Thursday, 10 July 2008

Statistics don't lie!

Daily Loss £211.50

I’m not going to explain in detail how I’ve managed to fritter away another large loss in 2 days but I’ve traded 5 races in the evenings, resulting in 4 losses and a break-even. I again got involved in a few drifters that I got involved in too early and in 2 races, I ended up with my whole bank on a horse which continued to drift.

As you’ll see from the P&L this month, I’m nearly £400 down this month which is an amazing turnaround from last month and previous months if I’m honest.

For those of you that like stats, if I ignore my trading at Alton Towers on BF Mobile, I’ve traded 24 races this month, resulting in 12 losses, 5 break-even and 7 wins. My average win has been £25 and average loss has been £48.

Without stating the obvious, having an average loss that is twice the average win and losing in more races than you win is only going to lead to a disaster. Statistics don’t lie!

Subsequently, I’ve done a lot of soul searching this week trying to understand how the hell I’ve managed to go from having a licence to print money it seemed to where I’m at now. It’s been quite hard for me but I think I’ve managed to get my head screwed on again and hopefully, I can kick on from here. Andrew has helped me greatly and without his guidance, I’m sure I’d be giving up now.

I’ve basically read over every blog post (fuck, I do write a lot I’ve noticed!) I’ve written in the past 2 months to try to understand what has happened to me. What have I changed, am I trading differently, have I lost my bottle, am I trading the wrong horses, am I reading the market indicators wrong etc.

I think my problem all goes to back to a horse called Tony James on Friday the 13th of June. I lost a substantial amount of money on this race (£286) and it has affected me in so many different ways. I didn’t realise it until now but after reading my blog posts and from looking at my P&L, I’m sure I can trace the problem back to this horse.

That was my first ever large loss on a trade and it was an absolute fluke. I was trading the horse, it did the splits on the way to the start, it drifted wildly and I cut my losses as soon as possible but it still cost me a fair amount.

My knee-jerk reaction was to decrease my trading bank, decrease my stakes, stop queuing up money to back horses (spoof money) and stop taking so many chances with trades. I effectively changed the way I trade without realising it!

Importantly, I continued to trade profitably but I was finding everything hard work all of a sudden. I was posting up comments saying my confidence was shattered and still posting up a £150 win! I think I got lucky by picking a few winners which papered over the cracks and this is clearly evident if you read some of my blog posts.

To change my trading strategy and try to hold different betting banks this week was also crazy as that’s part of the reason why I was doing so well. I’m not a conventional trader, I’ll never be able to trade systematic like most other traders, I’ll never be able to write down why I trade a horse and I’ll never be able to have a staking plan as it isn’t me! I’ve been reading other blogs and trying to become more systematic like these traders but it’s just not me and it never will be if I’m honest.

So, £400 down for the month and only a trading bank of £290, where do I go from here?

When I started out on The Experiment, I had no experience of Betfair, no strategy and yet I was willing to throw money at it to find a way to earn extra income. 5 months on, I’ve won £2k (which has been spent!) and I now have some experience and a strategy. However, I have a small trading bank.

From tomorrow, I’m transferring across £1,000 from my savings account to my Betfair account. Importantly, I’m putting a stop loss on myself at £300 loss as I don’t want to go below the £2k profit without discussing it with Denise. Basically, that £2k has been and gone now anyway as it helped us get on our feet in our new home and clear our overdrafts. It’s not like I’d be dipping into a fund. I would need to fund my trading bank with my overdraft!

So, from tomorrow, I’ll have a trading bank of £1,300 again for the first time in a while and let’s pray that I start to find some form from somewhere. If I do lose another £300 this month, I fancy a long break may be coming for The Experiment as I can’t go on losing money indefinitely at the moment as I don’t have the money to lose.

I’ve taken tomorrow off work to trade since Denise is at T in the Park, so I’ll trade tomorrow afternoon and tomorrow evening as well as Saturday afternoon. Obviously, my target is pure and simple…….

TO MAKE A PROFIT! Don’t care if it’s £10, just let me make a profit again!

9 comments:

Matt said...

