Saturday, 2 February 2008

Day 1 of Training to be a Betfair Trader

I must be crazy………..

Well, today was the day that I finally got to test out my trading skills on Betfair. I had been building up to this for a number of weeks as I had been slowly honing my skills with very small stakes trading and hypothetical trading. I had watched every tutorial and read every article I could find regarding trading, so today was my first opportunity to see what I had learnt.

I’d love to say that I took to it like a duck to water but unfortunately, I got off to a complete nightmare of a start and then it went downhill from there!

I had managed to accumulate £60 in my Betfair account over the last few weeks from trading very small stakes on horseracing. So, I started today with £60 in my account. Remember, the main point about trading is that it is meant to be pretty much risk free as long as you know what you are doing. Clearly, I’ve still got a lot to learn.

I somehow managed to lose the £60 within the first hour. I was shell-shocked…….

I mean, £60 in 1 hour…… I have had a Betfair account for over 12 months and I have only lost £120 in total. This included a £50 boxing loss (Hatton!) and a £50 loss on X Factor (Futureproof).

So, what the hell happened you are probably asking? Being honest, I bottled it! I have been trading with £2 stakes for the last few weeks and had never suffered a single trading loss on any race. I changed my stakes to £60 today and I couldn’t cope. I just seemed to pick the wrong horse to trade in every race.

In total, I traded 13 races over a 4 hour spell. This included a break when I had lost my initial £60. I won on 6 races (only 1 win greater than £1!) and lost on 7 races.

Below is a summary of my results today:

So, where did it all go wrong? Let’s analyse my performance 1 race at a time and I’ll try to pinpoint where it went wrong.

12.50 Doncaster – I spent 10 minutes studying this race before the off as I wanted to get off to a good start so badly. From my analysis, the Paul Nicholl’s newcomer only had to jump around to win. Kalhari King looked a dodgy favourite and would struggle to beat the Nicholl’s horse. After all, the Rippling Ring was entered in 2 races at Cheltenham before it had even seen the racecourse, so surely it was a certainty.

I checked the odds on Betfair and the latest odds from Bookmakers. King was 6/5 and Ring was 15/8. So, I made the decision (mistake 1) to trade Rippling Ring. I also made the decision that the horse was overpriced and must go off favourite (mistake 2). So, what happened??????

I must have been the only person in Britain who thought RR would win. The horse drifted out from 15/8 to 7/2 in the betting ring. On Betfair, the horse reached around 5/1…….

I had found the nightmare horse to trade. Due to my small starting bank, I had to back the horse and then lay it off. I was using stakes of £60. The more I backed, the more it drifted. Since I thought the horse would win, I just kept telling myself that it would come down in price. I couldn’t have been more wrong.

Within the first 10 minutes, I had created a £60 liability on RR. So I now had a big decision to make, do I close out the bet for a £10.21 loss or let the horse run? Obviously, if the horse wins, I win in the region of £200. If it loses, I lose my £60.

Now, if this was part of The Experiment, I would have undoubtedly let the horse run. After all, a £60 loss may sound a disaster but the horse was vastly overpriced. Since the point of today was to help me train my trading skills, I had no option but to close out the position for a £10 loss. OUCH!

Guess what happened? Yip, Rippling Ring bolts up with Kalhari King well beaten. I had called the race absolutely perfectly and managed to lose £10 in the process. My knowledge of odds and form has led me to lose.

And being honest, that’s how I managed to lost the rest of my £60 in the first hour.

Races 2 & 3 were ok and I managed to make very small profits (better than nothing).

Disaster again struck in race 4. Tidal Bay opened up at 1/3 and Leslingtaylor opened at around 3/1. I couldn’t believe how short Tidal Bay was as he hasn’t beaten anything over fences yet, so I decided that Tidal Bay would drift and Leslingtaylor would be backed. Again, I couldn’t have been more wrong. I started to lay Tidal Bay (able to lay first since it was odds on!). The more I lay, the more it got backed.

It actually got backed from 1/3 to1/4. For any horse to move this much, it takes a mountain of money, especially on a Saturday afternoon. So, after a nightmare 5 minutes, I was again faced with a tricky decision. Do I close out for a £12 loss or hope that Tidal Bay loses and win around £80? I didn’t fancy opposing a 1/4 chance, so I closed out.

Guess what happened? Yip, Tidal Bay gets pipped on the line by Leslingtaylor. Now, I’m not saying that I thought Tidal Bay would lose, but I thought it was a crazy price. Therefore, I should have been happy to lay the horse to lose. However, the main point about today was that I wanted to practice my trading skills, so I didn’t care too much about how much I won or lost.

