Giving money away?

I've been away for a week and havn't posted since then. during my time away I received a comment posted on the blog, which is similar to the ones that pop up every so often, along the lines of "give up, you guys are just giving money to the pros". The thing is, by the nature of bet exchanges, it is peer to peer betting. For each matched bet there is going to be a winner and a loser, it's as simple as that. Getting the skills needed to make a profit doesn't happen overnight (unless you're someone really exceptional). The only way to really learn is by doing. It's fine doing some paper trading, but the emotions are not there. You can be ice cold calm and sensible paper trading but when there is real money on the line then the emotions kick in and that's one of the factors that need to be controlled. So, if the only way to learn is by doing and as there are a number of skilled traders out there, it makes sense that there will be a period where you will take a hit. As you learn the lessons and get better and also new people join and others just throw money in without thought, you will rise up the ranks and with that your profit levels will rise too. For each of the people out there that say, "it can't be done", there are many people who are making profits. Look at fellow bloggers Mark Iverson or the Betfair Trader. They're taking profits and know what it is like to pay your dues.

An ass at Football

I thought that I had football sussed out and was going to make some consistent profits. What an arrogant tosser. Nope. I still have a lot to learn. I was trading on the Motherwell v Hearts match in the under 2.5 goals market and after looking at past stats and a bit of research, I thought there would be a couple of goals. I know too little about football to get confident here, but I was. I was too over confident to think and decide on a price to get out of the trade at. So after a few scalp trades which gave me a few ticks profit, I put on a lay, expecting a goal and the price to jump up. The price began slowly dropping and I watched as it approached my lay price. I thought, should I just get out here and re-lay at the lower price? But, no, I didn't, I just thought "any minute now, a goal will be scored and the price will jump up". It didn't. It kept dropping. I don't know why I was so convinced another goal would come in. I think I'll stop trying to predict results, or at least make sure I have an exit plan first.

Loss of Control or Control of Losses?

I've been thinking more about losses and how we deal with them. It seems to me that an experienced trader asks himself, "How much could I lose today?", whereas a beginner wouldn't even contemplate the possibility. Unless the idea of taking a loss is already in your mind then if it comes to the point when you have to, to avoid the possibility of taking an even bigger loss, you won't be able to. If you have read my report (see sidebar for a copy), then you will remember about the work done by Kahneman and Tversky on loss aversion. Having already prepared for the possibility of getting out of a trade early with a small loss, if the market turns against you, then you are partial innoculated against loss aversion.

I'm an idiot!

It's official, I'm an idiot. I managed to break the cardinal rule and have paid the price.

After a few trades, winning a few quid each time, I decided that if I intend to get from here to 100K I had better change my staking plan to something more aggressive. I changed from the current max of 10% of bank up to 25%. The idea was that if the exposure is increased then I need to reduce my risk, in order to protect my capital. So, what did I do?

Next race, I went for a lay on what looked like a rising trend but I mis-interpreted the direction the market was going and after a tick up it all turned round. I should have got out then and there, scratch trade, everyone happy. Did I do that? Nope, I did a classic schoolboy error and thought the market would turn back again. It didn't it went ploughing off. I was on the wrong side.

So, now I was on the wrong end of a rapidly moving market with little time till the off. Did I cut my losses and move on? No, I let it run, thinking (stupidly) that it was a good chance that the horse wouldn't win. So I had gone from trading to gambling. Gambling is not something I am good at. The horse won and half my bank went with it. The rest of my trading time was spent trying to recover whatever I could. Got back a measely £5 (I guess it is 10% of my current bank.

What to do now? I think I'm going to put this down to experience (read: stupidity) and learn my lesson, top up my bank back to £100 and start again.