Progress at last!

I made a steady profit for the first time since Saturday, which was a welcome relief. It almost felt strange seeing my balance increasing!

It was still a day of 2 halves. Until the 4:15 I was sticking to my strategy which I had tweaked from yesterday as I again had a losing day then (nothing major, fairly consistent but in the wrong direction!). I still defined the entry and exit points for trades but I was only looking for 3-tick profit instead of 6. This proved to work much better, but after reaching a profit of 8% of my bank by 3:30, I then gradually went into a 5% loss. At which point I returned to scalping 1-tick at a time. By the end of the day and a couple of evening races before dinner I made a 20% increase and an overall profit on the day.

I am weary of returning to a trading style much more like I used a couple of years ago (scalping 1-tick or so) because whilst it worked then, I would go on tilt occasionally and wipe-out my whole balance.

The new strategy I devised from the book I read has enabled me to be far more consistent, but I simply haven't been able to make it profit. It has been satisfying not to have gone on tilt and I haven't wiped-out my balance. But I still need a trading style that has an edge in order to profit long-term.

I have dug-out the old database I made back when I was trading in 2006. I was shocked to see that my average loss was actually 25% larger than my average win! My strike rate per race was 62.5% for wins, 12.5% scratches, 25% losses (all on horse racing). They really don't seem like very good stats to me, however I still made a decent profit on the trading.

I've thought about a revised way of doing the 1-tick scalping and I'll try it today. I will also pick the direction of the trade using the entry and exit strategy I've devised from the book. I have also printed out the main points to bear in mind when I have a losing race. The main one is that looking through my stats for 2,500 races, every time I had a large loss is was shortly after a much smaller loss (but one that was maybe double or more of my usual win amount) - basically I was on tilt from that point. I have thought about what I am going to do in future in this scenario and I will keep this printout next to my trading computer for reading at critical times!

The other points I've printed out are the stats above - if I can profit with stats that bad then I don't need to stress about a losing race. I've also thought about all the benefits that trading successfully can bring to my lifestyle outside of work - and also all the penalties for failure. Hopefully that will focus my mind!

I'd like to mention that I really started thinking about the trading v's proper job pros and cons after reading a post on The Experiment: Self-indulgent Bullshit which is an excellent blog.

That's it for now, wish me luck someone!

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So I need to know how to trade as well?!!!

Another losing day!  I have been so utterly focused on my new strategy and following rules to keep me from blowing my bank by chasing losses, that I seem to have totally forgotten how to trade.  Fundamental problem.

Normally I expect to win on about 80% of races.  I aim for 80-90%.  75% is still enough for an acceptable result with my trading style.  Yesterday I LOST on 75% of races!!!  First, the bad news.  If I can't trade profitably then clearly this is a waste of time..........Second, the good news.  I didn't blow my whole bank!  What an achievement, I still lost money, but at least I have a balance to live another day. 

In order to enable me to deal with losses as set out by the book I mentioned, I have had to create a new way of trading.  This involves having criteria for entering and exiting trades and not just entering trades because it feels like a good idea.  This worked fantastically on Saturday where I doubled my (small test) account balance.  It didn't work on Sunday or yesterday, however I think I would have blown my whole balance in times gone past if I was having a 25% strike rate.  I always used to find Monday was a poor day for me and I never used to trade on Sundays, so I'll stick with it on Tuesday - Saturday and see if my new trading method will show a profit for the rest of the week.  I've made a big dent in what I have available to trade with so it'll be hard to achieve a significant amount of profit, but I'll be happy with 10%.
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The £1 that cost me £130

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I can identify with the trader in that advert, that's how I used to react!  A major aspect of getting on the road to long-term consistent profit is being able to handle losses.  In my case I think it is by far the biggest challenge.  So that's why I'm very happy to have kept pretty much on the level after a stupid trade lost me 25% of my bank.  And this was on my first day of proper trading since restarting.  I had a trial day on Saturday with a tiny balance and doubled my bank purely through trading (i.e. I didn't let a few trades turn into bets and get lucky).  I'm pretty sure I've never made 100% in a day purely from trading before.  I guess I went into Sunday full of confidence......

Whilst I'm happy with how I continued afterwards, I'm really not happy about how I ended up in the stupid trade.  If I had been following my new rules to the letter I would have had a loss of around £1.  Here's how it happened.....

