Realistic portfolio behavior
I feel compelled to share my personal Pyramid Investing portfolio behavior throughout roughly last eight months. Those of you who don’t mind putting your heads into charts and numbers I am about to show, will realize what a powerful concept Pyramid Investing is. I can come up with number of different ways to present actual Pyramid Investing concept performance, and certainly this is one of them. But more so, I think this particular example will go even further in showing you an actual high level picture of one portfolio in action, portfolio that is based on Pyramid Investing. Hopefully, it will also help you connect some dots to get better understanding of pyramid application rules and results in practice. It is also to show you what is realistic and what pyramid investors can expect in return from their pyramids in action.
As I described in the article “Buy Weakness, Sell Strength”, such action is one of the most important ingredients of Pyramid Investing. You can call it Pyramid Investing or whatever you feel like calling it, but as long as you are buying every weakness and selling every strength in a pyramidal way, you stand to make a fortune. You should also try not paying much attention to absolute prices your trades revolve around. Absolute prices are meaningless in terms of making consistent profits and only serve to inhibit your otherwise profitable actions. One of the truths about making consistent profits is: “If you sell at certain price, be prepared to buy again at a higher price!” This may sound totally out of logic, but that may also be a reason why many investors refuse to understand this principle. Lack of such understanding contributes to eventual myriad of losses.
My portfolio consists of number of different pyramids. They are shaped differently, and they capture various oscillations by their design. However, they all work in tandem and behave like one giant pyramid – a pyramid that buys weakness and sells strength. Therefore, observing my whole portfolio in action is very close to observing a single pyramid and vice versa.
Gold volatility
As a starting point, let’s observe gold bullion price chart during the period between late June 2009 and late February 2010. The chart is shown in Figure 1 (courtesy of StockCharts.com).
Fig 1. Gold bullion daily price chart with trends
Fact is that price of gold was higher at the end of the period than what it used to be at the beginning. It could have been the other way around, but that is not the point. It is important to acknowledge that the price didn’t move in a straight line from $913.20 to $1,127.30. The price actually zigzagged.
Volatility during the period observed wasn’t extreme. Nevertheless, many price uptrends and downtrends can be identified. The chart shows daily prices of gold bullion. Overlaid is a ZigZag line based on at least 3.5% change in price that helps us identify trends. For every trend identified, one can observe even smaller trends. But we are not going to bother with those micro trends and we will assume price moved in a straight line between high and low points identified by ZigZag segments. In other words, without significant loss of accuracy, we can replace the actual daily gold price chart with our ZigZag line.
Bottom of the chart shows S&P 500 index moves for reference and comparison to gold price moves.
Figures 2 and 3 show left and right portion of the same period in a slightly different way. Some additional indicators (simple moving averages and Keltner channel) are given as a technical reference.
Fig 2. Alternative gold bullion daily chart (left portion)
Fig 3. Alternative gold bullion daily chart (right portion)
Portfolio breathing
Majority of portfolio pyramids are based on various gold instruments that directly or indirectly follow price moves of gold bullion. This is not to say that portfolio based on any other instrument would experience much different behavior. There are many reasons why gold is the chosen one but I wouldn’t want to discuss that at this time. Your focus should be on volatility, perpetual moves in price and of course buying weakness and selling strength.
Figure 4 shows a table with some very interesting data. The most significant trend highs and lows have been selected along with the date they occurred on. Price of gold column lists corresponding gold trading price extremes so the spreadsheet can do some calculations for us. Thus for each uptrend, percentual change in gold price is calculated and shown in black. Likewise, each downtrend percentual change in gold price is calculated and shown in red. The change column is supposed to give us a feel of how much gold price changed in percents for each trend we identified and approximated with a straight move in price.
Fig 4. Pyramid Investing portfolio table with trend related percentual data
I would like to bring to your attention one very strong bullish move in gold price: From $905.10 to $1,226.40 gold moved up with only few shallow weaknesses. That was more than $300 move in gold price or more than 33% move in percentage terms! Basically, this four-month move itself represented the entire price of gold just 10 years ago when this gold bull market begun. Such strength must be sold.
