Does pyramiding make sense? by Fred Cehm
The leverage obtained through pyramiding can be immense. But is it smart? Gehm examines the pyramiding technique and its possible consequences.
Recently, well-known traders and trading advisors have argued that pyramiding is one of the most
important— if not the most important—money management techniques. Stanley Kroll, for example,
attributes much of this success to pyramiding. "If done correctly," he states, "it is the trader's best tool for
big profits in commodities."
Since Kroll apparently used this technique to turn $180,000 into more than $1 million during a three-year
period, his advice should be taken seriously. Nevertheless, he is not necessarily correct. Is pyramiding of
Theoretically, an infinite number of ways to pyramid exist. Fortunately, all are variations on the upright
and inverted pyramids.