Good luck Graeme, don't feel obliged to add to the blog, keep your head down, one trade at a time. At the end of it, it's your money that matters, right NOW, going forward.. forget the large loss that you hark back to. If there's one thing I do know about, it's trying to 'win back' money you've lost, rather than 'making money going forward' that will screw you over mentally. Take a break if you find your mind drifting back to your losses.

Losses are part of the job, no one can win all the time, there'll be large losses and small ones, expect them and simply do your best to minimise. No horse is more important than the rest.

I can't help but feel that perhaps you need to look at these times when you are throwing more money at things that are drifting. And just check that you aren't falling for the sunk cost fallacy.. eg adding £10 to a £10 bet is doubling up, adding £10 to a £100 bet is "only another £10".. but that's exactly what it is. Averaging down is dangerous territory..

Anyway, I am loathe to suggest too much, only you can work through this, and you must do so in your own way... no one would think any less of you if you went 'dark' for a while to sort yourself out, and consolidate your strategy.

If you were to see my P/L chart for the last year you'd see periods of flat progress where its just a mixture of wins and losses, big and small but getting nowhere..then periods of fast profits and big returns. The flat / losing periods are times when my ideas and mentality are clouded over, where I couldn't fathom the direction to go in. The winning periods were when the mist cleared for a while and I felt good about my strategy and the way I worked, i could see exactly what to do. It happens to everyone. Time is required for the fog to blow away, there's no point rushing things while you are in it.

Best of luck G, and remember you don't actually have to do anything at all.

Matt
Punt.com

Graeme Dand said...

Hi Matt.

Reading back over that post mate, I’m a little worried it reads like I’m getting desperate! lol

As I’ve said, I have spent a fair bit of time thinking through this and as you probably guessed, stopping posting my P&L was an obvious consideration. One reason for having the blog though is that I wanted it to be a ‘real’ experiment and therefore, I want to continue to be as honest with myself and everyone else as possible.

I’m getting a lot of support from Andrew who also trades which is helping me a great deal. He’s saying similar things to you to be honest and I’m taking it on board. I’m sure he won’t mind me saying but he’s on course for one of his best ever months and he’s trading the same sort of horses as me and using the same sort of strategy! Typical…..

I agree that my trading method is looking particularly flawed at the moment (maybe an understatement!) but I do believe in it. I agree it does resemble the sunk cost fallacy on the surface but it’s not that really. I do close the trades off and then start new trades again but because I think the horse should be backed, I then get caught out again when it drifts as I didn’t expect it to.

Obviously, I back when I think it’s the right time to back and that’s the secret to the methodology. On Tuesday night, I traded the same horse 10 times and had to close out for a loss 10 times. I couldn’t do that if I was trying. I read the market wrong 10 times in a row for the same horse. My stop loss is 11 times! lol

At the moment, I keep entering the market too early in most cases and I end up just floating along with the drift! Instead, I want to be catching the end of the drift and then that should be my opening play.

Obviously, the easiest thing is to stop backing horses which double or triple in price and that’s the other main issue at the moment. My whole strategy is based on finding the correct horse to trade. It’s no coincidence that my whole trading strategy falls to pieces when I try to back horses which double in price all the time.

For two months in a row, I lost one trade in six races. Now I’m losing one trade every two races. Unless I was extremely lucky for 2 months, I’ve changed something fundamental to my strategy and now I’m going through the process of trying to get back to where I was 6 weeks ago.

As Andrew keeps saying to me, it would be a boring blog if I won all the time but at the moment, I would happily settle for a boring blog mate!

Thanks for the comment Matt and it’s much appreciated. I’m sure you’ve been where I am a few years ago when you started out but you managed to get through it. I’m hoping I get through it also……

Graeme

Matt said...

I don't think you should stop posting your p/l, sounds like you won't, but keep things honest.

Timing seems to be the issue really. Being wrong 10 times is easy, even if trading well!, but it suggests you might be over-trading in this instance.

The two cures for this are to look at whether you are thinking about making things back too quickly (you are never making anything back, you are always simply trading and your position is always 0/0 when you begin a market). This will make you over trade through impatience first, deperation second..