I'd been having a tough start to the day and had 3 losing races on the trot.  I then made my biggest profit of the day only for it to be voided as the favourite was withdrawn at post time.  That's pretty unusual and I think that really put me on tilt.  It's stupid, the amount wasn't that big, but after the three previous losses it was as if the market was conspiring against me, which of course is utter rubbish.  I had prepared myself before starting the day for losing on some races so I was able to cope with those, but I hadn't prepared myself for this and it really must have tweaked me!

The stupid trade occured a couple of  races later.  I had got into a medium-sized loss situation after three trades had all gone bad.  I then pulled it around and got back to only -£2 or -£3 which after redding-up would have been -£1.  I had 10 seconds until post time and had just exited a profitable 1-tick trade.  The same opportunity seemed to exist as the front of the queue on both sides were very small amounts backed-up by several thousand behind them.  My rule is to not initiate a trade inside 30 seconds to post-time (I close an existing position up to 10 seconds before).  But temptation got the better of me and I thought I could exit this race about £5 up after starting out like another losing race.

I put in a back order and shortly after the closing trade and - whoops - the race went in running.  The horse I traded on must have been napping in the stalls and the odds shot up. I did resolve to take the hit and closed the trade.  At that point the "reverse close" and "manual close" buttons were no longer available, so I had 0 liability on the favourite and £130 on all the other runners.  At the closing trade odds of around 6 this liability was really only £22 if I could have "redded-up" fast enough.  At this point I was just panicking and the odds were switching between 12 & 22.  By the time I'd worked out what I should be laying the favourite for to even-out my liability it was too late as it was trading at 100+.  I wondered about smashing my keyboard like the guy in the advert, but I'm glad to say I kept composed, took a break for the next race, grabbed a beer and traded through the rest of the day for a profit.

Hopefully today I'll do the the right thing and follow ALL of my rules and nothing unusual will happen to put me on tilt.  That being the case I should be starting my first week with a winning day.  However, I have to say I normally lose on Mondays................anyone else have that experience?

Good luck to all.
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Does a stop-loss save your bacon - or fry it?

Have you used the stop-loss feature, e.g. in Bet Angel Professional and others, and found that rapid and short-lived shifts in the market trigger your stop-loss only to then see the market move strongly in the direction you expected?

This means you end up with your worst-case loss and also miss-out on the profit of the trade you planned. Double doh. Unfortunately I couldn't collect the stats to see if it is true, but I have the strong feeling that I have lost far far more money on stop-losses than they have saved me from potentially losing with trades that went against me (not because I have some fortune-telling ability of which way the market is going to move, but because of the "double-doh" effect).

I am trying to construct a strategy for my trading before I restart next week so that I can measure my results with consistency. The idea is that if I have an average profit higher than my average loss and a strike rate of 50% or better, then I'll make money in the long-run. To be able to predefine the risk of any trade I ideally need an automatic stop-loss. Safe in that knowledge I would then be able to accept the inevitable losses when they come as a hazard of the job. That's the theory anyhow, if I feel that some red-brace wearing yuppie has just ransacked my trading strategy with his "misguided" £10k wager against the market trend then I might just have to take revenge and show him the error of his ways. This is usually the point where I blow my whole bank and put my last £2 on the 100-1 outsider in the last. Hence me trying to look at things in a more structured way......

What do you think is going on here? When using fast refreshing on BAP such as 200ms, I occasionally notice bets entered that move the market down as much as 7+ ticks and then the market surges in the opposite direction. Now I'm guessing that anyone with enough account balance to do this isn't a complete muppet.

Obviously this can only happen in a fairly weak market - or more to the point one that is exceptionally weak at that moment in time. I'm wondering if there are bots monitoring this. The large swing in one direction would trigger any stop-losses that traders have - presumably at the point where their exit-trades are significantly larger than the amounts taken to swing the market. The "non-muppet" then puts in a counter-order to match all those lovely stop-losses at a much improved average price and then the market goes on its merry way for them to eat out at the Ritz every day.

Maybe this isn't the reason for these sharp spikes in the market, but it's the one I came up with (no, I don't like the X-Files!), do you have any others?

