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Head and Shoulders Patterns

Pyramid trade on XRPUSD daily chart

Pyramid trade on XRPUSD

Pyramid trade on XRPUSD is the first trade of this kind that I open since I moved to daily timeframe. The pyramid trading is a way in which a trader add another position to an already winning one.

The premise

The pyramid trade on XRPUSD (ripple) is a confirmation and also a continuation of the Head and Shoulders Pattern on XRPUSD trade. Why a confirmation? Because I said in that article that something huge is about to come in the crypto market. So, what does actually pyramid means? It’s simple. It means that between my entry order from the initial trade and my take profit order, I saw a second trading opportunity. Therefore, let’s take a look on the daily chart below on XRPUSD.

pyramid-trade-on-xrpusd-daily-chart
Pyramid trade on XRPUSD daily chart

How did I trade the pyramid trade on XRPUSD

As I told you in the previous article Head and Shoulders Pattern on XRPUSD I already had a sell stop order in place which was activated at 0.2593. And, the price dropped until the 0.2154. My initial take profit order was at 0.1781. So, when the price started to stall in the 0.2154 area I waited to see what will happen. Therefore, if you look at the daily chart from below (or above), you’ll see that the initial head and shoulders pattern morphed into a wider head and shoulders pattern. Consequently it is this second SHS pattern which provided the pyramid trade opportunity. So, I placed another sell stop order slightly below the 0.2154 area. And, I also moved my initial stop loss order in the same place with the stop from the second trade.

The outcome

You can see the outcome of both trades in the daily chart below. You might ask yourself why I didn’t let my second trade run to the take profit level? The answer is simple. The move it was already huge and even if the price went almost 70% from the profit target I though that it is better to collect all my profits in the strong support area. So far, the price didn’t reached the take profit level but that doesn’t mean it won’t do it.

the-outcome-of-the-pyramid-trade-on-xrpusd-daily-chart
The outcome of the pyramid trade on XRPUSD daily chart

The conclusion

An important conclusion is that if you see another trade opportunity during an already open trade all you have to do is to asses your risk and open the second one. Therefore, the money and risk management is always present in trading. Keep in mind that the first trade is a 1:2.5 risk reward trade. And the second one is a 1:5 risk reward trade. The important thing here is that I always maintained my risk at the same level. But, I managed to get an overall 1:4 risk reward ratio after I manually collected all my profits. The other conclusion is that I need to improve my trade management because I let some money into the market again. By the way, if you want to learn more about pyramid trades you’ll find more informations here.

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