjust stop-loss levels to protect against reversals. Some move stops to breakeven once the trade gains momentum, while others trail stops behind higher lows (in an uptrend) or lower highs (in a downtrend).

Example of a Pyramid in Action

A trader enters a forex trade with 1 lot after a breakout. As the price moves 2% higher, they add 0.5 lots at the next resistance break. After another upward movement, they add 0.25 lots. Their stop loss is adjusted upwards each time, reducing risk. If the price reverses, they lock in potential returns rather than losing their initial position.

Challenges of Pyramiding and How to Deal With Them

Using pyramiding as a trading strategy can be an effective way to scale into trades, but it introduces unique risks that require careful management. While adding to a strong trend can potentially boost returns, it also increases exposure, magnifies losses in reversals, and requires disciplined execution.

1. Increased Exposure in Volatile Markets

One of the biggest risks of pyramid trading is overexposure. As a position grows, so does the potential downside. A sharp market reversal can wipe out potential accumulated gains or lead to a larger-than-expected drawdown. This is particularly challenging in high-volatility conditions, where price swings can occur more often.

Traders who use pyramiding are mindful of position sizing. Instead of doubling exposure with each entry, some reduce position sizes incrementally, so that later additions carry less weight. This prevents a single-price move from turning a strong trade into a major loss.

2. Liquidity and Slippage Issues

Adding to a position in low-liquidity conditions can result in slippage, where orders get filled at worse prices than expected. This often happens in after-hours stock trading, near the end of trading sessions, or during high-impact news events when order book depth is thin.In fast-moving markets, slippage can cause later pyramid entries to execute at increasingly unfavourable levels. This not only raises the average entry price but also increases the risk if the trend fails. Traders focused on managing execution risk often monitor liquidity before scaling in to check if market conditions allow them to place trades efficiently.

3. Overleveraging and Margin Pressure

Leverage amplifies both potential returns and losses. In pyramid trading, each new entry raises margin requirements. If a leveraged position expands too aggressively, a sudden price move against it can trigger margin calls or forced liquidations before the trade has a chance to recover.Managing leverage effectively means maintaining a controlled risk-per-trade allocation rather than committing too much capital to additional entries. Many traders assess account exposure relative to market conditions and adjust position growth accordingly.

4. False Trends and Market Reversals

Not all breakouts sustain momentum. An asset might briefly break through resistance, triggering pyramiding entries, only to reverse sharply. If a trader misreads the strength of a trend, they could end up adding to a losing position rather than a winning one.A structured approach to trend confirmation can help avoid premature entries. Instead of reacting to every breakout, traders often rely on higher timeframe trends, price structure, and volume confirmation to assess whether momentum is sustainable.

5. Poor Stop-Loss Placement

One of the most common mistakes is failing to adjust stop losses properly. If stop losses are too tight, the trader might exit too early. If they’re too loose, losses can escalate quickly.A common adjustment is trailing stop-losses that move in line with price swings, locking in potential returns while allowing for continued trend movement. Some traders move stops to breakeven after the second entry, while others adjust based on key technical levels.

6. Psychological Pressure

Scaling into a position changes the psychological dynamics of trading. A growing trade size can lead to emotional decision-making, such as exiting too soon out of fear of losing accumulated potential returns or overtrading in an attempt to maximise potential gains.Having a structured plan before entering a pyramiding trade can help mitigate these pressures. Clear predefined entry, stop, and exit strategies ensure that decisions are made based on analysis rather than emotion.

The Bottom Line

Pyramiding allows traders to take advantage of strong trends by gradually increasing position size while managing risk. When used with a structured approach, it can potentially enhance returns. However, overleveraging is very common, and discipline and risk control are essential when using this approach.

Source:FXOpen

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Michelle

Economic

Forex

The White House is trumpeting its new trade deal with the European Union, following a similar agreement with Japan, as a great victory. Both pacts impose tariffs of 15% on most exports to the US, along with other concessions — on the face of it, lifting the threat of open-ended trade war and reaffirming US dominance. Financial markets advanced on the news.

In truth, there’s nothing to celebrate. Both deals are lose-lose for all involved. The best that can be hoped for is that the administration now moves on to other priorities before more damage is done.

