Shall we play Bigger and Better?

I’ve been reading Kyle Macdonald’s book ‘One Red Paperclip’ in which he tells the story of how he gradually traded one red paperclip all the way up to a house by playing the bartering game called ‘Bigger and Better’ that he had remembered from his childhood. The rules of the game are simple: take a small inconsequential item, find someone who will swap it for something ‘bigger and better’ that they possess, and repeat until you end up with something very substantial like a car or a house.

I’ve been thinking about how feasible it would be to play a game of ‘bigger and better’ with spread bets. This would be quite the opposite of the highly diversified long-term position trading approach that I’m practising in my trading tail. The rules of the game would be something like this:

1. Place all my risk capital* on a single stock that I expect to generate a profit reasonably quickly.
2. When my profit target is reached — close the position, bank the profit, and return to Step 1 with the enhanced capital.

* I mean starting with say £100 worth of “risk capital”, not my entire life savings.

I’m not usually driven by take-your-money-and-run profit targets, and I’m more keen on diversifying across many small positions in parallel than I am on running single big positions in series, so this is not a game I would usually play. But it sounds like fun, don’t you think?

The non-diversified high risk at each step would necessitate a guaranteed stop order on each serial position so as not to run the risk of going bust, so I think that one of the London Capital Group accounts would be the best trading vehicle.

I’d need a ‘starter stock’, the equivalent of Kyle’s ‘one red paperclip’, so it’s a pity I hadn’t thought of this before taking a punt on Credit Agricole yesterday. My position is already in profit (by £28 at the time of writing), it has good profit potential, and I have the mandatory guaranteed stop order in place in case it suffers a shock. It looks like this:

If this trade reached the profit target before stopping out, I would have a £149 ‘bigger’ cash pot to invest in a ‘better’ opportunity for the next leg.

So, shall I play the game of ‘bigger and better’ for real? I’m not so sure, but in the interests of fostering some interaction in this ‘community’, I might let you decide. If enough people comment below, I’ll consider giving it a go with real money (and at no expense to you) and I’ll let you know how it turns out. Alternatively, you might decide to play your own game of “bigger and better” (not that I’m encouraging you to gamble) and let us know how it goes via this community.

It’s probably a game best played by experienced traders and / or those with deep pockets; and everyone else would be better off playing a game of “play it safe”… like I usually do.

Tony Loton is a private trader, and author of the book “Position Trading” (Second Edition) published by LOTONtech.