Cricket World Cup money management

So as I mentioned earlier in the week I went away for the the weekend and so didn't get round to trading. Missed some good events but it was great to have a break after all the recent DIY. And anyway, with the start of the Cricket World Cup tomorrow we have the first of over 50 matches in a 6 week period. Enough for even the most degenerate trader! Anyway, I also mentioned I would be using some different money management rules from my usual during the World Cup so I thought I'd outline them here before a ball is bowled in anger.

In a nutshell I shall be increasing my bank and stakes. This is something I've mentioned I would probably do several times once I'd built up over £10k profit so as I passed that milestone earlier this year the World Cup seems as good a time as any to give it a go. Especially as some of the matches will be more than a little one sided and a larger bank will hopefully make the time spent involved in the short-priced matches more worthwhile.

Essentially my previous money management method involved an event bank of £1k with a normal trade size of £500 although, depending on circumstances, I would often use less than this. I had a maximum allowable event loss of £500. If I hit the maximum loss I simply bailed out of the event and left my book alone. Damage done. Take it on the chin job. At the end of each day I would either withdraw any profit above £1k, or put my bank balance back up to £1k if I'd lost.

The new method will run along similar lines but the event bank will be £4k and the maximum allowable loss per event will be £750. I plan to make the normal trade size £750 though will use a sliding scale depending on match factors as I have in the past. I don't anticipate making the maximum loss but as I've hit the existing £500 maximum loss three times since I started the blog last May it is a possibility. I'm happy to take this risk however in the belief that profits will be greater on the matches I do win on. Basically the changes being made will have a net profit effect. Fingers crossed. :-)

Immediately it's noticable that the bank has increased by a far larger percentage than the maximum amount I'm willing to lose on an event. The main reason for this is I've realised for a while now that I was not making the most efficient use of my time towards the end of a match when it becomes pretty clear a team will win. In the past when a team's price has hit the 1.1ish range I've often upped my betting stake to £1k. I've explained this previously pointing out that I do it only when there is good liquidity and very little volatility. This way if the price moves against me and I want to get out I can for only a couple of ticks loss. The trouble is a £1k position at 1.1 makes you £100 (before commission). A £2k position would make you £200. A £4k position £400. Multiply these numbers by maybe the 25-30 televised world cup matches and you can see why I'm trialling a new money management system.

Now of course just because a team is a short price it doesn't mean the team will win. And we've all seen 1.01s overturned in cricket. The skill will still be in reading the match and choosing when to get involved. And when to bail. That's the same as it's always been. It's just that when I get involved now I'll have the opportunity to make more profit. I won't always be lumping the £4k on looking for a tick or two profit. In fact I doubt I'll use that amount that often at all. Previously I've always kept in mind my exisiting position when placing my maximum £1k trades. If I have a profitable position that is only small I will protect that first. By that I mean I won't open a position that is too large in comparison to my existing position. In this case a move of a few ticks against me could wipe out all the profit for that game. Everything will remain in proportion as it has done in the past. The key however is that by trading in £750 chunks instead of £500 I'm hoping to have more green to play with towards the end of a game. Which in turn will allow me to open larger positions in the low volatility markets that often occur at the end of cricket matches. While at the same time keeping everything roughly in proportion to each other.

So there you have it. Obviously I'm not going to rush into it. And for tomorrow's opener between Pakistan and the West Indies It'll be business as usual. Afterall, I've had a few weeks away from trading cricket - and done very little on any other sport too. But once I feel I'm back into the swing of things I'll pick a suitable match to start with the larger figures and see where it leads. It''ll be interesting to see what kind of psychological impact the rise in stakes has in my decision making. But hopefully my thought processes will remain clear and at the end of the tournament I'll have a nice profit and more wedding funds! :-)

Just remains to be said I wish you good luck if you're planning on getting involved in the world cup. Well, unless you're the one filling my trades anyway!! :-P