Perhaps the more important question is actually how to have an effective stop-loss strategy. Of course the more common scenario than what I have mentioned above is that major moves in the market can be preceded by an initial sharp move. This is another problem for stop-loss though as it is processed by the software on the trader's computer and not on the Betfair server. I'm sure I'm not alone in that I've also had my stop-loss unmatched because the market has moved too quickly through it, which then leaves the unpleasant task of scrambling to exit a trade with all the other red-faced traders.

I'm wondering if it is best to set "mental" stop-loss limits before trades and then place them manually when needed. I suppose it comes back to whether you can trust yourself to do the right thing...............

The Beginning - of the beginning or of the end?

I don't know which.

Apparently 50% of traders on betfair successfully make steady consistent profits over many events which they then wipe out (and some) with one loss, then repeat the cycle. I have been trading for a few years, some full-time, and I fall into this category. My significant loss would normally be my entire account balance.

I am part-way to understanding why (f***ing software crashes are a good excuse, but really not for all of it). I'm writing this blog partly so that any of the other 50% I'm in with who care to follow my voyage of discovery can do so without risking anything! And partly because I've just found out how to create a Blog and it seems so goddamn fashionable.

I have found a very promising book which was mentioned in a comment of an excellent blog of another betfair trader. I am part-way through it and really feel it is offering something I need (no, I already have a large drinks cabinet). It is purely psychological. Hence the name for my blog. I'm not sure that I should mention the name of the book, because this blog isn't a plug for the book (yet!) . I expect some highly intelligent person will probably comment on it before I do anyhow (if in fact anyone reads this - oh please, the other betfair bloggers have hundreds!).

Reading the book has reminded me of the first few months after I had started trading daily. I was so much more disciplined and I could trade without fear because I didn't have the fear, self-doubt and emotional pain of a large loss in my memory. I could take the trades that went against me because I knew from experience that I had an edge and I would make it back before the day was out (and if it was the last race of the day, then there was always the evening races!).

I have gambled in bookies since I was old enough to look 15 (when I was 17, but Corals didn't seem to mind). Straight-forecasts on the Greyhounds was my speciality then. One Saturday on lunch-break from my Saturday job I won £105 from a £5 bet (normally I would wager £1 but I had a "feeling!"). This was at a time when I earned less than £20 for the day (many moons ago). I think I've been searching for a "system" ever since. Crack-cocaine step aside (metaphorically, don't get me wrong).

I started trading on pre-race horse racing because it seemed that if I could work out how to have more winners than losers that all I then needed to do was increase the size of the trades from my winnings and I'd soon be working from the office of my newly funded villa in southern Spain. Ho ho ho.

What I am learning now is that I seem to have fallen into all the classic traps of trading. It's a bit of an ego-basher! I thought flunking out of university guaranteed that I'd be challenging Bill Gates by now, not falling into utter mediocrity. Anyhow, I will endeavour to keep this informative, here are a few points that I am attempting to fundamentally incorporate into my thinking when trading:

• a better understanding of the competitors / horses in a trading event is not the solution to trading difficulties or lack of consistent results (I guess that wouldn't apply to in-running trading though, but I'm not getting into that).
• it is attitude and state-of-mind that determine results.
• long-term successful traders learn how to think in probabilities.
• the typical trader assumes that he already does think in probabilities, but he doesn't.

Here's a thought to end with. It takes no skill, knowledge or forethought to execute a profitable trade, but long term profitability through consistency despite losses along the way requires a winning traders mindset. It is this that I intend to learn.

My intention is to finish the book, maybe re-read it, for the first time ever construct a trading strategy before starting my trading day and to report back faithfully to my blog with results. I am not seeking to find or write about a "system" for finding successful trades, more an attitude that will enable me to consistently increase my profits without putting my whole balance at risk.

It has occurred to me that maybe in order to be a successful trader I will have to be so mechanical and dispassionate about my trading that I will find it mind-numbingly boring and it will cease to have the attractions that it held for me at the beginning - several blogs I have read cite the desire to get out of mind-numbing day jobs, but if this isn't any more creative and carries a considerable risk then is it a superior option? As I am self-employed this is quite an issue for me and trading would have to be a lucrative way to spend an afternoon.

I will re-start trading in a week and will update before then with any further illuminating insights!