Daily Result: £104.79
After yesterday's blog entry I received an email asking me why I traded out of a position for a guaranteed loss in the circumstances that I did. In the blog entry I'd said if Bangladesh had lost each of their first two wickets an over or two earlier I'd have been fine and would have made a nice profit. As it is I got out at a preplanned point and just accepted the loss. Why hadn't I just waited for the wickets to fall and then traded out for a guaranteed profit I was asked?
While I'm not going to go into a full on explanation of why I use a stop loss today's final ICC Champions Trophy Qualifier between Sri Lanka and the West Indies is a good example of why I traded out for that guaranteed loss. Basically the answer is I didn't know those wickets were going to fall. And if they hadn't I would have suffered a greater loss. And as part of my bankroll management - which has the simple aim of making sure I save enough to pay for my wedding over the course of 15 months or so - I have a limit to what I am willing to lose on any one event.
So, today's game. And why a stop loss can be so valuable. Well, given that West Indies were bowled out for an embarrassing 80 I guess I look more than a bit of a mug for backing them pre-match at 2.24 for £500! Obviously I wasn't expecting a circus performance, thought they may post a decent total and enable me to get out for a nice profit.
Even before a ball had been bowled though around £45k had appeared in the market opposing the Windies. The money was pretty insistent they weren't going to win and managed to push the price out to 2.4x.
No worries I thought. Gayle and Chanderpaul will get the Windies off to a good start and that'll be my opportunity to get it. Except it didn't work out like that. At all. Gayle was out in the first over, Vaas was moving the ball all over the place and the Windies price shot out to 3.3x. Which left me with a £500 red on a short-priced Sri Lanka. Now, at that stage, another Windies wicket and my position would have been unrecoverable. I'd could have been looking at a guaranteed loss within minutes of the game starting. As the ball continued to swing I decided I'd rather have that £500 red on the Windies and layed them at 3.25. So my position is now level Sri Lanka, £505 red the West Indies.
So I had a crap position by anyone's standards. But the point is my position was now recoverable. Even if the Windies won the game the match had only just started and I had plenty of time to sort my position on them out. If I'd hung on to my original trade hoping for a Windies price recovery I may well have got lucky and ended up level again. But another wicket and I would have been screwed.
And, of course, another wicket is what happened. Pushing the Windies price out to around 5.0. Followed by 8 more in pretty rapid succession. In fact the 80 scored beat their lowest ever previous score against of 147 comfortably! And that was with the benefit of a some dodgy LBWs decisions in their favour - and a wicket that wasn't given as it came from a no ball.
Anyway, as the game progressed and it became obvious what the result was going to be I backed Sri Lanka and it's that position that resulted in today's win. Small in comparision to what many would have made on such a one-sided game. But, nevertheless, a profit is a profit. And it was possible because I was willing to accept I'd got my first trade wrong and got out of my position before it became unrecoverable.
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