Thus the price of gold went up and down and up and down… It zigzagged during the period we observe right now. It zigzagged pretty much within every period before, just like it will zigzag in every period to come. Volatility is here to stay and it will never become obsolete. As a matter of fact, those well informed mention that volatility is about to skyrocket!
So the question is: How did the Pyramid Investing portfolio behave during these price oscillations? And the answer is – Portfolio responded to price of gold by breathing!
For each downtrend when price expressed weakness, portfolio inhaled. Likewise for each uptrend when price expressed strength, portfolio exhaled and generated profits. This is a process just like we all breathe every day. Sometimes we sleep and we breathe slowly. Sometimes we run and we breathe quickly and deeply. Although we choose whether we sleep or run, Pyramid Investing portfolio responds to price moves that are beyond our control. “Breathing” may not be so regular. Portfolio action is not influenced by time. Only price determines actions and the more volatile it is, more action is created and consequently more profits are generated.
Portfolio inhaling is equivalent to buying and exhaling is equivalent to selling. BOT/SLD column in the table shows how much buying and selling occurred during downtrends and uptrends respectively. Data is given on a percentage basis with the basis being total cost of all pyramids comprising the portfolio.
Last column shows the amounts of profit generated during each uptrend and downtrend move. Profits are expressed in percentages based again on the total cost of all pyramids comprising the portfolio. Bold numbers correspond to profits generated during uptrends, while smaller font is used for profits generated during downtrends.
ZigZag chart with the data
Let’s combine the table from Figure 4 with ZigZag chart from Figure 1. Now we have all relevant information shown in one place, Figure 5. (Please open Figure 5 in new tab or window so you can read all the details)
Fig 5. ZigZag chart with percentual data callouts
As you can see, each trend line is accompanied with corresponding low and high price of gold as well as callout that contains relevant percentual information. It should be easy for you to get a good feel of portfolio actions that accompanied each trend and draw some conclusions on your own.
Looking at the entire eight-month period, it can be observed that there were exactly eight downtrends and exactly eight uptrends. In other words, there were eight distinct oscillations with an average of one oscillation per month. These numbers just happened to be round and divisible. Nevertheless, you should get an idea of frequency and magnitude of oscillations in gold bullion price.
Returns
If we go back to Figure 4 and look at the Total amount of profits achieved during an eight-month period, we see approximately 8%. In other words, the rate of profit generation is approximately 1% per month! Not only this is an amazing number, it is consistent. More-less we don’t even need to care where gold price goes – we simply respond to price variations in a pyramidal way and collect our 1% profit each and every month (on average). Some months the return may be ½%, but some other months may generate 2-3%. We cannot demand profits, but sure enough we’ll take all the profits market has to offer.
What is expected annual return? 1% a month once annualized becomes 12% a year. Talking about consistency, this means 12% EVERY year. Some will argue that stock market can occasionally produce 30% a year. That is true. But notice the word occasionally. That same stock market occasionally loses 30% a year as well, which is extremely unlikely in Pyramid Investing. If you take last century of returns in stock market, you may get something like 8-10% per year on average. Not only that Pyramid Investing beats the market in general since it produces higher returns, but the consistency is what makes significant difference. We will address consistency of returns in more detailed manner at some later point in time.
Let’s go back to the original eight-month chart shown in Figure 1. Price at the end of eight-month period was ~24% higher. Ordinary amateur investors can argue that if one simply bought and held the position throughout the entire period, the return would have been three times larger than what was achieved through Pyramid Investing portfolio. Unfortunately, such thinking is flawed. What would happen if price went down during the same time frame? How can one know exactly when to buy and exactly when to sell to make this return on a consistent basis? The answers to these questions are exactly what makes majority of market players actual losers.