In narrow economic terms, the claim that the US has emerged the winner from both sets of negotiations is simply false. Tariffs are taxes. Before long, American consumers will pay most if not all of the increase in costs. And the problem isn’t just that imports will be more expensive. US producers of rival products will face less pressure to compete and innovate, and they will raise their prices as well. In due course, these forces will depress US living standards. Always remember, the biggest loser from tariffs is invariably the country imposing them.

Such costs might be manageable over the long term, as long as the agreements draw a line under recent quarrels over trade. European Commission President Ursula von der Leyen, who struck the deal with the US over the weekend, emphasised this point in justifying the bloc’s surrender to American demands — lauding the agreement for restoring stability and predictability for consumers and producers alike.

If only. For a start, both pacts, like the one struck earlier with the UK, are better seen as framework agreements than finished deals. For example, what does Japan’s commitment to finance a US investment fund managed by the White House actually entail? Hard to say. (It’s been portrayed as a US$550 billion (RM2.3 trillion) “signing bonus.” Japanese officials probably don’t see it that way.)

Under the US-EU deal, some European goods will be given tariff-free access to the US. Which ones? Nobody knows. In both cases, many important details are yet to be finalised. Meanwhile, citizens in Japan and Europe have seen their governments humbled, which makes mounting political opposition and uncertainty all too likely.

If or when these particular deals are concluded, there’ll be new ones to strike — and the contested issues aren’t confined to trade policy. If in the future the White House aims to settle all such disputes by reviving the threat of punitive tariffs or tacitly threatening to withhold cooperation on security, von der Leyen’s vision of stability and predictability will be confirmed as a mirage.

Most dangerously, the administration’s supposed triumphs may now affirm its belief that the US is powerful enough to demand submission, as opposed to genuine partnership, from countries it once saw as friends. If so, heightened instability — lethal to long-term planning, investment and global cooperation across the board — won’t be just a passing phase.

Strength through disruption is a self-defeating strategy. Sooner or later, that will become painfully obvious.

Source: Theedgemarkets

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Risk Warnings and Disclaimers

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Glendon

Cryptocurrency

QCP Capital’s recent analysis outlines a static environment for Bitcoin, which remains confined between $116,000 and $120,000, and Ethereum, which hovers around the $4,000 line. This report, dated July 30, 2025, suggests that a combination of institutional investments, the progress of spot ETFs, and enhanced regulations could potentially drive new market heights in the coming months. Yet, the market’s tepid response to encouraging updates raises concerns about its susceptibility. QCP warns of a possible sell-off triggered by a swift dollar short squeeze impacting equities, emerging markets, and the broader crypto sector.

Bitcoin and Ethereum’s Struggle with Price Barriers

QCP Capital points out that Bitcoin’s ascent past the $120,000 level remains inconsistent, though consistent buying interest at $116,000 prevents deeper declines. Ethereum approaches its $4,000 threshold, but neutral momentum suggests limited upward propulsion. Strategies by companies like SharpLink Gaming to invest at low Bitcoin levels are hampered by insufficient new trading volume, hindering a significant price shift.

Will Dollar Movements Prompt Market Reactions?

Given the general expectation of a “weak dollar” throughout the year, the US Dollar Index’s 10% drop since January leaves scant room for further declines. CFTC observations highlight unprecedented dollar short entries, notably in the USDJPY pair, with elevated funding rates pressuring these positions.

An unpredictable dollar resurgence could instigate broad market hesitancy, impacting equities, emerging markets, and cryptocurrencies. Tariff wars affecting corporate margins, along with shifts in US inflation and job statistics, will likely influence market trends. Fed’s upcoming interest rate discussions in July and September are critical in guiding these economic dynamics.

The cryptocurrency market is poised at a crossroads:

Institutional interest sustains optimism yet falters without volume support.
Critical ETF approvals could be potential market triggers.
Stable price thresholds hint at market stagnation without significant momentum shifts.

Observing these market elements suggests potential waves of volatility ahead. The interplay between macroeconomic signals and market sentiment may determine the direction of financial and digital asset landscapes. Investors are urged to remain vigilant as traditional finance and cryptocurrencies navigate these unsteady waters.

