His method of pyramiding differs from the Turtle's in some way and are similar in
some way. To increase the expectation of profitable trades, pyramiding is
important. How you pyramid is also important. The are pyramids made by
ill-disciplined traders and there are pyramids made by skillful traders. The results
are world apart.

This text is already 82 years old yet still as applicable as ever. Comments within
square brackets [...] are mine for clarity.

"Many a trader has begun at the bottom of a Bull market to trade conservatively
and accumulated a large amount of profits. Finally he begins to pyramid too
heavily and too fast near the top, with the result that when the trend turns he gets
caught overloaded and loses all the profits he has made and probably a lot of his
capital. Sad experience has taught me that it is better to be safe than sorry. In
speculation let "safety first" be your motto.

In trading, your first risk should be your greatest. Supposed on your first trade
you risk 5 points, which if lost, comes out of your capital. We will assume that the
stock moves 5 points in your favor. You can then buy a second lot and place a stop
loss 5 points away, and if it is caught, you will still be only loser 5 points, because
you will be even on your first trade.

Pyramiding all depends on where you get in on a stock - whether near the bottom
[for longs] when a move starts upward or near the top [for shorts] when it starts
downward. On active stocks, as a rule, it is safe to pyramid every 10 points up
[for longs] or down [for shorts], but you should decrease you trades and never
increase them.

Suppose your first trade is 100 shares and it advances 10 points; then you buy 50
shares and it advnaces 10 points more; you buy 30 shares and it advances 10
points more; you buy 20 shares and it advances 10 points more; and you buy 10
shares. After that every 10 points up you buy 10 shares more. In this way, if you
follow up with a stop loss order, your profits will always increase while your risk
will decrease. Your last trade may show a loss of 3 to 5 points according to how
you get out on stop loss orders, but all of your other trades will show big profits.
It is always safer to pyramid after a stock moves out of accumulation [for longs]
or distribution [for shorts] zones.

Learn to adhere strictly to a rule or do not follow it at all. One thing you must not
overlook, that every time a stock moves in your favor 5 or 10 points, the chances
against it moving further in your favor have decreased. This does not mean that
the stock will not go a long way in your favor, but it is the percentage against you
that must not be overlooked."
W D Gann, 1923


How many of you fail to grasp the last paragraph?