With a new £101,000 challenge in place I thought I'd put some new bankroll rules into action to help me achieve the new goal. Proper bankroll management is a critical part of being a winning trader. Afterall, you're going to make nothing if you blow everything first.
Discipline underpins the whole bankroll issue. Retain that and you'll always be in the game. If nothing else that will always give you the opportunity to be a successful trader. A well thought out bankroll strategy gives you the chance to be a winner. Keeps you liquid. It's a crucial first step in being a consistent long-term winning trader.
So what are my new bankroll rules? At their most basic they are this. I will operate with a £12,000 Betfair balance. The most I am willing to lose on an individual event is £1,250.
Before I go into that in a little more detail regular readers will probably notice the similarities to my original bankroll strategy as well as the one I trialled for the Cricket World Cup before adopting it full time at the end of the tournament. The basic principles are the same. The only real difference is the size of the sums involved.
As i've discussed with some readers I'd actually upped my operating balance again since adopting the post Cricket World Cup rules and peaked with around £17k in my Betfair account. By that time I was operating to a max loss of £1.5k from trading as well as any losses from outright bets that I considered value in running. It was at that point that disaster struck. I'd got ahead of myself a little and following that loss I decided not only to stop the outright value bets but also that I needed both a new challenge (for focus) and to spell out my new bankroll rules. (for discipline)
So. A £12k operating balance with a £1.25k max loss per event. Small fry to some. But big numbers from where I started with just £1k in total. That £12k and £1.25k tell their own story too. They reflect the way I trade. Let's say I used all that £12k and made £1.4k on an event. I'd consider that a result. But another trader might use just £2k and make a £2k profit. Assuming a run of the mill trading event what differentiates us here is attitude to risk. I'd be willing to place a small wager that my long term results would be more consistent than the other traders. That my overall losses are smaller. That I don't experience as many highs and lows. (Well, either that or they're a far superior trader!)
Of course, the real point here isn't about who makes what profit. But how. I might have £12k sat in my Betfair account. But there's no way I'm going to use it all until I'm pretty sure I know the result.
An example....
Team A and Team B are evens the pair at the start of a cricket match. The reality is £12k balance or no £12k balance my biggest liability in this situation is rarely going to reach £1k. Which given I can cut a loss if things move against me means perhaps a £150 - £200 all red book if I hit a stop loss point.
Now, it's later in the match. Team A are on top and their price is 1.1. For the sake of a straightforward illustration let's say my book stands at £750 green Team A and a level £0 Team B. In this situation I am far more willing to have a larger liability on Team B than at the start of the match. If I consider the price warrants it I will now happily bet £5k on Team A. This gives me a book of £1.25k green Team A and £5k red Team B. Of course, if the price moves against me I can bail from the £5k back. Each tick it moves against me costs me £50. But if I chose my spot to make the bet well I will have plenty of time to bail here and still make a decent profit. I just have to pick the point I will get out at and stick to it.
What I'm effectively doing then is building up a green during a match with a limited liability approach before trying to maximise my position at the end of the match. Bet £1k at 1.1 in this position and you add £100 to your winnings. Bet £5k and you add £500. Repeat this 10 times a month and you're £4k better off. The effect this approach has had on my own trading is clearly visible in this graph. Despite the fact that there were simply more events to trade you haven't got to be the sharpest tool in the box to realise I increased my operating balance from £1k to £4k in the March to April 2007 period.
Of course, I'm not saying I'm just going to lump on short odds. Anything but. Picking the right situations is crucial. And then the amount of that £12k I will be willing to use in a lump on situation will depend largely on my exisiting book. Back to the example of Team A at 1.1 near the end of that cricket match. I'm not going to lump £5k on a 1.1 shot if I have a book of £50 green Team A and level £0 Team B. If the price moves just two ticks against me I'm staring at an all red book.
The point is having that £12k there gives me the opportunity to maximise my green from situations where my book allows it. Crucially it also gives me the chance to be involved in two events at once. Say a slow moving test match and an ODI. It enables me to run sizeable exposures in both games. In the past I've found I'm missing out on opportunities to make money simply because my operating balance has been set up for a single event only. I've estimated £12k will allow me to comfortably trade two concurrent events within my max loss limit. I'll see how it goes but if I find I'm still missing out I may go ahead and increase my operating Betfair balance to £15k.
So there you have it. My new bankroll strategy. Of course, I've really only covered the basics but the black and white amounts are there as well as some of my more general management principles. The prospect of losing my new max loss of £1.25k isn't enthralling but looking back through the 18 months or so I've been keeping the blog I've had just 3/4 max losses. The reality is I tend to just cut losses and leave a match if things keep going wrong.
Concentrating on maximum losses, while necessary, is also a little pessimistic too though. So on a more positive note I'll be keeping my fingers crossed and hoping these new rules keep me in the green and on the road to that £101,000!
