Pyramiding

That thing cheerleaders and ants in a gutter during a rainstorm do. Also, a time-tested way to sell nutritional supplements.

But we're not talking about either of those situations here. Instead, we're talking about a trading technique.

You're a stock trader. You buy 1,000 shares of Pointy Top Industries at $100 each. You're in for $100,000 total. The stock goes up to $125. You now have $125,000 worth of stock. You use that additional value to borrow money on margin, essentially using the stock as collatoral to borrow money from your broker, in order to buy even more stock. They loan you $60,000. You buy more shares. Now you have $185,000 in stock.

Shares rise again over the next few weeks. Now they're worth $150 a share. Your shares are now worth a total of more than $215,000. You use that additional value to get even more margin. You get another loan, this time of $30,000; again, your shares act as the collateral. This collateral allows you to buy even more stock.

That's pyramiding. You use the rising value of your holdings to secure additional margin. That, in turn, lets you purchase more.

Everything goes well...as long as the stock keeps rising. You're borrowing money, so the strategy comes with inherent risks. If the stock plunges, you could be stuck owing a good chunk of the money you borrowed...like when the cheerleader pyramid collapses and the the girl on top cracks her skull on the gym floor. Sorry to end on such a downer. She should pull through.