Monday, 7 July 2008

A long post!

Before I start this post, I’d like to warn you that it could be a long post! I’ve written some long posts before on here but I’ve got quite a lot to say today, so apologies before I get started. Take a deep breath…..

Firstly, I’ve just caught up with all of the nice comments to Saturday’s post. Having re-read Saturday’s post, I’m conscious that I maybe came across like a bit of a ‘spoilt brat!’ One thing I’ve learnt about writing a blog is that posting up straight after a heavy loss is never the brightest thing to do but at least you get to see my initial reaction which is sometimes entertaining!

Having read all the comments, I can safely say that I agree with nearly every comment. I’ll reply to each comment on the post but I just wanted to say thanks. I’ve been having a quick look at my site stats recently and I’ve noticed that my blog is being read by about 100 unique readers every day at the moment. When I started my blog, I didn’t think anyone would be interested in it to be honest but I’m finding it is a very useful tool for me to share my thoughts and get ideas of how to improve my trading.

OK, lets deal with Saturday and what happened. On Saturday night when I wrote the post, I couldn’t really understand what had happened if I’m honest. I knew I lost my discipline and I knew I traded like an idiot but even still, that was one hell of a bad loss.

On reflection, it’s very easy to see why I lost so much from trading. As regular readers know, I’ve developed a strategy that works very well for handicaps. Just to reiterate, I look at the form of the race, find the most likely winner and then trade that horse as if it is a world beater. I back it at what I think is a value price and lay off before the off for a riskfree bet. If it continues to drift before the off, I continue to back and if it doesn’t shorten before the off, I’ll lay a large chunk of the exposure off and take a manageable sum in running.

The only way I can lose with this strategy is when I back drifters who run badly in the race. Due to my form knowledge, this very rarely happens and I usually always end up with a well backed horse that runs well in the race. I’ve been adopting this strategy now for a few months and it’s been serving me very well.

The drawback with this strategy though is that it takes time to assess the race and sometimes, it’s difficult to trade the horse before the race for a large riskfree bet if it is heavily backed. I always want to back at a value price and sometimes, if the horse is too short on Betfair, I won’t back it and then I get annoyed when it runs well.

I’ve now adopted this strategy to look at other races which are non-handicaps. Andrew is a bit of a specialist with non-handicaps and has adopted my strategy very well to work in these races. Again, we look at a race, decide which horse is likely to run well, assess which odds we would like to back at and then back it as if it is a world beater at our selected odds. As it drifts, we continue to back it and if it shortens before the race, we lay off for a riskfree bet. If it doesn’t shorten, we lay a large chunk of the exposure off pre-race and then we take a small sum in running.

Again, the only time we lose with this strategy is when we back drifters who run badly. I’m less confident with this strategy but Andrew is an expert at finding the right horse to trade in these races, so we both do well.

Recently, as you may have guessed by some of my posts, I’ve been experimenting with Betfair and Oddschecker. When I first started out on Betfair 5 months ago, I tried scalping and really struggled with it. I didn’t enjoy it and could understand the price movements and what was causing them.

However, I’ve spent the last month or so looking at Betfair (BF) and Oddschecker (OC) when I’ve been adopting my strategy with my handicappers. I think I have noticed a phenomenon whereby there is an initial over-reaction on BF to horses that drift on OC. Therefore, if you can enter the BF market and exit the BF market quickly, you can make some nice riskfree trades. From my analysis, it works for horses in the price range of 8-14 on BF as these sometimes drift too quickly on BF as they drift in the betting ring.

I think this over-reaction happens in many races but you need to be very, very careful. If BF doesn’t adjust quite quickly (within 3 minutes) to the overreaction caused by OC, you need to exit the trade immediately. In most cases, this will be a scratched trade. In a few cases though, you will need to exit Betfair for a small loss on the trade.

Once BF has adjusted to the correct equilibrium, you exit the trade and green up for a guaranteed win. I’ve been playing about with taking the riskfree bet but this is hopeless since you end up with a riskfree bet on a horse that is drifting and in most cases, doesn’t run that well in the race.

Obviously, the last strategy is a form of scalping but it is using OC as the weight of money indicator. I’ve found that if you can read the market correctly, you can get in and out quickly for fairly large price movements and large stakes no bother. I think this strategy takes an amazing amount of skill and being able to read the market correctly and the behaviour of other traders but I’ve been doing well thus far, so it is promising.

So, everyone is probably gasping to know how each strategy performed on Saturday then………

The first race I traded on Saturday was the 2.25. I looked at the form, found a horse who was OK handicapped and who would like the softened ground at Haydock. Also, the horse is a guaranteed front-runner in a race where there isn’t much pace. Latterly was the horse to trade.

