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.

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

Embedded Video

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!