Ordinary amateur investors tend to focus on possibility of achieving higher returns under illusion of being capable of making perfect timing calls. They neglect simple rules of mathematical probability. If one has, let’s say 10% chance of making 24% return for a given eight-month period by applying buy and hold concept (that is plopping the entire capital at the beginning and selling the whole position at the end), it boils down to making only 2.4% actual return on average by performing large number of such plays. More likely, such financially suicidal plays would result in above mentioned “investor” being wiped out from the investing arena.
At the same time, pyramid investor would accumulate “only” 8% return on every such eight-month period, with a chance of doing so close to 100% while taking microscopic risks along the way.
Thus to reiterate, Pyramid Investing returns are greatly independent of price move’s direction. Pyramid Investing returns don’t rely on timing. By virtue of eliminating these two obstacles, actual returns are decoupled from market direction and biased investor’s timing urges. Returns are consistent. Pick your timeframe, pick your investing instrument and pick your market. Chances are, with Pyramid Investing concept you are going to end up as winner no matter what.
Risk
Another aspect I would like to mention briefly is risk. How risky does Pyramid Investing concept appear to you when you observe the chart in Figure 5?
First, what IS risk? What do we all afraid of when we commit our capital to investing? Of course, we afraid we may lose it or lose a good chunk of it. So the risk is likelihood of us losing money when we invest.
In Pyramid Investing we start from 100% cash in our accounts. We plan to have enough cash to be able to keep buying our investment of choice in a pyramidal way all the way to zero. Short of that investment going off the board, the only thing that happens when the price goes down is that more cash gets invested. That’s all. Nothing gets lost. The price goes down, cash buys us stocks. The price goes up, we sell and get our cash back plus profits.
What if gold is 50% down in five years? Buy it now and hold it and your account value will halve. Apply Pyramid Investing and book 12% annually or 60% for five years (cumulative, but not compounded return) – not only Pyramid Investing will lose no money, profits would actually exceed the percentage drop in gold price. In other words, there is no risk. Of course, there is risk that the rate of gold dropping exceeds expected rate of Pyramid Investing returns (most likely only temporarily). Even in such unlikely scenario pyramid investor would fare significantly better than ordinary buy-and-hold investor. Or even better, extend your period to 9 years – after that you won’t even care if gold went to zero! Above all, gold kept its value for 5,000 years. Chances are slim it will go off the board in next 9 years.
What if gold goes 50% up in five years? Then sky is the limit. Or better yet, think about gold going up 50% before the end of 2010 or 2011. This is just an outburst of my gold bullishness.
Bottom line, I don’t know and I may not care where the gold goes. But the risk of Pyramid Investing through gold is negligible, yet the rewards are fabulous.
Data skews – downtrend profits
I should mention an apparent anomaly that you may have wondered about. Namely, even during downtrends in gold price, some profits have been realized. How come?
There is no way I would sell any portion of any of my gold positions on weakness! I came up with at least three explanations to this apparent paradox.
- Not 100% gold
Although heavily weighted in gold, my portfolio has some oil components and other minor components that do not necessarily move in the same direction as gold. Thus while I am acquiring gold on weakness, other stuff may be experiencing strength and I may be realizing profits in those other instruments. That is one of the reasons profits are realized regardless of gold going up or down. However, it is noticeable that profits realized on gold strength far exceed profits realized on gold weakness.
- Gold short instruments
Intermittently I use some gold short instruments to boost my overall returns. Those are normally inverted short gold ETFs or ETNs that I employ only into the extreme strength in gold price. By their design, those instruments bring profits during downtrends in gold price. That is another reason of portfolio non-zero profits during gold price downward moves.
- Short-term up-moves
No trend propagates in straight line. Whatever length of a trend you analyze, you will always find some counter-trend moves within that trend. Duration of counter-trend moves is normally much shorter than the trend itself. But nevertheless, on occasion, those moves are strong enough to generate profits during otherwise downward trends. Especially, some of portfolio pyramids are based on highly volatile gold juniors that are also inherently leveraged to gold price moves. So this is one more reason profits get generated even while price of gold is mainly heading down.