The other thing is to look for better quality, premium opportunities before heading in. As a poker player would tell you, they will have days where they fold many many hands more than normal. If there's nothing doing, there's nothing doing.

I think what you are going through is more similar to some of the things I've struggled with in the last year or so, rather than when I began. When I started I was a very serious, driven money making machine! I would love to have that ability with the stakes I trade with now, but it's not that simple. The last month or two I've tried to get back to that.

All the best,

Matt

Graeme Dand said...

Matt,

You should really be some sort of e-trading coach mate!

Over-trading is exactly what I think has been happening recently with me and that was my main conclusion I drew from the past 6 weeks.

I wrote a post on the 9th of June (before my loss 4 days later) and that was probably about the peak of my trading. I called myself an Assassin and that is exactly where I want my strategy to be. I sat watching the market, waited for an opportunity, pounced on it and then exited the market very quickly.

That was my trading strategy. Compare that to 10 trades on the same race all going against me and you understand where I’m going wrong!

I think it’s taken me a bit of time to work through where I’m going wrong and hopefully I can now take action to avoid it in the future!

Great comments again Matt. It’s worth having a blog just for your comments….

G

Alistair said...

Hi Graeme,

There's not a lot I can add to what Matt has advised. I wouldn't presume too in any case as I am hardly in a position to offer advice due to my lack of experience.

You know a hell of a lot more about racing than I do, but there's one thing that would concern me, and this was touched on by Matt. That is, your tendency to carry on backing when a horse goes on a major drift.

I understand the reasoning as you have identified that horse as a likely candidate to do well in running where you'll be able to trade out. Perhaps in these circumstances a different tact is required.

Specifically, when a major drift occurs, trade out of the initial back bet (for a loss obviously) and jump on the drift in order to build up a pre-race free bet, which you can then lay off in running if you are convinced of your form studies.

I guess what I'm trying to say is 'don't buck the market' in such situations. You are very knowledgeable of racing, but it may not be wise to go against the wait of opinion when it is so much in disagreement with you. At least by jumping on the bandwagon in such a manner, you will minimise your losses.

As Matt says, only you can decide how you get through this difficult period. Keep in mind though that there are lots of support out there if you need it.

All the best

Ali

Matt said...

Yes, one thing I learnt early on is, don't argue with the market. It's you v the world out there and, most of the time, they know more than you do ;). You can't impose your will on a drifting price, it's usually drifting for a reason.

If you hit something and it keeps drifting, and you hit it again, and it carries on, you are just digging a larger hole.

Something incredibly simple I knew but needed to learn (I find I have to consciously learn all the things I did subconsciously) was ultimately we are slaves to market sentiment. This is what decides when you are in and when you are out. It's the deciding factor, it's easy to lose sight of that.

Perhaps it's not a case of not giving it enough respect, but more a case of realisation that you aren't getting out of those positions unless the rest of the market decides. So you have to keep them onside.

I have someone to thank for kindly reminding me of this recently. When you realise this fact, then it will begin to dawn on you that if you are a trader, then you can't focus on just one direction, you are here to bet in both directions.

If it's drifting, and you are against it, get it onside! You can always get back on later. Though I think you do this already..

Work with the market, rather than against it. At the stakes you are playing with, I think this should be doable.

I don't wanna write a book here hehe.. I'll leave it there :) Alistair's comment just got me going again..

Matt
Punt.com

Graeme Dand said...

Hi Ali.

The reason I keep a blog mate is to get comments from guys like you who are fellow traders. Don’t ever be afraid to share an opinion just because the both of us are as inexperienced as each other!

I agree with what you are saying. I’m finding there is a very thin line between trading and gambling with my strategy. At the moment, I’ve moved across the line and my trading has become gambling, so I’ll be working hard today to jump back across the line.

If I see a horse I like and it’s 10 and I feel it should be 8 in the race, I would back. As that drifts, 99% of me wants to keep backing as if it was a bet at 10, it’s a stonking bet at 12 and an even better bet at 14. However, come 16, I wake up to the realisation that maybe I read it wrong and it’s time to limit losses. If it then reaches 20, I’d get involved again but when it reaches 26, I’d realise I’m wrong again and get out for another loss.