It was trading at about 24. I then drifted to 30 before I got involved and started backing it. I think it may have reached 40 before shortening and settling somewhere in the mid 20s. I had a £400 riskfree bet on it at the off and as you would have seen from the picture below, the horse traded at 1.06 in running after being given an easy lead and just getting caught on the post. I won £62 on the race.

That was the only race I analysed during the day as I was short of time before racing to look at any more races. My little strategy (MLS) won me £62 in one race.

In the 3.20 race, Andrew had said to me to trade Stotsfold as it was too high a price. As usual, he was spot on and I had about an £900 riskfree bet on a horse which started at 50! The horse ran really well and travelled well through the race which allowed me to make £38 in running on it.

This was one of 3 races where Andrew told me to trade a horse and I broke-even on the other 2 races. Therefore, I won £38 from Andrew’s and Other Races (AOR).

Therefore, it would appear to be the case that I lost £400 from my Oddschecker (OC) strategy then. Well, not quite….

As I stated above, the key to this strategy is getting in and out of the market quickly. When the market turns against you, you need to exit the market. When I was trying to learn to scalp, my problem was always exiting trades. I always wanted to gamble too much and this usually led to me losing.

I’m not sure what happened to me on Saturday but I read one market wrong where I lost £23 from not exiting the market quickly enough for a scratched trade, and I suddenly lost my discipline. Not only did I lose my discipline, I then combined my little strategy (MLS) with my oddschecker strategy (OC) and it became (MLSOC) which became a total mess.

Basically, when I read the Oddschecker strategy wrong, instead of exiting the trade, I just followed my strategy for handicappers and started backing it as if defeat was out of the question. Race after race, I should have exited the trade but I thought no, just keep backing and it will shorten in price and I’ll get out OK.

After 4 races of losing about £320 in total, I gave up and learnt my lesson. I then did a wild £80 win on Gala Sunday with little intention of laying off. As it drifted anyway, this made it an easy decision to make it a pure gamble and the horse ran OK in 5th. On reflection, it was on bad ground and drawn wrongly, which meant it was never a horse to trade or bet on but MLS was well out of the window by now anyway, so my judgement and discipline was shot to pieces by then.

Overall, a £23 loss from my oddschecker strategy (OC). Not great but I know what I did wrong, so no big deal.

Importantly, a loss of £377 from a strategy that is not even a strategy makes me cringe thinking about it. Hence, a £377 loss from losing my discipline and adopting some sort of strategy that says when you have a losing trade, dig yourself an even bigger hole and when that goes against you, did an even bigger hole and so on. This will become known as MS (a mug’s strategy!)

Interestingly, some people may think that MLS is flawed due to the fact I keep digging holes but importantly, holes for horses that run well are OK. In some cases, digging yourself a hole for a well handicapped horse is no bad thing since it means you end up with a little more risk and subsequently, a little more return when it runs well.

Clearly, what happened on Saturday is that I lost some discipline and I stopped following a strategy that works due to having a small loss. The thing I struggle to get my head around is that even with my small loss, I was still £80 up on the day. I reacted badly to the loss though and it resulted in me losing my focus and discipline and when that happens to a trader, you become irrational and a loss soon follows in most cases.

Now that I know what went wrong, what does the future hold?

Firstly, I’ll now be trading with a bank of £500 from here. As my profit grows, my trading bank will grow again. I have thought about topping it up to £1,000 but as I’ve shown time and again, MLS produces a return of about 50%+ on races for my stake when my riskfree bet runs well, so I don’t need that large a bank to generate nice profits.

The key difference from the past though is that I’ll have 3 separate trading banks going forward. Obviously, I’ll only have one account but I’ll be splitting my bank into 3 notional amounts:

My Little Strategy (MLS) will start with £300.
Andrew and Other Races (AOR) will start with £100.
Oddschecker (OC) will start with £100.

I’ll be tracking these on the blog going forward and when I post up my profits (or losses), I’ll split out each component.

The cool thing about my strategy going forward is that I’ll effectively have a strategy for every flat horse race. When I have the time to look at a handicap, I’ll use MLS. When Andrew has had time to look at his races or if I’ve looked at any non-handicaps, I’ll use AOR. If I’m trading and haven’t had time to look at races beforehand, I’ll just use OC and play with reduced stakes.

When I started out on The Experiment, I expected it to take me 12 months to find a strategy that works for Betfair horse-racing markets. I think I have now found 3 strategies that work and now is the time to stop experimenting and start to put what I know into practice.

Obviously, I’m guessing that using a reduced trading bank will reduce my profits down a notch or two but as I keep saying, I’m in this for the long-haul. I’ve probably been spoilt in the first 5 months of trading whereby I have generated profits far greater than my knowledge or skill level. I don’t see too many blogs out there generating my profits after 5 months of experience of Betfair, so I’m probably ahead of the game.

