Is it possible to learn how to successfully trade on Betfair (and Betdaq) markets in the long-term? Why do only 5% (or less) of traders manage this? Is the correct mind-set the most important factor leading to success?
I've been enjoying a little look around the "iTunes U" online university and found some podcasts from The Open University and in particular thought this one had some relevance: Money and Emotions
They are looking at how emotions affect financial decisions and as well as discussion from the people carrying out the research they interview a few city traders including a Forex trader. It's interesting to hear from the Forex trader that he feels a lot more comfortable with his positions when they're going the right way rather than against him. It doesn't sound much different to someone sitting in hope watching their Betfair trades!
As is all too often the case when it comes to successful trading, the piece doesn't offer any solutions, but there are some surprising points. For example, one observation they made from their analysis is that contrary to popular belief, people largely devoid of emotion but with all their logical reasoning in tact were not better at making financial decisions. Furthermore, one of the traders' managers at a bank felt that outbursts of emotion such as banging the desk / throwing the phone etc was helpful! Her reasoning was that she felt they need to let off steam and can subsequently make better decisions if they've got it out of their system.
Personally, when I've "had a moment" I have frequently gone on to have a winning day, but very often at the (potential) cost of taking far greater risk. So, yes, sometimes I've just made things worse. What I have noticed though is that I've made several of my most profitable trades in this mindset. Trading is inherently risky but, particularly when I'm happy with the way things are going, I naturally start becoming more cautious - and hence limit my potential profitability. I guess the ideal balance is to remove the fear of taking a reasonable amount of risk whilst not needing to get steamed-up to do so!
Has anyone found any other research into this topic which may be useful?
I've been lacking any inspiration to write new posts for some time but a kind comment asking me to get on with it has prompted action!
A good part of the reason for having no trading-related ideas for posts is because I've been spending all of the day outside of racing working on automated (Excel) trading spreadsheets. It really is a joy to have your criteria systematically executed without loss of concentration and emotional distraction. One of the things that frustrates me when I'm having a really good day trading (manually) is that I tail-off rapidly, I just don't have the killer instinct to keep on hammering the markets when I'm well up on the day. However, with an automated strategy, the spreadsheet shows no mercy! It's really something to have 3 great winners at the end of an evening's racing whilst you're out having a beer. Of course it doesn't always happen like that at all but you get the idea........
For anyone struggling with "mind games" in their trading I would highly recommend them considering investing some time looking into ways of writing automated betting spreadsheets. If your trading is going nowhere then at least investing time into this will progress you in other ways even if your system turns out to be unprofitable in the long run, for instance, you learn a new skill - i.e. Excel and programming principles, which could be useful for your job. Also it makes you think about the reasons for making trades and what might be the best conditions for entering / exiting trades which could perhaps help in your manual trading.
So far as I'm aware Gruss Betting Assistant and Bet Angel are the only two trading applications that offer Excel linking. I have used both extensively but have used Gruss exclusively for well over a year. Back then its Excel functionality was well ahead although since I think Bet Angel has closed the gap somewhat and added some alternative features. The support on Gruss is just so superb I wouldn't go elsewhere though.
The Gruss forum, which non-subscribers can join, has loads of discussion about Excel trading ideas and technical help (search for keywords or look in the Discussion, Suggestions and Help sections) as well as a dedicated section for requesting professional help from Excel developers, including getting them to write all the code for you.
As well as implementing automated betting using the standard Excel interface, you can code much more sophisticated strategies using the built-in Excel programming language called VBA (Visual Basic for Applications I think it stands for). One post that gives you the basic framework of code for the start and end of your own code can be found here.
You will be amazed how often people on the forum will assist you and maybe even write whole chunks of code for you (for free) - often what might seem complicated to someone who has never written an automated sheet before is really straight-forward to someone experienced (and has probably been thought of and written by many people before you!). It's a great way to learn how to write the spreadsheet code - you can start by just tweaking an existing one to fit your criteria - that way you don't have to give away your idea for alchemy!
I was thinking about writing some posts about specific coding techniques and examples but am not really sure that is what my blog is about so haven't got around to it so far. Lets see if anyone's interested.
Now I have realised the possibility to watch back my trades on in-running markets in sync with the race replay (archived races are now free on the RUK website as well as ATR, no need to pay 20p to the Racing Post). It's great to be able to review and replay the betfair odds alongside the action - it's a lot cheaper than learning about the behaviour of the in-running markets by sticking some money in and hoping for the best!
I bought a second monitor for my laptop last year which has been worth every penny. I use it as the main monitor for trading and use the smaller laptop screen for ancillary information such as graphs and the bets manager. However this is also great for replaying videos as I can have my trading screen recreated on my main monitor in full-screen mode and have the race replay on my laptop also in full-screen. It took me a while to work out that on the ATR replays, if you double-click the replay it jumps to full-screen mode - doh!
For anyone looking for a new monitor now, my top tip for what it's worth, is to consider the resolution of the monitor as more important than the size of the screen. My 19" monitor has a higher resolution (i.e. shows more information) than many of the common resolutions for 21" and 23" screens. And it fits better on my desk!
When I first started dabbling with the in-running markets, it was quite amusing watching the replays - it was a bit like being at a pantomime where the audience is trying to warn of impending danger - "HE'S BEHIND YOU!!!!!" - I would be shouting at the screen, "NO, don't back that horse now, he's done for!". It's funny how the heat of the moment can make you see things very differently. Watching replays with the betfair market "live" can help you become more accustomed to what can and does happen.
Of course, nothing beats real experience and putting real money into the market, but at the very least it can be a useful tool to get up to speed before starting the day, or when returning from a holiday. Sometimes after a break I feel quite disconnected from the markets before starting the day. Often this goes quickly, but watching some videos of my trading first helps get me back in the swing of things.