Data skews – excessive buying on weakness
If you look at the gold price retracement that occurred after all time peak of $1,226.40 in early December 2009, you will notice another apparent anomaly – the amounts of buying appear to be excessive: 25% and especially 40%. The cause of these larger-than-expected buys lays in accumulation of core positions.
Core positions have not been addressed here yet. However, in terms of wealth creation and capturing large price moves, core positions play crucial role. By definition, core is a position that at the time it was acquired hasn’t been associated with a clear plan of when or at what price it will be sold. Although core is also acquired in pyramidal way on a price weakness, it does not belong to trading pyramids. Only certain instruments qualify for core positions and gold is definitely one of them. Core positions are always long and placed in various major markets. Sometimes they sit in portfolio for generations.
Just in case you wondered, roughly around gold $1,600 I may consider starting selling some of my core gold positions. Of course selling would be performed in a pyramidal way.
Treat portfolio as a sculpture
Pyramid Investing is a process of scaling into a position on weakness and scaling out of a position on strength. Portfolio based on Pyramid Investing tends to breathe in and out as the price goes down and up. Just as price doesn’t go from zero to infinity and back in short periods of time, Pyramid Investing portfolio doesn’t experience abrupt changes in its positions. Portfolio in Pyramid Investing is like a sculpture that is constantly to be tended to. Only small chips are taken away only to be glued back later. This process is smooth and slowly evolves in front of our eyes. The whole sculpture actually grows quite nicely in time.
Treat your Pyramid Investing portfolio as a precious sculpture. Be gentle, yet responsive. Take care not to break any limb of your sculpture, let alone cut its head off. If you do it, your sculpture will shatter and you’ll be sorry. Your pyramid sculpture is your financial life. Respect it in every sense of that word and you will live long and happily ever after.
![[Most Recent Charts from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_4.gif)
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/silver/t24_ag_en_usoz_4.gif)
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/images/sp_en_6.gif)
Great article Sasa. I really like the metaphor around the pyramid breathing in and out as the market fluctuates. The market is a living organism, based on the emotions and actions of its many participants. If we can get in tune with the market, then we have nothing to fear.
I have already been using a simple pyramid to trade gold and silver producers. These are already showing profit, which is great, but the most amazing part of this all is that I have experienced absolutely no fear.
When the market declines I simply sit back and wait for it to trigger my buy orders. And when the market rises, I watch my sell orders go through and bank my profit.
I no longer worry about whether the market will turn, about whether I have timed my entry right, about where my stoploss should be or any of the other many decisions that may turn out to be wrong. I have a plan for buying all the way to zero and selling all the way back again.
I look forward to more of your knowledge Sasa.
Thanks for your nice words. Your comments are motivating and make my efforts worthwhile.
Not only you hit the nail right on the head, your observations are exactly what I try to convey to readers of this blog. It is hard for investors who know only for losses and fear to believe that there is a way out of that vicious cycle. I find extremely difficult to explain people that all they ever learned about investing is likely flawed for many reasons. Pyramid Investing concept is simple and logical approach that removes all unnecessary and deleterious aspects of investing from investor’s life. Profits and emotional balance are definitely on the list of items that DO remain.
Lifetime investing losers are turned into consistent winners thanks to Pyramid Investing approach. My early investing experience was an agony compared to what I’ve been experiencing ever since I started applying Pyramid Investing. Not only that my investing account experienced a rebirth, my entire view to investing world has changed 180 degrees. I still have a hard time believing that this is not just a dream although I have all the proofs to the contrary.
Main reasoning of many investors and market observers around me is: “If something like that would be possible, everyone would be doing it”. Although I understand their suspicion, I think it is pathetic how they let phrases like this prevent them from achieving their desires. Ultimately, the success is reserved only for those who are capable of recognizing opportunities that present to themselves. I sincerely believe that your recognition of Pyramid Investing will lead you to the ultimate success one can experience through investing.