Source: CryptoSlate

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Winkelmann

Economic

Political

Indian officials are planning to continue negotiating with the US for a bilateral trade deal by fall of this year even if US President Donald Trump follows through with threatened tariffs this week, people familiar with the matter said.New Delhi is less optimistic about securing an interim agreement with the Trump administration before an Aug. 1 deadline when higher US duties kick in, the people said, asking not to be identified as the discussions are private. If India is slapped with higher duties on its imports this week, officials see this as a temporary measure until talks on a broader bilateral deal are concluded in the fall, they said.

India’s Ministry of Commerce and Industry didn’t immediately respond to an email seeking further information.

Trump signaled Tuesday that India may be hit with a tariff of 20% to 25%, while cautioning the rate hadn’t been finalized yet. Any levy of that magnitude would be a blow to the South Asian nation, which had been one of the first countries to begin trade negotiations with the Trump administration, and had been seeking lower rates than the 19% given to Indonesia and the Philippines.While failure to secure an interim deal would be concerning to New Delhi, officials see any tariff hike as a temporary disadvantage, people familiar with the matter said. Negotiations for the broader deal are on track, with a team from the US expected to visit India during August, they said.

Internal calculations suggests about 10% of exports would be affected in July to September if India is slapped with a tariff rate above 25%, one of the people said. Sectors including electronic goods, gems and jewelery, would be impacted, the person said.India and the US had already finalized the terms of reference for a broad bilateral trade deal during Vice President JD Vance’s trip to India in April, and had committed to a fall deadline for that. The two sides were negotiating a multi-phase approach to the deal, with an interim agreement expected to cover the tariff.

Trump had initially threatened India with a 26% import tariff. Bloomberg News previously reported that both sides were working toward a deal that would reduce India’s proposed tariffs to below 20%.New Delhi is still waiting to hear from the White House on the tariff levels, an official told reporters earlier this week. Negotiations had hit a hurdle around US demands for greater access to India’s agriculture, dairy and automobiles sectors. India had been pushing for exemptions from the US sectoral tariffs, particularly in pharmaceuticals.

Source: Bloomberg Europe

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Michelle

Economic

Forex

Britain’s grocery shoppers face mounting pressure as food inflation climbs, pushing up the overall cost of the family shop.

New data from the British Retail Consortium (BRC) reveals a persistent rise in the price of essentials, eroding household budgets and consumer confidence.

Food inflation drives rising shop prices

Shop price inflation returned to positive territory in June for the first time in nearly a year, rising 0.4% compared to a 0.1% fall in May, according to BRC‑NielsenIQ figures.

Food inflation surged by 3.7% year‑on‑year in June, up from 2.8% in May. Fresh produce inflation reached 3.2%, while ambient food costs rose 4.3%.

These trends pushed shop price inflation higher again in July, where overall prices rose 0.7%, with food up 4.0% annually—the highest rate since early 2024.

Helen Dickinson highlights budget and labour pressures

Helen Dickinson, chief executive of the BRC, emphasised that the return of headline inflation came within three months of last autumn’s Budget measures taking effect.

She noted food prices showed little sign of easing, particularly in fresh produce, where meat prices have been pushed up by elevated wholesale costs and rising labour expenses.

Vegetable and fruit prices were also affected by hot, dry weather reducing harvest yields.

Dickinson warned that retailers had long cautioned about rising costs following increases to employer national insurance contributions and the national living wage—factors forecast to drive further food inflation before the year’s end.

Mike Watkins on consumer willingness to spend

Mike Watkins, head of retailer and business insight at NielsenIQ, said that broader economic conditions and supply chain disruptions were behind the price increases.

He added that while Britain’s spell of good weather had boosted demand, rising prices could prove problematic if consumers become reluctant to spend later in the year.

He suggested retailers may reinforce value‑for‑money messaging over the summer as a result.

Retail downturn and consumer behaviour

Retail sales have declined for ten consecutive months, with the Confederation of British Industry (CBI) reporting sales sentiment at –34 in July, improving slightly from –46 in June—but still signalling weak consumer demand.

Economic uncertainty, rising labour costs and increased employer contributions are cited as key factors curtailing household spending.

Compounding the pressure, survey data from Worldpanel shows grocery inflation reached 5.2% in July—the highest since early 2024—leading households to resort to simpler meals and shift towards supermarket own‑label lines to manage budgets.

