So, what is pyramiding in forex? Pyramiding is adding to positions as price moves in the desired trend direction. An investor who is pyramiding uses excess margin from the increasing price of a security in his/her portfolio in order to purchase more of the same security. Pyramiding is generally a slow method of increasing one’s position size as the margin increases will permit successively smaller purchases. Pyramiding is useful as well as profitable if the trend goes by your side but also it may cause losses in case of reversing of the forex trends.
There are several types of pyramiding techniques and strategies available which if you understand and use can ensure you good profits.
a. The standard pyramid, which is also known as the scaled-down pyramid or upright pyramid starts with a large initial position and is followed by predetermined additions that decrease systematically in size as price moves in the indicated trend direction. As for example, if the initial entry was for 100 shares, then as price moves to the next predetermined level add 50 more shares, then 25 more at the next level, then 13 more, for a total of 188 shares.
b. The reflecting pyramid systematically adds to a position up to a predetermined price level, then it reduces the position systematically as the trend continues, so the reflecting pyramid is not a pure trend following method. If the price does have a major move in the indicated trend direction, the reflecting pyramid would result in less profit than both the standard and inverted pyramids.
c. The maximum-leverage pyramid keeps on adding maximum size up to the limits of accumulated profits and margin requirements. This is the most aggressive strategy possible, and it offers the maximum potential reward, the maximum potential risk, and the worst reward/risk ratios. This pyramid must be combined with tight exit rules, or else it is a formula for near-certain ruin.
d. And the inverted pyramid, which is also known as the equal amounts pyramid, adds to an initial position in equal share-size increments. For example, if the initial entry was for 100 shares, then as price moves to the next predetermined level add 100 more, then if the price continues 100 more, then 100 more, for a total of 400. Here, however, the average cost per share is much higher, such that a smaller price reversal eliminates all profit. And this one is the most used strategy while pyramiding. You as a forex trader have to develop a forex trading strategy that will allow you to quickly identify flaws and make adjustments while continuing to trade and a strategy based on the classical approach in order to evaluate risks in the currency trading system is the inverted pyramid approach.

But in order to understand and utilize the inverted pyramid it is required for you to understand the macroeconomic factors that are a function of the top of the inverted pyramid. This may include international issues that influence the global trading community. So keep tuning in to know the further uses and advantages of pyramiding in forex system.