TRI has two simple rules for investing.

Rule #1: Follow an algorithmic system that produces a 2:1 reward for risk and is correct 60-70% of the time.

Rule #2: Never risk over 5% of your stake/capital on any one investment idea.

Following these two rules mean you’re always following a trading setup and plan, and you’re never risking too much on one idea. Minimizing your risk as a trader is a key component of successful trading, and it’s how I turned $500 into over a million using a setup called the “Little old Lady”.

If you’re learning how to trade but you have a low-risk tolerance and you don’t want to be stopped out of any positions, then you’ll love this risk-management strategy.

How to Trade Like the Average Market Participant

Most market participants are what TRI calls “Joe-six-pack”. These traders can risk 10% of their stake on an idea but must exit if the trade goes 50% against them, following the 5% total risk rule.

Most ‘stock trading’ clients from back in my brokerage days would fall into the Joe-six-pack category. However, some clients wanted to invest without their positions ever getting ‘stopped out’.

They don’t want the stress of ever having to close a losing position. For them, my Little Old Ladies, who don’t want me calling every day or looking at screens but are still eager market participants, we tell them to only invest 5% on any name. This way, even if the idea goes to zero, you haven’t broken Rule #2.

Following The Plan

After leaving my prop firm in 2014, I began following this strategy in the cryptocurrency market, and since then we’ve followed a very simple plan. Never risk over 5% into any single idea and spread the risk across a multitude of potential assets.

This way, we could buy names and hold them with no worry if they go underwater or fall to zero. During bear cycles, crypto winters, and crashes in the market, the ‘Little old Lady’ doesn’t experience painful losses, and she can just nibble away with tiny purchases in order to average into 5% positions.

How to Trade Nanny Nibble’s in The Little old Lady Strategy
During down markets, you can split up your 5% stake into smaller 1% or 0.5% portions. Then average into assets as the bear market brings everything to its knees. With 0.5% capital positions, you can purchase an asset 10 times to add up to your 5% allowed risk. Over time, you’ll average into an acceptable position, and with multiple ‘Nanny Nibbles’, you still end up with only 5% in any one idea.

When I started this ‘Nanny Nibble’ strategy in the crypto story in 2014-15, I used just 1.25 BTC (at the time worth around $500) and traded the account to 35.5 BTC over a 2.5-year period. The gross profit was 34.11 BTC,

At a $50k BTC price, that adds up to a gross profit of over $1,700,000.