Showing posts with label bankroll management. Show all posts
Showing posts with label bankroll management. Show all posts
Friday, November 02, 2007
Monday, April 30, 2007
Cricket World Cup review
Not so much a review of the competition as a whole but rather my trading performance during the world cup. I've mentioned what I thought of the world cup in several posts including parts of this one and this one. Suffice to say now it's all over I thought it was pretty poor in many aspects. I wasn't at all surprised to see that Rudi Koertzen after his, shall we say strange, decisions in the Sri Lanka v New Zealand semi final, appears to have had a leading hand to play in the shambles that marked the end of the final. Knock me down with a shovel but it appears Rudi, as 3rd umpire, didn't know the rules. (Though I wouldn't be churlish enough to blame him entirely) And I find it all a little unsavoury that the death of Bob Woolmer appears to have been swept under the carpet somewhat.
Cricket fan or not though ultimately the competition was about my results. Mercenary I know but that's why I sit there for hours and trade. It's for me. My profits. And paying for my wedding. So, how did I get on?
Well, it was great! Despite a losing start I made precisely £7,175 from the tournament. Small fry to many I know but a great result for me. Better than I'd hoped for before a ball was bowled. And a massive contribution to paying for the big day. I can't be anything but chuffed with that result. It's more than £1k tax free a week and as such will work out at more than I earned from my job! I think I can safely say my trading software paid for itself.
Breaking it down a little, of the 50+ games I got involved in 38. For some I did the whole match, for some most of it and for some just an innings or even just a few overs. Of the 38 games I did have an interest in I won on 33 and lost on 5. My biggest win was £933.44 when Bangladesh turned over South Africa. My biggest loss was £419.97 when South Africa humiliated England and I let a losing position run too long.
I had a lucky escape when the Ireland v Zimbabwe match was tied and once again learned /reminded myself of some lessons about trading cricket including these three. (1, 2, 3)
Ultimately though the size of my final profit on the tournament comes down to a change in bankroll management before it started. I mentioned I was going to trial a new money management system and I did. Not immediately. In fact not properly until well into the Super 8s although I was using aspects of it on some shorter priced games before the Super 8s started.
Reviewing my trading and results on the whole I can call the trial a success. There were aspects I wasn't pleased about but I've identified these and can work on them. On the whole though using the bigger bank was beneficial to me and I've decided to continue with the new money management rules indefinitely. The larger amounts will be for cricket only though - I'll continue as before with other sports - and I'll obvioulsy take account of liquidity in each game before getting too stuck in. Now we're into the domestic cricket season liquidity is generally reduced. Though should still be enough for me.
Anyway, that's that. The 2007 Cricket World Cup is over. I hope it treated you well. From my trading perspective at least it was a success. And I hope I can now carry that success forward into the domestic season. :-)
Cricket fan or not though ultimately the competition was about my results. Mercenary I know but that's why I sit there for hours and trade. It's for me. My profits. And paying for my wedding. So, how did I get on?
Well, it was great! Despite a losing start I made precisely £7,175 from the tournament. Small fry to many I know but a great result for me. Better than I'd hoped for before a ball was bowled. And a massive contribution to paying for the big day. I can't be anything but chuffed with that result. It's more than £1k tax free a week and as such will work out at more than I earned from my job! I think I can safely say my trading software paid for itself.
Breaking it down a little, of the 50+ games I got involved in 38. For some I did the whole match, for some most of it and for some just an innings or even just a few overs. Of the 38 games I did have an interest in I won on 33 and lost on 5. My biggest win was £933.44 when Bangladesh turned over South Africa. My biggest loss was £419.97 when South Africa humiliated England and I let a losing position run too long.
I had a lucky escape when the Ireland v Zimbabwe match was tied and once again learned /reminded myself of some lessons about trading cricket including these three. (1, 2, 3)
Ultimately though the size of my final profit on the tournament comes down to a change in bankroll management before it started. I mentioned I was going to trial a new money management system and I did. Not immediately. In fact not properly until well into the Super 8s although I was using aspects of it on some shorter priced games before the Super 8s started.
Reviewing my trading and results on the whole I can call the trial a success. There were aspects I wasn't pleased about but I've identified these and can work on them. On the whole though using the bigger bank was beneficial to me and I've decided to continue with the new money management rules indefinitely. The larger amounts will be for cricket only though - I'll continue as before with other sports - and I'll obvioulsy take account of liquidity in each game before getting too stuck in. Now we're into the domestic cricket season liquidity is generally reduced. Though should still be enough for me.
Anyway, that's that. The 2007 Cricket World Cup is over. I hope it treated you well. From my trading perspective at least it was a success. And I hope I can now carry that success forward into the domestic season. :-)
Monday, March 12, 2007
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
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
Thursday, June 22, 2006
Trading and money management
Been a busy day today with no chance to trade so thought I'd answer some questions again. Firstly though it's great to know so many people are reading the blog, leaving comments and emailing me about it. Please do keep asking, sending good luck messages and letting me know what you think!
