Wednesday, 30 January 2008

Bankroll Management Strategy

How do I plan to manage my £15k capital?

I plan to only utilise £5k of my overall capital at the start of The Experiment. The main reason being that I don’t want to be fully exposed at the start of The Experiment as I expect that there will be a steep learning curve and I am likely to be most vulnerable to losing all of my bank at the start when I have limited knowledge and no experience of serious trading or gambling.

I only intend to keep £5k in my Betfair account at the end of any day. I will withdraw any winnings made each day on Betfair and I will add the amount that I have lost in any day to my Betfair account. The simple reason for this is that I want my exposure to only be £5k at any time and if I made a serious error i.e. laying a horse for my entire bank by accident, I will only ever be liable to lose £5k and not any profits that I have made over time.

Another obvious reason for not leaving unnecessary money in my Betfair account is that I will earn no interest on the money while it is held in the account. I will keep the £10k residual amount of capital and any winnings I make in a high interest-bearing internet savings account where I will be able to access the money immediately if it is needed.

Trading Amounts (Arbitrage & Hedging)

At first, I will trade in blocks of £100 - £500. Obviously, the trading amounts depend on the price of the horse being traded and whether I am trading short-term (10 minutes before race to race time) or long-term (morning of race to race time). In addition, unlike most other Betfair traders, I will not only trade the favourites in each race. I will trade the horse that I think is most likely to be backed (steamer) or laid (drifter). This obviously increases the risk of my trading but it will increase my returns also.

Gambling Amounts (Dutching)

At the start of The Experiment, I plan to earn £5 profit on every race through Dutching. I will also follow a staking plan that allows me to recoup losses to some extent after I have had a loser. The exact staking plan I will use is one that I produced whilst at university and I don’t intend to share the staking plan here.

The staking plan has been tested over a sustained period of time and generates returns of between 5%-10% of turnover through Dutching. The plan also includes a stop-loss trigger which will operate throughout The Experiment. Once the stop-loss trigger has been reached, I will start the plan again with an increased target profit amount in order to try to recoup earlier losses to some extent. At no point will I vary the profit target depending on the type of race or horses in the race.

Once my bank has increased sufficiently, I will look to increase my Dutching stakes accordingly.

Exposure and Liability

Losing is going to be a large part of this game and so, you need to be clear as to what your limitations are. Since I’m treating this as an experiment, I will be prepared to lose the whole £15k over the course of The Experiment. However, as stated above, I will only ever be exposed to £5k at any one time as this is the maximum amount that I will keep in my Betfair account.

If I do lose my first £5k at some point, I will just treat this as a sunk cost and start from the beginning again with my next £5k.

With regards to any one event, I will aim to never lose any more than £1k. In reality, even if I’m in the red on a runner for £1k, it is likely that I will be able to trade my way out of it before the race starts, so I can minimise my losses somewhat.

No comments: