Excellent question KC and great responses so far as well. Let me just add a couple of points to what has already been said. First off, the ability to pyramid or pillar depends largely on your preferences as a trader. For instance if you are trading a large account or trading a long time frame with larger risk, then pyramiding or pillaring might be right for you. The idea behind pyramiding is to multiply your profits as the market moves in your direction, and it's a good idea; however it normally requires that you try to capture a larger market move.

Pyramiding, or rather reverse pyramiding, is where you multiply your contracts as profits allow. This means that if you begin with one contract you will eventually add another to have two, and when these two earn enough profit you will add two more for a total of four, then add four and so on. As Dino Dave pointed out the problem with a reverse pyramid is when the market mvoes against you, namely that you will have more contracts working against you than for you making the losses add up very quickly.

The "safer" version is to pillar, where you add to your original position with the same number of contracts as you began. I used to pillar in the "old days" and had moderate success with it. At the time however I was trading much longer trends and routinely risking $1000 per trade.

As I began trading support and resistance my time frame shifted to a slightly shorter focus and my risk per trade declined dramatically. This allowed me to pyramid in the "real" sense, where the base of the pyramid is broader than the top. The key to this type of pyramiding is to weigh the size of the move you expect with the amount of positions you would like to hold (given the risk).

For instance, if I am expecting a relatively small move in corn, but one I consider to be "safe" (ie. predictable) I might consider trying to establish six contracts over the duration of the expected move. To do so I might open the position with three contracts and as those three accummulate profit (or better yet at a predetermined point) I will add two more after which I will add one more to have all six contracts working. This way your original three are earning the most profit and more stable as opposed to the reverse (upside down) pyramid where the structure is top heavy.

This type of pyramiding works well, but again requires you to have a longer focus on the markets and often will require you to ride out a pullback move or two. Pyramiding is fun so long as the market moves with you...but it can be a real nail biter when prices start to move against you.

As a result I've adopted a third method of trading multiples and that is to establish the whole position at once and then take profit at predetermined targets. Essentially if I see a promising move with relatively low risk, I will establish a position with an even number of contracts (ie. 2, 4, 6, etc). Then when the market hits my first profit target I will liquidate half my holdings. When it hits the second target I will liquidate half of the remainding holdings and so on until I eventually get stopped out. In the case where I am only trading two contracts I will liquidate one on target and trail a stop on the remaining one vs. taking profit at the second target (ie. the March Wheat trade from the last couple of weeks is a perfect example).

There will be some people that don't agree with "my" method, but I find that this is what works for me as far as trading multiples goes. It's relatively easy on the nerves, although the tensest part of the trade is the beginning when you are the most suseptible to loss.

Erich
http://www.tradershelpingtraders.net
http://www.supportandresistance.com