Sunday, January 21, 2007

Small profits add up

Daily Result: £44.1

Not the greatest of profits today but a green is a green and better than a loss. And each small profit reminds me of a line from Market Wizards book I mentioned recently where the trader points out that combined they add up surprisingly quickly and shouldn't be sniffed at. Ok, he was referring to mere $10,000 profits but the principle is the same! :-)

Made the money today on the snooker final and the American football playoffs, as well as continuing to add to my 2nd test position between South Africa and Pakistan. In between going out to buy carpets and a surprise visit from relatives my trading was pretty stop start. Which was most true on the snooker where I had to equal out for an £80 red each way when visitors turned up. I'd switched positions from Junhui to O'Sullivan after Ronnie pulled it back to 2-2 but couldn't risk just leaving it unattended for a few hours. Missed the rest of the first session but managed to turn it into a £20 profit or so during the early part of the evening session.

As for the NFL playoffs again it was a case of a quick look in. More importantly we ran through all our wedding stationary options tonight as we need to get some proper invites done now. But inbetween I managed to get involved for a few plays in each game and make around £25 or so. Again, not a lot but even £30 a day is £900 a month. Manage that and by August, add it on to my exisiting profit, and it's virtually job done on paying for the wedding. So these small profits are all important. They do all count.

It's been my approach throughout the blog to try to bank smaller consistent profits rather than enjoy big wins at the expense of bigger losses too. As an approach it's simply less risky. Of course it sometimes means you feel you could have made more on an event. But it also means you know you didn't lose as much as you would have done when you do lose.

The classic example is probably something along the lines of it being around evens the pair in a tennis match. You're £400 green one player and £600 red the other. You rate the players' chances as evens, both are injury free and playing well, and you think the prices are about right. What do you do? My usual action during the blog has been to level out for a red, especially if after a point or two I've felt there's a touch of value in one of the prices. Or at least reduce the positions drastically.

Sure, it's not as exciting as hanging on for the big win (for me) but I'm not in it for the excitement and try to keep my losses below a set level. Variance in poker is what busts a lot of players who don't have a disciplined bankroll strategy and end up playing for stakes and buy ins that are too large for the money they have available. And especially on the blog, where I have a set target in mind within a set time frame, I'm happy to try to maintain a more consistent growth in profits. It's all factored into the money management rules I set out at the start and, for me at least, is preferable to having huge spikes in my P/L figures where I win and lose big.

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3 comments:

Brent said...

Hi Betfair Trader,
I have been reading your blog since September (I have acutally gone back and read every post you have made on here) and I think your blog and your writing is great!!

I have a question about your money management. As you state in todays link, you have a 1000 pound bank that you reset daily, and I take it you are probably going in with 500 pound stakes these days.

With that in mind, do you only place the one trade and then cash that out for a win or loss depending on the situation, or will you re-load. Thats not well explained so I'll try an example. Say in the cricket, you back Pakistan @ 1.30 for 500 pounds. They then lose a wicket and are now at 1.50. In this situation, would you normally put another bet on Pakistan or would you just leave your original bet stand, hoping that the odds would go the way you want them too (of course trading out if the odds kept going away from you at your designated stop-loss level).

Hope that made sense. Good luck with your wedding. I only just got married in September myself, so I know all about the hassles involved, but in the end its worth it.

Trader in Oz
http://www.traderinoz.blogspot.com

The Betfair Trader said...

Hi Trader in Oz,

So sorry for not replying earlier. (Well I did but I just noticed the post isn't here so I must have done something wrong!) It's a tough one because the answer depends so much on the situation in the game (near the start or end - and increased volatility normally found at the end of close events) the price I got in at and what the current price is at. But I'll try and summarise my thought processes using cricket examples. Just bear in mind it isn't an exact science...

I guess the overriding consideration is my maximum loss limit of £500 which you mentioned. I'm not willing to lose more than that on each event. So if I've backed a team to make a run chase at 1.10 and they're on target, lose a wicket and I think the market has overreacted by going say 1.17 I may well go in again. In the back of my mind is the knowledge that even if they lose another wicket I could bail out and still be very comfortably within my £500 limit.

However, if they were even money to make the run chase, I had my £500 on 2.0 and they lost a key wicket early on (like Gayle in today's [Saturday] ODI) and the price goes to, say 2.45, I very much doubt I would go in again. In that situation another wicket would leave me facing a potentially large red position. I'm far more likely in this instance to cut my losses, spread the loss for the individual trade against my two positions and end up with a reduced green for the two outcomes, or an increased red. Sometimes I'll only bail from part of the trade and sometimes, again depending on the circumstances, and especially if I believe it's an over-reaction, I'll leave the position open. All the time in the back of my mind though is What if. ie, What if another wicket (or two) falls. Where will that put the price? And how will that effect my overall positons?

Basically I guess I'm happier to let a position ride, or increase it if it goes against me, if it doesn't threaten my max loss limit, we're dealing in short odds, if I believe there is value in it and volatility is low. Increase the volatility and price and I don't like it and tend to get out rather than hold or increase my positions.

I've said a few times on the blog that small consistent wins are more appealing to me than bigger wins, bigger losses and less consistent results. This is because of what I'm trying to achieve with the blog. And I just feel happier knowing that I've made some profit at the end of each month to help pay for the wedding rather than having big up and down swings. Of course a true value bettor would probably just keep adding if they thought the price was value. And in the long term they should come out on top. But if I take a 20/1 price because I think the true price is 14/1 I'm still going to lose 20 out 21 (or 14 out of 15 if I'm right about the true price). Sure, over years that will balance out and I should run out a winner. But over the time frame to my wedding I just can't afford that kind of volatility in profit hence my trading approach on the blog.

Bit long winded that but hope it helps.

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oh, btw, had a read of your blog. Thanks for the link and I'll add one back when I next update the template.

Brent said...

Thanks for the reply, that was very informative and answered everything I was after. I for one hope you keep the blog going after your wedding.

Best of luck
TraderinOz
http://www.traderinoz.blogspot.com