Source: Yahoo Finance

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Gerik

Economic

China–U.S. Trade War

China Responds with Assurances, But No Major Stimulus

At a key summer policy meeting, China’s Politburo committed to aiding businesses battered by U.S. tariffs, vowing to stabilize foreign trade and investment. Measures mentioned include export tax rebates and leveraging free trade pilot zones. However, the statement lacked the clarity or bold stimulus many in the market had hoped for. The government’s messaging focused on themes of resilience and “domestic demand activation” but sidestepped any aggressive policy shifts that could immediately buffer trade-reliant industries.

This cautious stance reflects the deep uncertainty surrounding trade negotiations with the U.S., which remain unresolved. The Politburo emphasized helping foreign trade enterprises access financing and improving integration of domestic and international trade channels, but officials remain reactive rather than proactive as the August 12 tariff deadline looms.

Stockholm Talks End Without Breakthrough

Two days of high-level talks between U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng ended without a breakthrough. While both sides described the negotiations as “constructive,” no formal agreement to extend the tariff truce was reached. The existing deal had paused tariffs that were set to return to triple-digit levels, currently capped at 30% on Chinese exports and 10% on U.S. goods.

Bessent stated that President Donald Trump alone holds the authority to approve an extension, and no sign-off had occurred as of yet. Chinese officials claimed there was a mutual willingness to work toward an extension, but the lack of resolution left global markets and particularly Chinese exporters on edge.

Domestic Pressures Compound External Risks

The internal economic picture for China remains fragile. While official figures show a 5.2% annual growth rate in the April-July period, analysts suspect real activity may be significantly weaker. Industrial profits fell 4.3% in June and 1.8% over the first half of the year, highlighting how squeezed margins have become, even before any new tariffs take effect.

China’s leadership reaffirmed its focus on preventing poverty reversals, boosting jobs, and managing overcapacity and destructive competition issues particularly visible in sectors like auto manufacturing, where price wars are slashing profitability. The push to “unleash domestic demand” underscores Beijing’s concern that weak internal consumption cannot offset external shocks.

Energy Tensions and Strategic Messaging

Complicating the trade narrative further are geopolitical frictions. U.S. officials raised objections to China’s ongoing purchases of oil and gas from Russia, warning that continued energy cooperation with Moscow could provoke additional tariffs. In response, China’s foreign ministry reiterated its energy sovereignty and warned that coercion would not work, emphasizing that it would protect national interests and development priorities.

As of now, China’s promises to support exporters are more rhetorical than actionable. The lack of a definitive outcome from the U.S. talks and the fast-approaching tariff deadline risk reigniting supply chain disruptions and further squeezing industrial profitability. Unless Washington and Beijing agree to extend the tariff truce soon, both Chinese exporters and global markets may face renewed volatility in August. Beijing’s restrained policy stance, combined with geopolitical friction, leaves its economic recovery efforts vulnerable to external forces beyond its immediate control.

Source: Reuters

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Glendon

Economic

Forex

A major flow of Chinese trade away from the United States would likely lower eurozone inflation next year, when price growth is already set to undershoot the 2% target, a European Central Bank blog post said on Wednesday.

China is negotiating a trade deal with the US and pressure has increased on Beijing to accept higher tariffs after Washington cut deals with the European Union, Japan and Britain.

If those talks failed and US tariffs on Chinese goods rose to an effective rate of around 135%, as threatened by the Trump administration, then China would likely sell much of its surplus product in the eurozone, pushing up supply and lowering inflation by as much as 0.15% next year and to a lesser extent in 2027, the ECB blog said.

While economists do not see this scenario as the most likely outcome, such a price drag would be problematic since eurozone inflation is already expected to fall to 1.6% next year and this trade diversion would raise the spectre of more persistent undershooting, potentially forcing the ECB to cut rates.

"It will take some time for consumer prices to drop," the blog argued. "Consumer prices for non-energy industrial goods tend to respond with the strongest impact materialising one to one-and-a-half years after the initial shock," the blog said.

Under this "severe" scenario, the eurozone's imports from China could rise by as much as 10%, resulting in an excess supply of goods equivalent to 1.3% of overall goods consumption, the blog, which is not necessarily the ECB's opinion, said.

For the market to absorb such an excess supply, overall import prices would need to drop by 1.6% and non-energy industrial goods inflation may fall by as much as 0.5 percentage points in 2026, it said.