Excelling in mediocrity

I've been experimenting with the Excel automation capability of BetAngel Pro since May and have had several occasions when I've thought I've finally found The Answer! However, so far most of the criteria I've been using have resulted in variable results, normally ending up in a neutral result over several races.

I'm not a programmer, but I did used to be over 15 years ago and I've dabbled with bits and pieces since then to serve a purpose outside of work (e.g. Filemaker Pro was an easy way of creating a database to import and report on my betfair results). I soon found that the Excel macros wouldn't enable me to do what I wanted to try out and so I've delved into Visual Basic / VBA which is a whole bag of tricks included as additional functionality in Excel that I never knew about. It's all very well getting automated, but without a good system it's fruitless. I think the main downfall is that in order to be fully automated, stop-loss is required and as I discussed in a previous post, I'm struggling to find the long-term value of those.

If there is a solution to trading successfully in this manner, I think it would incorporate a mixture of automation and manual skill. I wrote a new automation system this morning whilst watching "Hollyoaks" (Darren has really chanced his luck this time, faking the death of his father, as if lumping his home and business on a roulette wheel wasn't enough before!). Once I got chance to start using it this afternoon, I found that I really needed to ditch the stop-loss and I used the automation to open the trades and I would manually close them unless they reached the offset I'd set (2 ticks).

The real advantage of the automation is that it is a lot faster than me (even on my trusty old laptop!) and it doesn't get bored of looking for the criteria. The fact that it can't deviate from the criteria means that it it possible to test the criteria (if you can be bothered to sit around for long enough) to see if you have an edge and also has the huge advantage of not going on tilt! One point that I noticed was that often after closing a successful trade the system would place another trade before I'd even had time to think about it - aka "striking whilst the iron's hot", which just happens so much quicker than doing it manually.

I was quite motivated to sit it out because the first race I traded, the automation produced 11 successful trades out of 13! I'd already worked out how I was going to spend the £4k I'd have earned next week before the 2:10 started! Of course it's never that simple, each market is different and the subsequent ones didn't work the same.

When I started this blog I wasn't looking for a "system", but I do need an edge to my trading. What I have learnt from reading about the psychological aspects of trading successfully is that I do need a definable "edge" to enable me to remain calm and ride-out losses when they inevitably occur so that I can reap the benefits of long-term profits.

I will be trying out the system further tomorrow, again with small stakes, now that I have had chance to refine it and see how it goes.

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tick, tock, boom - what's at stake?

There's two things I'm considering - relative stake for backing and laying, and also what's a 1-tick trade worth as a % of my trading bank?

First up, the value of a tick. I made a fundamental trading error for years. When I was doing scalping trades looking for a 1-tick profit only, it took me a long time to realise that entering a trade right on one of the points where the odds increment changes on betfair has almost double the risk of a trade only 1-tick away and therefore I simply shouldn't enter a trade at these points. I think it's the gambler in me - I wouldn't enter the trade unless I was confident of a winning trade anyhow, so what does it matter if the risk is higher? Well of course anything can happen in the market and this is one of the many many routes to the poor-house.

In case I haven't explained that clearly, for example, if I enter a trade with a back order at odds of 3.00 and I successfully exit with a lay at odds of 2.98 then I have made 2% (0.67% if I green-up). But, if the trade goes wrong and I exit 1-tick higher, the odds are 3.05. I have lost 5% (1.64% if I red-up). My loose understanding of probabilities says that I should only enter these trades if I have over a 70% chance of success - but it would be unusual to be that sure if indeed it is possible in reality. A similar scenario of course applies at the 1.99-2.00-2.02, 3.95-4.00-4.05, 5.9-6.0-6.2 etc odds-increment changes.

What I do now is turn this on its head and bear it in mind when the odds have drifted towards the point of an increment change and are getting sticky. I'll try and lay 1-tick before the odds-increment change (e.g. 4.0). I'm certainly not the first one to spot this, as demonstrated by the huge piles of money that accumulate at these points, so sorry if this is old school to you! Because of the large amounts that tend to accumulate at these points I have found that they are relatively safe trades - if there is enough trading volume to get matched.

The second part of what I'm considering is how to allocate my trading bank to each trade. I'm aware that some only risk a minority of their bank for each trade and I can see some advantages of this, however personally I am in rather of a hurry to get to the gates of freedom and I like to put every penny on the line, every time. (I think Rik Mayall put it something like,"I'm on the last freedom moped out of nowhere city" in the Young Ones). I guess it's the gambler in me again.

Before I used BetAngel, the software I used required me to work out my stake for each race. I would work out the maximum I could lay the horse for that I was trading. That would then also be my stake for entering a back-trade on the nag. With BetAngel I found that I had the option to open a back trade for my whole bank and open a lay trade for my bank / the odds, not only that but it automatically calculates the maximum lay amount precisely according to the current odds. Great I thought!

It is kinda great, but the obvious draw-back is that if the horse I'm trading is at, say 4.00, then I'm opening back-trades for 3 times as much liability as I open lay-trades. If the odds are indeed shortening then this pays me the maximum profit I can make with my bank, however, if the odds actually drift then I lose 3 times as much by getting a back-trade wrong as I do by getting a lay-trade wrong. What would often happen is that I would make a couple of winning lay-trades and then only one losing back-trade would put me in an overall loss. Don't get me started on what happens when there's a rapid drift in the market..............