I was sent an interesting article from Nat at the weekend concerning trading. One thing I’ve taken from it is that discipline can be learnt over time whereas instinct can’t. I think I have shown that I have an aptitude for trading and I’m sure I have the instinct to be a great trader. However, I still don’t have anywhere near the correct level of discipline and this is what I need to master from here on in.

I’ll have a few days break now and I have a big weekend of trading ahead, so I’m looking forward to it. Denise is off to T in The Park all weekend and I’ll be trading all day Friday as I have taken some time off work. This weekend will be the most time I’ve ever had for trading, so we’ll see how I do!


Anonymous said...

That's not a blog post - it's a f**king novel !! LOL
In fairness, you were absolutely right to take the time to properly analyse what went wrong and Saturday.
I think it was Matt who put a comment on your blog on Saturday, part of which suggested methods for dealing with loses... Truly coping when things go wrong is something you simply must crack. If you can accept them and just carry on, then fine; if they cause you to increase your focus, then so much the better; if you have to simply walk away until you are able to rationalise them, then that's what you must do...
This is your achilles heal - unless you find an effective way to over come it, it is always going to limit what you can achieve...
With regard to your future plans: 3 strategies sounds good. I'm not so sure about 3 logical banks myself - but if you can get it to work, then great...!

Graeme Dand said...

Hi mate.

If only I logged off my BF account when you logged off MSN, I’d be a couple of pound down and I would have saved myself a few hundred quid at the weekend!

I’m not sure why I lost it so quickly. I was really annoyed with myself for the £23 loss as it was just stupidity on my behalf and it affected me more than I thought. I then followed it with a large loss and I just lost my discipline completely after that!

I think the key for me is to not have many losses mate. Obviously, when I have a loss, deal with it but I’ve now had about the same number of losses this month as I had last month. Not a great start to the month.

The 3 banks thing is just so I realise what I’m doing at different times. I’ve got nothing against playing around with Oddschecker and Betfair and trying to find betting patterns but I can’t do it with £600 stakes! I should have set boundaries before I started experimenting and I wouldn’t have got in that mess.

I need to get back to looking at form and finding my ‘edge’ again. I’ve lost focus a bit recently and now I need to put in the hard work to get it back again.

We both know my Achilles heel and I now need to look out for it more. I could feel myself losing my discipline on Saturday as the day went on and I should have stopped when you stopped. The fact you stopped with a large profit is easier to do though than me stopping when I’ve just lost a nice profit!

It wouldn’t be as much fun for us if I didn’t go through these trials and tribulations mate. If I made profits all the time, we’d both get bored by it……


Anonymous said...

Hi Graeme,

LOL f**cking novel!!! We expect nothing less from you mate.

Those losses become a pain but I guess your a bit more circumspect (where did that word come from?) about it now. I guess a problem you have is you don't have a memory bank of wins and losses to fall back on, so when you have a big loss the self doubt kicks in. I suppose it's just a case of experience over time but they eventually don't affect how you trade. I won't lie I did lose the thread a bit on the stategies, but having separate banks makes alot of sense as it'll tell which are working and by how much.

Hope you enjoy those books, "Remininscences" has a few losses in it and that was when a million dollars meant something. I'll be interested what you make of "Fooled by Randomness", in a way it's the antipathy of a trading book but theres quite alot of relevance to your degree/job,

Goods luck, Nick...

Graeme Dand said...

Hi Nick.

Cheers for the support mate. I think you maybe hit the nail on the head. I don’t have a large memory of wins and losses to fall back on and every loss I take at the moment appears to be knocking me sideways!

Again, in context of my four and a bit months, a £290 loss at the weekend if not a big deal as I’m only £170 down for the month now and if I was playing with the same stake size as previously, I could make this back and more in a ‘normal’ few nights of trading.

However, I’m not sure if I can handle going back to trading the same stakes again so quickly, hence, a reduction in stake size again. I don’t see the stake thing as a big issue for me as when I’m confident I have a strategy that is bullet-proof (or at least one where I make consistent profits), I’ll happily ramp up my stakes again.

I think the thing I need now is a period of consolidation and steady profits. If I could pay you £500 mate to give me 12 months of experience, I’d happily do it! I don’t think it’s as easy as that though……

As you’ve said before, I have a full-time job and this is extra money for me to play with. Once I’ve got a strategy that works, I can pump more money into my account to boost my trading bank but I need to be sure I know what I’m doing. I’m not sure I’m quite there yet!

This weekend, I should get an opportunity to get a fair way through one of the books, so I’ll let you know how it goes. I may even write a review on the blog which would be a laugh since I hated English at school but maybe that’s me being slightly too ambitious!



Graeme Dand said...
This comment has been removed by the author.
free bets said...

you wasn't wrong about it being a long post lol