“If something like that would be possible, everyone would be doing it”
To be honest Sasa, I thought that myself at first. And so I played around with building pyramids for different equities and commodities over different timescales and with different depths and price levels. I tested the system over and over and I could not find a way to lose money. The only risk is that price goes to zero and never comes back, eg Enron.
I even tested pyramids on housing stocks which lost 95% of their value in the bear market. They are still 60% off their highs, but the pyramid has traded out of drawdown and is now in profit.
But what really cemented my confidence in the system was when I read an article on trading gold, where the author spoke of how the banks trade commodities. He explained how the banks would be taking on more contracts as price declined and then selling as price increased.
Obviously, the banks have powerful computers to calculate pyramids based on algorithms and average true range etc, but the principle is the same. They buy into weakness and sell into strength. And investment banks are not in the habit of losing money.
Finally, I think I have a nice reply to your comment. Your mention of banks trading commodities prompted me to write a whole article on the true role of Banks in the world of investing and transfer of wealth (towards them). The article True Market Players and Wealth Transfer is somewhat controversial but I deeply believe it is true. It is also in agreement with statement that Banks never take actions in the market in order to lose money. We may or may not like bankers, but if we are to consistently profit from our investment efforts, the only solution is to imitate their actions. Pyramid Investing is really a concept that allows for systematic approach to investing in a “bankster” style.
I consider Pyramid Investing too simple to qualify as algorithmic trading. However, I agree with your observation that banks make use of powerful computers. Computers can certainly allow them to calculate optimum pyramid parameters in realtime. Another thing, they are capable of automating their trading which is crucial during highly volatile sessions especially when they run pyramids with minuscule step sizes. I calculate my pyramids with a help of Excel and I operate my trading manually. It works fine 99.9% of the time but I can see where my limitations are.
It is interesting to note that Pyramid Investing actions have stabilizing effects to the markets. Pyramid Investing trades provide support in down-trending markets and resistance to up-trending markets. On the other hand, algorithmic trades that Institutional players apply have destabilizing effects since those tend to amplify market moves in either direction (in other words “price chasing” actions; in engineering, this is called positive feedback). Actually, that is not surprising at all since Banks are (among other things) in business of writing and selling those algorithmic trading packages to Institutional players so they can take the other side of their trades.
Couple days ago when DOW sunk 1,000 points in a matter of minutes, there was a total breakdown in number of stocks that were traded by algorithms instead of humans, where Bankers didn’t show up to take the other side of the trade. That only serves as a proof of pity nature of trading that Institutional players perform. On the other hand, it signifies the value of Bankers in stabilizing the markets. Most of the stocks I have pyramids on barely even dipped during the whole ordeal. That gives me confidence that I am dealing with quality stocks where I have to compete with Bankers to get them cheap.
Hello Sasa,
Would like to get your thoughts on something I have been playing around with recently.
I notice above that you talk about having a core position in Gold alongside your pyramid trades. I have been playing around with pyramids with a view to trading the volatility in order to build a core position: rather than take profits out, we leave them running as free stock.
So for example, we buy $500 worth of stock down through the levels, then sell $500 of stock up through the levels until we reach the top. But instead of selling all our stock at the top of the pyramid, we sell $500 worth and keep the rest as free stock.
For example:
Level……..Price………..Buy………Shares………Sell………Shares
…0……….$1.00……………………………………..$500……….500
…1……….$0.95……….$500……….526……….$500……….526
…2……….$0.90……….$500……….556……….$500……….556
…3……….$0.85……….$500……….588……….$500……….588
…4……….$0.80……….$500……….625
So we buy 2295 shares on the way down and sell 2170 on the way up. This effectively gives us 125 shares left that are cost free and can be sold at anytime for a profit.
I see the benefits of this in a bull market: You still get the low risk benefits of pyramid investing but now you are building a core position and letting your profits run.
Of course, this does introduce an element of discretionary trading, as you will need a plan for selling your core position at some point before the next bear market.
Look forward to hearing your thoughts on this Sasa.