For some reason my laptop clock drifts a few seconds between the weekly checks with internet time. This article shows you how to set Vista to automatically check every day. This means that you can accurately sync playback of your video (looking at your countdown timer recorded on your screen video) to the clock in-picture on the ATR/RUK race replay.
Whilst I haven't posted for some time the number of people reading hasn't gone down and it has been enjoyable to have more of a two-way dialogue as I have been replying to helpful and interesting comments from readers, especially regarding the spreadsheets. Thanks to all who commented!
When I get asked, “what do you do?”, I don’t tend to say, “oh I place an average annual salary on every horse race throughout the day. I don’t even glance at the form beforehand. But it’s really not like gambling”. I tend to mention my part-time businesses or what I used to do.
When I have mentioned sports exchanges in reply to this oft-asked ice-breaker, I have almost succeeded on occasion to keep the conversation the right side of respectable, but then as soon as I have to mention the word “horses” I can feel a cavern opening beneath my feet taking me back to burn in hell where I belong!
I have felt this unease from many people and at times from myself. Why is this?
I think at its simplest, any link with betting on horses has a very negative connotation for the majority of people. When I explained in detail what trading on horses is about to a friend, she pointed out that her father lost a fortune betting on the horses and I suppose this indirect negative experience of gambling is typical.
When I started dabbling with Betfair trading in 2005 I believed the sales blurb from the software maker that it wasn’t gambling. Now I am sure that it is gambling. But I do believe that trading is a subset of gambling that probably has a higher likelihood of success (albeit still very small).
When betting, you only need to produce your stake for the next bet, whilst when trading, you are intentionally using far larger amounts of money than you intend to risk. The problem is that if it goes badly wrong, then a form of Parkinson’s Law can rear its ugly head – Losses expand to fill the size of the bank available! Looking at the path I’ve taken in the past 5 years – and losses along the way – surely does mean that trading is gambling and the losses can be horrendous. Just look at how many blogs spring up from traders only to disappear in total bank loss within months or less.
It is gambling that has the negative connotations, not horseracing per se (but the search suggestions on Google are quite shocking) although obviously the two are inextricably linked. According to the British Horseracing Authority, “Racing remains, by a clear margin, the country’s second biggest sport after the modern commercial and social phenomenon that is football, with core industry expenditure now exceeding £1 billion per annum and a total economic impact of £3.4 billion”. So we’re part of a huge tax-paying industry (£325 million in 2008) with over 100,000 direct and indirect employees. That’s a good thing isn’t it?
Furthermore, Betfair stated last July that for the financial year 08/09, "Betfair paid £6.16m of the reported £6.2m paid by “exchanges”. We also paid more than 90% of the £1.35m which has been reported as “voluntary levy from offshore operators”. This payment was paid at the full levy rate – 10% of gross profits.
Our total contribution to the Levy in the period is therefore approximately £7.5m, up 7% from last year.
............Betfair would like to thank its customers for their continued support which enables us to make significant contributions to British racing."
Football doesn’t seem to have the widespread negative connotations about gambling (although I think the same or more may now be gambled on it than horseracing on Betfair). Betfair’s M.D., Mark Davies, states on his blog, “80% of Betfair's revenue came from UK horseracing eight years ago, and less than 25% does today”.
Here's something I've been mulling over for some time. What is gambling? Just betting? What about hedge-funds, Forex traders et al? Is that socially acceptable gambling ? It is after all, gambling. British taxpayers are all the owners of several banks to prove what goes wrong when their bets lose. What do those traders do that is so superior? Why are they "Masters of the Universe" and horseracing traders are something to be frowned on?
What about the millions of people following a traditional career path who "invest" chunks of their life-savings in shares? My opinion is that they’re gamblers too. In some ways that is quite reckless as it is not their full-time job to research companies properly, albeit that as the stock-market goes up over time then with a portfolio you should be on a winner eventually. But if getting a steady return is the objective then why not stick savings in the bank or government bonds etc? Because, I think, it's a gamble to make more.
If, like me, your trading has been taking a well-earned break due to the abandonment of so many horse racing meetings, then you might want to consider booking a Betfair holiday to prevent your commission discount from reducing.
When you book a Betfair holiday (penultimate option on "My Account" page) then you don't get the 15% deduction on Sunday. HOWEVER, you also don't get credited for any points for the week either so you need to make sure the 15% deduction is more than any points you have accrued this week.
The other consideration is that you only get 4 "holidays" per year, so if you are lucky enough to swan off on "real" holidays to the Caribbean regularly then you'll have to weigh up the pro's and con's. Chance would be a fine thing!
I've been taking the opportunity to have the whole week off, rather than trying to scrape something from 1 or 2 meetings a day. I don't really like such days as the long gaps between races stops me getting into a rhythm and sometimes leads me to increase my risk by trying to milk every tick from every trade - sometimes ending in disaster!
Yesterday I started to get worried about how much trading I'll be able to complete this month as the latest forecasts are for the cold spell to continue for up to 2 weeks. Once the cold weather lifts, I expect it could take a while for the racecourses to thaw out too. Hey ho!
As a consequence I've been looking at other markets. I looked at the in-play "leg" markets for the World Darts last night and wished I hadn't! The markets are so thin that I got royally screwed. I might lick my wounds and have another pop tonight with a different approach.
Also, on Sunday afternoon the Masters Snooker tournament breaks-off. The frame-betting markets do have a higher volume than the leg-betting for darts (not surprising really) but the spreads can still be very wide. Played the right way though this does present some good opportunities.
(image copyright The Open University 2010) 
