Trading style analysis and graph

Regular readers will know I'm a fan of small consistent wins rather than risking everything for a big payout. So it may be a bit of a surprise that my recent results have often been pretty large wins (1, 2, 3) and losses (1, 2 ) compared to similar results in June for example. In fact in the last couple of weeks I've had both my biggest wins and losses since starting the blog. So what's happening?

Well the answer is pretty simple. I've altered the way I trade a little. One of the great things about doing the blog is I get a lot of emails from other Betfair users and get to chat to a lot of people on MSN whose opinions I respect. My style of trading was very much one of get in and out of a market very quickly, often within seconds, nicking a few ticks along the way. The trading software I use made this possible, and it meant I was usually making small profits on the events I traded. They were consistent, but perhaps I was not being as efficient as I could be.

Anyway, one of the topics that was continually cropping up was why don't I let my winning trades run longer? Afterall, it's one of the great sayings in Financial markets that you should run with your profits and cut your losses. So I decided to give this a go. It's quite startling what this subtle change has resulted in. Perhaps the best way to show this is the graph below, which shows my profit / loss in relation to the number of markets traded since I started the blog. (Just click the picture for a bigger version)



I guess the first thing to note is that's quite a lot of events! But many of them are just ones I dip into for a single trade or two. I'm not actually trading the entire event. I'd had some time off trading when I started the blog so initially used blocks of £250 just to get me back into it. But from somewhere around Event 10 I started using my regular £500.

Anyway, the interesting thing is this. It's pretty clear just from looking at the graph when I switched to letting my wins run for longer. On first impressions it looks like around Event 109, which is where the gradual climb in profits finishes. The turn point was actually around Event 120 and the dip before that, from Event 109, was a bad patch I went through that I have discussed previously.

Until the switch the profit grows in a pretty smooth consistent manner. There are ups and downs but the trend is pretty clear. After the switch the consistent growth disappears. There are some very big wins which see the profit line turn much steeper. But some of the losses are also much bigger than usual. Basically there is far less consistency in the results, as evidenced by the patch from around Event 142 onwards.

I guess that's partly what is to be expected. Though the irony is, if I put a trend line on the graph the finishing profit position is almost exactly where I'd expect it to be if I hadn't made the change to letting my wins run. (It's actually just above) The trouble is, if my wins are as bigger as they have been I should be further ahead. Which leads me to think I'm doing something wrong.

And, of course, I am. And my mistake is this. Although I'm letting my wins run, I'm also letting my losses run longer than I used to. This explains the recent spate of heavier losses, especially in tennis where the markets often move a lot quicker than in cricket. Trading my old way I used to cut losses very quickly. But in letting my wins run I've also started to let my losses run too far. The solution is, of course, simple. Just cut the losses like I used to. Hopefully then the profit figure will continue to increase more sharply than in the original steady growth period and I can save funds quicker for the big day!

So what does it all mean?

Well, this may all be very boring to some of you but has been a good exercise for me. It shows that what I was doing was profitable. But perhaps was not the most efficient use of my time. The graph clearly shows the benefits of letting my wins run longer. My mistake has been to let my losses run longer too. Show the same discipline in cutting them as quickly as I used to and hopefully I can start winning at an increased rate.

---

Popular links: Betfair trading software .....Bookmaker Free Bets.....Bet365

---