Regards,
Simon
Pyramid Investing is rather flexible in its nature. There are many “discretionary” aspects and most actions can be done in many different ways. Nothing is black and white, especially not when it comes to investing. You need to look in the mirror and ask yourself: “Am I GOOD in making discretionary calls? Are those calls eventually profitable or not? Do I WANT to be making those calls at all or would I be better off just sticking to some predetermined plan?”
Pyramids are to help us reduce the amount of decisions. Many traders are way too influenced by their own feelings and different urges. Without help of Pyramid Investing or some similar concept, they are unable to profitably operate in the investment world. On the other hand, some possess talents to trade profitably without any specific concept. Those traders are extremely rare.
So we need to be honest to ourselves where we fall on the scale of trading capabilities and talents. There is nothing wrong in digressing from the concept here and there as long as those actions do not produce losses. I never digress from my trading pyramids, but to satisfy my urges of greed, I acquire core positions in a flexible and discretionary way. Although my core buying decisions do not follow any specific pattern, they roughly DO happen in a pyramidal way.
My favorite core acquiring technique involves buying stocks that I deem oversold (with help of Relative Strength Index – RSI). I do not call the bottom. I look for oversold conditions before I even start my core acquiring campaign. Then I look forward to continued weakness. This works very well to me.
Thus I buy core before I make a profit on a trading position, meaning I employ more capital upfront (during severe weakness). Eventually, I end up with core positions paid off (after I sell out my trading pyramid). My approach is somewhat similar to your example with the main difference being that I designate core purchases as such at the time I buy them. I find this approach simpler to handle and I also keep core and trading shares separate. I like your game with different numbers of shares and having leftover shares at the end though.
One of the ways to acquire core is to have only one pyramid, but to split purchases at each level into two or three portions. One portion is always regular trading portion. One portion is always core portion. If there is a third portion, then it is trading portion with delayed selling (larger offset). Actual percentages of portion split are arbitrarily determined, with fifty-fifty or thirds being the most common. I never found this approach appealing since I didn’t like the idea of core positions being acquired in any regulated manner. I also do not agree with core positions being acquired close to the top of trading pyramid.
As far as trading gold related stocks and plan to sell core before next bear market begins, I would like to comment: It is too early now to think about whether this is the top and whether the bear market can start any day now. There is so much trouble out there in the financial world that precious metals will be in a bull market for another decade easily. Thus there is no worry for me that I will miss selling my core. If we get a gold price smack down at any time in next few years, you can bet I will be on a buying side. I will be in gold accumulating mode for years to come, thus I will allow myself to remain without core selling plan.
I must admit that this is a very strange situation; I am actually enjoying a market sell off!
Why? Because I had sold my positions all the way up the recent rally, netting a nice 1% profit. Then I waited for weakness, which was quite frustrating as the market kept going higher. But I kept my discipline and sat patiently.
Now, I am buying into this weakness and enjoying the knowledge that I am trading with the smart money. Buy weakness, sell strength.
I’m not saying that it is easy, as all the same psychological issues exist around discipline and overcoming greed and fear. But now I don’t care which way the market goes, as I have a plan for it and as long as I stick to that plan, I will be ok.
I have one pyramid which is in drawdown at the moment, as I have been building a position in Natural Gas. Before, I would have been feeling really bad and tempted to just sell out and take the hit. But now I have no worries and don’t mind if it goes lower, as that just means better prices. I don’t need the money as it is in my pension, so I have 20 years to wait for this pyramid to run its course.
I gotta say that pyramid investing is a revelation Sasa. It has taken all the anxiety out of trading the market.
Regards,
Simon
To: Sasa Jakovljevic
Well, this is interesting! In my previous remark I identified that this Pyramid Investing was a contrarian method: periodically buying on low prices and selling on high prices. . and indeed the explanations at the top of the page prove that Pyramid Investing is exactly that (price driven trading).
Congratulations Sasa.
