[XM Trading: For Beginners] Differences between Pyramid and Namping

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There are various forex trading methods and techniques. And each trader has their own way of fighting. Pyramiding and Namping are among the ways of fighting, but they actually have different meanings, so let’s keep them in check.

What is pyramiding?

Pyramiding is a method of accumulating positions as the unrealized profit of the holding position increases. As a premise, it is a condition that the position held at the beginning is unrealized profit. Basically, it is the basis of pyramiding to increase positions in the form of riding the trend in the trend market. If you hit it with a method that gradually increases your holding position, you will make a big profit, and if you miss it, you will lose a lot. The following methods are available.

forward pyramiding

Forward pyramiding is a trading method that gradually reduces the number of additional lots purchased when buying more. The most orthodox method is to hold the first position when the trend occurs and buy more while reducing the lot if it is determined that the trend will continue. First 5 lots, then 3 lots, then 1 lot, etc.

reverse pyramiding

Reverse pyramiding is a trading method that gradually increases the number of lots that are purchased in contrast to forward pyramiding. The advantage of reverse pyramiding is that you can buy more while seeing if the market moves as you expected, in order to reduce the number of positions you hold at the beginning. First 1 Lot, then 3 Lot, then 5 Lot and so on.

rectangular pyramiding

Rectangular pyramiding is a trading method that buys more lots with the same number of lots as the first held position. This is a fighting style that averages the above.

What is Namping?

Namping is to dare to buy more of the same brand when the position you hold is going backwards. However, the base price may fall further, which will increase the unrealized loss. Therefore, if you get caught up in a strong trend, Namping will become your enemy and go bankrupt. Automated trading systems incorporate this technique, and these systems are 100% bankrupt if they fall into a trend even once.

Decisive difference between Namping and pyramiding

There is a crucial difference between namping and pyramiding.

Namping and pyramiding are both methods of accumulating additional positions after the initial entry. This point is the same, but the meaning of accumulating is different.

In the case of Namping, it is a method of increasing positions while holding unrealized losses, whereas pyramiding adds more positions while holding unrealized gains.

Advantages of pyramiding

Unrealized gains may continue even after adding a position. If you go forward further, all the accumulated amount will be unrealized profit, so it will be a big profit.

Disadvantages of pyramiding

If you suddenly reverse after adding a position and turn negative, all the positions will become negative and you will lose a lot of money.

Benefits of Namping

If the price recovers, you can make a profit. Unless there is a very strong trend, the market will reverse at some point, so in the end it is often possible to make unrealized gains.

Disadvantages of Namping

If you get caught in a strong trend, you can lose the full amount by picking up. Even if you pick up while you have an unrealized loss, the unrealized loss will not be resolved, and you may end up with a big loss.

pyramiding is difficult

If pyramiding is done at a beginner’s stage, there is probably a high risk of full loss. Pyramiding worries about how long positions should be placed and where to close. And if it reverses, all the positions so far will be negative and you will lose a lot. Pyramitting is a common practice to look at the big picture and set it at the timing of whether or not a trend will occur.

Care must be taken with easy picking

Care must be taken with easy picking. Many Forex beginners tend to go backwards after entry and easily pick up. However, if you catch the trend, all positions will be unrealized losses and all losses will be lost. If you try to pick up the minus easily and get back the minus, you can’t take it back. If you’re going to do an easy pick-up, it’s better to cut all the positions once and the damage is shallow.

XM is recommended

XM was originally known as a forex company with too wide spreads. But this was only recently. Now there is an account type called KIWAMI account. The spread is very narrow and very suitable for trading. Therefore, this account type is highly recommended. Especially for those who trade in pounds, it is recommended because the spread is extremely narrow.