Race 5 produced a tiny profit and then in the space of 10 minutes, I somehow managed to lose nearly £40.

Race 6 was basically a 2 horse race involving Straw Bear and Afsoun. I personally had strong views that Straw Bear would win and decided that I would trade this by backing it and since it was effectively a 2 horse race, I would lay Afsoun at the same time.

Well, guess what….Wrong again. Afsoun was the better backed and I was left with a bit of a liability on Straw Bear. However, instead of closing out for a small loss, I decided that I would hope that Straw Bear won. It just got beat from Afsoun. That was another £10 gone.

So, it takes us on to Race 7. This really was the race that broke the camel’s back……. I was very sweet on the chances of Celestial Halo. He opened up at about 4/7 and got backed all the way down to 2/5. I had generated a little risk free bet of a few pounds, so I was looking good for a profit.

In the last few minutes before the race, he seemed to be on the drift, so I decided that I would try to trade for a little quick profit. I had read the market wrong and had managed to lose my risk free bet in about 30 seconds. So, after 10 minutes of trading I had nothing to show for it.

Out of pure stupidity, I decided to risk my £30 on Celestial Halo to win. I think I was probably a bit annoyed with myself that I had cocked up 3 of the previous 6 races in a big way, but as luck would have it, Halo was beaten into 2nd place. So, my £60 was gone. Probably the quickest £60 I have ever spent……

After this, I had a break to compose my thoughts and take a few notes about what I had just experienced. That’s why I’m able to write such a detailed report tonight.

I really was downbeat. I couldn’t believe what had happened. I had broken nearly every one of my commandments that I said I had to stick to. I was so disappointed with myself, I felt sick. I had been waiting for this moment to start trading for weeks and yet, when it has arrived, I have blown it. Really blown it.

However, I quickly got things into perspective. I had lost £60. It’s not the end of the world. But more importantly, I had learned more about myself and trading in that hour than I had learnt from my previous trading experiences. I went and had a read of my 12 commandments I had made up:

Knowledge – I had not used my knowledge wisely. I had let it interfere with my trading far too much. Just because I think a horse is overpriced, this doesn’t mean that other’s do.

Discipline – I lost my discipline after the Straw Bear race. Gambling £30 on a 2/5 shot was crazy. BIG MISTAKE!

Research – I again let this affect my trading strategy. One lesson (of many) I learned today is that people follow money. Traders don’t try to work out which horse will win; they just follow the way the odds move. I need to use my research and knowledge to exploit this in some way.

Value – Far too many times I got caught out trying to trade horses which were overpriced. I disregarded the money going on each horse. BIG MISTAKE!
Time – I need to plan which races to trade in advance. I was trying to trade every race. Another mistake from me.

Low Risk Trades – Probably broke this rule more than any other. I seemed to get caught out every single time I traded and ended up chasing the market. BIG MISTAKE.

Cut losses short – Ignore my last comment, this was the biggest mistake I made. This was a really BIG MISTAKE. On the first race alone, the market moved about 3 whole points against me. This was for £60 stakes. Nearly every trade I placed in the first hour moved against me. I tried to chase every one. I’ll put this down to my inexperience!

Build Profit’s Gradually – I was never anywhere near making a profit today, but gambling £30 wasn’t the brightest thing I did.

Learn from mistakes – Well, I made so many mistakes today that I’m sure I’ll make many more but I’ll hopefully learn from them. Put it this way, if I don’t learn from today, my £15k isn’t going to last too long!

Keep detailed records – probably about the only good thing I did today. Means I’ve got too much too write on this blog though!

Be Patient – Probably the one thing I’ll take away from today most. I’ve a long way to go before I can consider myself a good trader. I’ve a feeling that I have many other hard days ahead before I’ll be any good at this game.

Luck – Luck plays no part. I don’t think I was unlucky once today. Yeah, maybe I should have had more conviction in my beliefs that some horses would win and lose but today was purely about trading (apart from the wild £30 bet!).

After I’d lost my £60 quid and written a few notes, I deposited a further £10 into my account and played around with £2 stakes like I have been doing for the last few months for practice. I traded in 6 races, winning 3 and losing 3, purely from £2 trades. I managed to make a profit of £3.30. That’s a return of 33% on my investment, which was pretty good.

So, that’s my first day of training for Betfair Trading. My mind is a bit of a mess tonight as I’m obviously starting to have second thoughts about this whole project and whether I should call it off or not.

I’ve already started to rethink my strategy for making The Experiment succeed and once I’ve finalised these plans, I’ll share them on here. The one thing I’ve learned from today is that I’m not going to be able to use Dutching (or gambling) to supplement my Trading income on a regular basis. I need to start to look at ways to supplement my Dutching income through trading!

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