As I mentioned, this generic contrarian investment method is not new. Various forms of it exist, each specific variant having its own trading guidelines as to at which moment to buy low and to sell high (The Golden Rule of Investing) that most amateur investors ignore. . .but the professionals use this method consistently (like the examples mentioned here how banks manage their investment portfolios): when prices rise they increase their liquid assets and when prices drop they expand their equity positions. . .being careful to avoid “obviously” dying dogs and to invest only in “reliable stocks”.
The AIM Method, from which I have developed my Vortex Method and TurboVest Method work generically the same way as Pyramid Investing. In the execution various overlay structures can be added to optimize the trading (algorithms, filters, market know-how etc). The more one knows about the market and its dynamics the more profit one can make. In this sense my TurboVest Method, a buying technique using asset based resources. . .it is an accelerated investment method for dropping prices. . . .is intended for aggressive investors with a stuffed wallet!
I am glad I am in good company! Pyramid Investing is not my competition. . .you and I are underwriting the same sensible & logical way to Buy Low and Sell High!
I admire your marketing skills for this investment method!
I wish success for you with your book.
Regards,
Conrad
Conrad,
One of my favorite rewards from this blog is when I get a response from people who understand what Pyramid Investing is all about and how powerful the concept is. I appreciate your support and understanding. I find it interesting that you are a Mechanical Engineer. I guess engineers do think alike when it comes to investing…
I looked at your Vortex investment program web site. I still haven’t learned Dutch so the level of information I was able to get was limited. However, I did see that you use some more sophisticated mathematical analysis in your approach. In my case, I try to stay away from hardcore mathematics so not to defer potential interested investors if nothing else.
I also believe in simplicity being a core of profitable investing. Any optimization is fine but has to be optional. Basic model has to provide for decent profitability on its own. I like to refer to Pyramid Investing as “a game of small round numbers”.
One aspect I definitely lack of is software platform for trading. Currently I operate with a help of Excel spreadsheets and I enter my orders manually. A Pyramid Investing software that would be capable of talking to my broker’s trading platform would certainly be of a great help. On the other hand, the amount of capital I currently manage does not require automation of the process.
You must be loving this big sell off Sasa. Been a busy week buying both gold and silver on the way down. Now looking forward to booking some profits on the way back up.
Trading by pyramid has been a revelation, my friend. There was a time when I would be trying to spot market turns using technical analysis. Lord was that stressful – hours spent hunched over charts calculating stops and risk factors, then days spent worrying about whether the market would turn against me and stop me out – it was like death by a thousand small cuts.
Now, I look at the market for a few minutes each day, and I could care less about where it goes. I welcome market weakness with both hands, I even wish it to go lower so that I can get more invested.
I feel like I’ve been set free.
Simon, I am so glad that you have such excellent understanding of Pyramid Investing mindset. It seems that you’ve embraced the concept very well and it does great for you.
I do love this sell off indeed. However my greedy side desires more! More selling so I can have more buying. It is interesting how Pyramid Investing concept alters one’s mindset regarding the price. Can you imagine long investors who sincerely desire lower prices? How perverted. Yet totally true. We are so confident that eventually price will get much higher that the expectation of such outcome gets completely pushed in the background. So we operate in present and what matters here and now is to accumulate more. The only way for that to happen is if price goes down. Thus the focus on dropping prices and desire to be able to acquire position additions cheaper.
I was a little disappointed when gold and silver stocks didn’t express much weakness while bullion was sinking. I expected some amplification of gold’s downside move to be reflected in stocks but that didn’t happen for most of ones I trade. Well, better luck next time. I hope this was NOT the bottom. On the other hand, if it was, I can’t complain – I am in excellent standing for parabolic move in gold price.
I appreciate testimony of your former market practices. I think there is still great majority who trade the same way you described. And what is even worse, they go through the same agony over and over again, emotionally and mentally while their accounts absorb endless losses. Unfortunately, I can only do so much to promote Pyramid Investing but the task pretty much lays on others to find out about this blog and seriously ponder the benefits this approach offers.