I've also heard that some people don't trade on odds above a certain point. I thought, why? I got to thinking, "am I being daft again?". After all, if you're being responsible and trading back and lay trades with the same stake, then the higher the odds the smaller the stake and that would compensate relatively for the higher odds (and the bigger odds increments between ticks in absolute terms). I think the answer is actually due to the smaller liquidity in the 6/8/10 odds range making it potentially more volatile and therefore risky, so fair enough.

However, it made me think about the difference in profit for trading 1-tick at, say 2.20 and 3.80. The answer for that example is that you make 0.78% trading a tick from 2.18 to 2.2 and only 0.48% trading from 3.75 to 3.8 (after greening-up). The average is 0.62% from odds of 6.0 down to 1.6.

The graph shows what % profit (or loss!) you make for a 1-tick trade at a range of odds from 10.0 down to 1.2 (after greening-up)

The greened-up % profit is shown on the vertical axis and the odds range from 10 to 1.2 decreasing along the horizontal axis.

The two lines represent different staking strategies. The blue represents a level stake the same at all the odds (and greened-up). This would be the case for back-trades if you always staked your whole bank.

The purple line is where you stake relative to the odds, i.e. the maximum for lay-trades (and also back-trades if you being sensible and also limit that relative to the odds).

What it basically shows from what I can see is that if you divide your stake by the odds, back or lay, then the value of a 1-tick trade is relatively consistent and the method I've been using for back-trades is multiples more risky, so I should stop. Equally, when I'm laying below odds of about 1.6 I should limit the stake to my maximum back stake to keep it consistent. Naughty me.

What's also interesting is the sharp differences in profitability around the points where the odds-increments change. But at the end of the day, who's only going to trade where the % is slightly higher? Not me!

It's a challenge

It's a torrid time out there!  I've stopped trading for a while as I'm going around in circles and have traded away a fair chunk of the money set aside.  2 of the few blogs I read on trading posted small losses yesterday (The Experiment & Don't give up your day job) and Ticksize has packed in his blog because of abusive comments.

I'm really new to all this blogging lark and have found it a really encouraging to read about other traders.  I started trading 3 years ago and back then all I knew about trading was a handful of video's provided with the trading software.  I was really winging it and was successful for a few months and then couldn't understand why it started going wrong.  Reading the blogs of other traders has helped me understand more about what is needed to be successful long-term and also about dealing with losses.

I'm going do some more work on my trading methods over the next couple of weeks and won't be trading much if at all, but I'll post to my blog occasionally if I think there's anything that might be useful to post up and get your views on.  I'm thinking about going on one of Peter Webb's "Masterclass" trading courses - do you know anyone who has done one and if it actually produced results?

Another reason I'm spending less time on the trading right now is because I'm doing the "Thirty Day Challenge".  It is a free course in how to set-up a sustainable Internet business, i.e. Internet Marketing.  It's run by a team of IM professionals who've made millions by building-up and selling website businesses.  I've been doing the pre-course training for the past couple of months in my spare time and it's been fun and interesting, I'm really looking forward to finishing the course (It started on 1st August).  Have a look at www.thirtydaychallenge.com if you're interested.  In fact it was the pre-course training that taught me about blogging and Google Reader and what got me started reading the blogs of other traders and deciding to set-up this blog.

Hope to hear from you and I'll be back with some more ramblings soon!

All the best.
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Déjà vu maggots

I found maggots climbing out of the kitchen bin this morning.  Well slivering anyhow.  Really gross.  According to Wikipedia they're from the larval phase of flies and the such and not really anything to freak about, I just need to keep the bin closed when there's flies about.  Anyhow, they were nice white ones, not like the ones in the picture.  Kinda upmarket maggots.  If only I could make some money trading I'd be able to employ a cleaner, because it's the last f'ing time I clean the bin. 

I was listening to William Hill radio again yesterday whilst I was trading really badly and the pundits were bemoaning the price of an odds-on favourite before the off, saying that it wasn't backable at odds of 2-5, but that it didn't stop the "maggots" piling-on to take a piece of the action.  I think he means our wonderful vocation.  The cheek.  Still, he is employed by a bookmaker.  They were a bit of a boring bunch yesterday, it was much better on Thursday.  So was my trading.

I hope they weren't an omen for today.
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Movin' on up

A quick update as I'm running late after writing some comments and I actually had some other work to do! Then I couldn't publish post for some reason.

I made a 20% profit over 32 races yesterday with 69% of races being profitable and no scratches (no hanging about!), which I'm very pleased with. I have a loose target of 10% per day, but no longer set a daily target as I think that in the past that was one of the pressures that led me to take excessive risks. Come to think of it, I don't even have a weekly or monthly target yet either. Doh! Actually, I suppose my aim of not blowing my bank is my real target for now. If I feel I'm trading consistently in the future then I think I'll set a monthly target.

Does anyone listen to the William Hill racing commentary? Yesterday was very amusing, especially in the early evening when the presenters were wheezing with laughter. Interestingly I did my best trades of the day during that time.

All the best.