This refers to a strategy whereby a trader first enters into a small buy or sell position in a stock, or any other financial security, before adding more money to it. The trader might wait for his initial position in the stock to show a profit before increasing the size of his position. The initial profit serves as a confirmation to the trader that he was right about his original idea and offers increased confidence to add to his existing position. By the same token, the trader will prefer to gradually scale out of a trading position if it moves in a direction that causes him to lose money. Pyramiding helps traders increase the size of their profits while minimising the size of losses.
