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After I graduated college I took my father’s advice to “rent everything from underwear on out” and have never owned a home, a car or a boat my whole life. But whenever I am on the road at some hotel killing time, I turn the remote to HGTV and like a visitor from another planet watch with fascination the endless house renovations on the channel. I love Tarik and Christina.I love Chip and Joanna and I love the crazy twins. I love everybody who flips houses and turns garbage into gold.
But the one show on HGTV that has been getting the most play lately is “Tiny House” where people abandon their complicated, gadget-filled lives in McMansions and exchange them for tiny little affordable homes that look more like toys than actual places of residence. What is perhaps most amazing about the Tiny House phenomenon is that almost no one regrets their decision to downsize. In the end, most people are happier in a Tiny House.
I’ve been thinking about the Tiny House trend a lot recently. There is a huge upside to getting small both in real estate and in trading. Whenever someone asks me what is the first thing they should do to improve their trading, I always tell them -- reduce size. It’s no guarantee of success but it is definitely an assurance of survival. And survival is 90% of the battle.
But let’s take that point further and consider the idea of Tiny Trading. The minimum MT4 size is 0.01 lot -- a dime a pip -- or 1000 units of currency. Lately, I’ve been trading one of my accounts at that 0.01 size and the results have been quite positive. Mostly because I could give a f- about either entries or exits. Stops are easy to take when they are trivial and entries are easy to make because you really don’t fear the stops. The net result is a kind of a virtuous cycle that puts you in the groove with the market and allows you to do all sorts of things that are much harder to do physiologically at a larger size. You can let trades run for a hundred pips. You can trade many pairs at once. You can scale up and scale out of a given trade without feeling any discomfort whatsoever.
Trivial you say? Perhaps not, Today I managed to bang away nearly 20 dollars clicking away at the account in between managing much bigger size elsewhere. 20 bucks may not seem much but think about it for a second. Say you have $10,000 account. There are 250 trading days in a year and you make $20/day with your Tiny Trading. That’s $5000 at year-end. Double that every year and by year seven you are making $360,000 per year in an account that started at 0.01 lots. Granted by that time your size has to rise to 3.2 standard lots but it’s a slow and steady progression to big money.
But let’s just say you simply Tiny Traded for the rest of your life. And every year you put the $5000 in winnings into a 3% carry trade and just let that compound. After 30 years you would have a quarter million dollars trading all those dime pips.
And with much better clarity on the market than you probably have now.
Just like Tiny Houses, I suspect Tiny Trading could make a lot of people much happier by getting more with less.