Obviously, if I had read the race better and waited for it to drift wildly, I could have jumped on at 26 as that was far too high and assuming I’m not too greedy, this becomes a very, very easy riskfree bet in running. If it was a 10 shot at the off in my book, then backing at 26 and laying at 20 for a riskfree bet is pretty safe. In these circumstances, I’d get riskfree 99% of the time in running and I don’t care about the 1% I lose as it’s no big deal.

It’s being able to realise when I should back and stop backing that’s so crucial. My judgement has gone pear-shaped at the moment and I seem to backing drifters that keep drifting all the time which is killing me.

When I’m in form, that £100 at 10 would become a £100 riskfree bet at 9 as the horse would shorten towards my view of 8 before the off.

I backed a horse the other night which went from 5 to 10 in 5 minutes. I can’t get out of these huge drifters quickly enough as I thought 5 was a good price. The market was correct though as it didn’t like the ground even though it was bred to like heavy going. I don’t mind these losses so much as the market beat me. In the long-run, I’ll beat the market but at the moment, it’s beating me up this month!

I’m sure I’ll turn the corner soon.

Thanks for the comment and good to see you are nearing your first thousand of profit. If we continue as we are, you’ll pass me on the way up soon as I keep falling! Lol

Graeme

Graeme Dand said...

Matt,

It's like you have access to my conversations with Andrew!

All week we have been discussing digging holes and that really is what I have been doing recently.

I get into an argument with the market, try to dig my way out of it instead of taking an early loss and when I find out the market is correct, I then cut losses which is far too late obviously.

I'm not in 100% agreement with the principle of the fact that we are market slaves. With the size of stakes that you use, you would be able to swing the horse-racing markets quite easily.

One technique I've used quite successfully and will be using again now I've increased my balance is making horses look weak or strong by queuing money up behind money already there. One reason why I think I have been reasonably successful is that I trade horses which don’t have much liquidity on them. Obviously, it’s much easier to swing the market in this case and I think it works quite well.

If I really think a horse at 28 is overpriced, I’ll set my stall out at 28 and then queue up cash behind it. I’ll then lay off a couple of points lower and every time I get matched on one side, I just queue up on the other. Obviously, this needs to take place about 30 minutes before the off but it works very successfully. I’ve never really got in trouble using this strategy but I got caught out once and stopped using it.

I’ve now realised this was one of my main ‘edges’ and now I’ll be adopting this strategy from today again, so I’m looking forward to seeing how I get on.

I agree that in tennis games with millions matched, this sort of thing would never work. However, on a horse with only £40 on the back side and £40 on the lay side, if £200 appears on the lay side, this horse looks remarkably strong to people and will shorten. This is the sort of thing I need to start doing again.

I think when I reduced my bank, I didn’t realise I lessened my trading abilities at the same time. Hopefully, a small increase in my trading bank can get me back on the straight and narrow!

Thanks again for the comment.

Graeme

Steve said...

Hate to state the obvious but playing with a small bank was always going to lead to the loss like I stated earlier Graeme. Don't take this as a criticism as we've all been there at one time or another, the trick is to learn quickly from our mistakes.

At the moment you're in that stage where you've won money so you'll convince yourself the losses aren't lost money but if you continue in that vein it will be, then you'll be onto full on chase mode trying to recover it.

I think you're doing the right thing to use a stop loss as previously you've happily piled onto drifting horses assuming they'd turn and you now know they don't. Get back to the basics of your strategy and look back over the races where you've won money to replicate that again.

Even though you have a somewhat unconventional way of trading you are still trading and remember it's the traders tricks of the trade that determine if you'll make money in the long run.

Just remember to cut your losses short and let the profits run. That way even by guessing which way the market is going on a horses will ensure you'll make a profit in the long run, if you have some edge picking the horses price movement too you'll be quids in but only if you employ a strict trading method.

I noted you say you're not a systematic trader which is fair enough but unless you trade to a set of money management rules you'll be back in this situation of self doubt within the next month or so as regardless of your wins you'll always take the enevitable losses to heart.

Just remember you've spent 4 months part time trying to get money off all the sharks and traders out there who've been doing this a lot longer than you and been through those pitfalls.