To answer the most common questions, yes I have a set bank and money management system, yes I use some one click trading software that enables me to trade quickly through the betfair api (Read more about it here - I honestly don't think I could do what I do without it. There's a free trial so why not see for yourself?) and yes I will explain the basics of what I do.
I'll explain how I manage my bank today and deal with the other questions over the next day or two. Please do bare in mind though that there are many people who are far more knowledgable than me on these topics and make far more on Betfair than I ever will. I don't even do this full time.
Money Management
I guess it's my fault that I hid basic details on the bottom of this page so not many people find it.
Basically I started with a £1k bank at the start of May 2006. My first trade was on May 8 and everything I make and mention here will go towards paying for my wedding which is in August 2007. To date the bank stands at £3,508.5 - roughly a £2.5k profit.
At the end of each day I either withdraw any profit made on that day from Betfair or add the amount I lost to my Betfair account. That means at the start of each day I have 1k in my Betfair account. Withdrawing winnings is just incase I have a rush of blood and exceed my set exposure limits in a crazy effort to chase losses. I think I've learned that's not a smart thing to do and it's far better to be disciplined and take a loss on the chin. But at least this way if I totally lost the plot the most I can lose is £1k and not all the profit I've made to date. (Unless I go completely insane and start depositing more of course!)
Anyway, on top of that I opened a specific account for this so all the transactions don't show up on my regular bank statement. And I'm also getting over 4% interest on the money in the account while it's there. Far better than leaving it doing nothing in my Betfair account and it all helps pay for the big day. :-)
Trading: amounts
I started with the 1k and obviously didn't want to lose a large part of that straight away. Combining that with the fact I had had a break from trading because of my mum's illness my initial trades were in blocks of £250. In other words I would back and lay the same result for £250. Once I was back into the swing of things I increased this to blocks of £500. (Naturally suffering a loss the first time i did it!)
Blocks of £500 is mainly still what I'm trading in. I do go up to £1000 occasionally (Again, losing the first time I did it!) and explain this below. Once I have (hopefully) built up some more profit I'll increase the standard trading amount again, maybe to £750, before ultimately using the full £1k.
Trading: Exposure and liability
While I accept losing as part of the game I don't like it! My biggest loss to date was £361.42 on a tennis match between Roddick and Baghdatis. It was my first loss once I'd started the blog. I had a long look at why I lost so much on that match and worked it out. And although I was pissed off about it I was ultimately pleased that I didn't blow a lot more and kept the loss managable.
So like I said I trade in £500 blocks. I almost always trade the favourite. So if I back the favourite my liability on the other runner is £500. If I lay the favourite my liability will always be less than £500. So as a general rule my largest exposure is £500. And that is the absolute limit I'm currently prepared to lose at this stage on a single event. Though in reality when things go wrong I tend to limit the loss to around the £250 mark as a maximum where possible.
I do sometimes trade in blocks of greater than £500. Even up to £1000. And although this isn't yet my normal stake level I'm prepared to do it where there are very short odds and there is no immediate danger of any real volatility. ie, The market may move against me but it will only be a few ticks and I will have plenty of time to bail. So although I may have a 1k red against a runner I would never anticipate losing anywhere near that amount on the event.
Anyway, apologies for rambling on a bit there (it looks bloody long from here!) but hope that answers some of the questions you've been asking. Please do feel free to leave comments / questions and I'll get round to answering them when I can.
To answer the most common questions, yes I have a set bank and money management system, yes I use some one click trading software that enables me to trade quickly through the betfair api (Read more about it here - I honestly don't think I could do what I do without it. There's a free trial so why not see for yourself?) and yes I will explain the basics of what I do.
I'll explain how I manage my bank today and deal with the other questions over the next day or two. Please do bare in mind though that there are many people who are far more knowledgable than me on these topics and make far more on Betfair than I ever will. I don't even do this full time.
Money Management
I guess it's my fault that I hid basic details on the bottom of this page so not many people find it.
Basically I started with a £1k bank at the start of May 2006. My first trade was on May 8 and everything I make and mention here will go towards paying for my wedding which is in August 2007. To date the bank stands at £3,508.5 - roughly a £2.5k profit.
At the end of each day I either withdraw any profit made on that day from Betfair or add the amount I lost to my Betfair account. That means at the start of each day I have 1k in my Betfair account. Withdrawing winnings is just incase I have a rush of blood and exceed my set exposure limits in a crazy effort to chase losses. I think I've learned that's not a smart thing to do and it's far better to be disciplined and take a loss on the chin. But at least this way if I totally lost the plot the most I can lose is £1k and not all the profit I've made to date. (Unless I go completely insane and start depositing more of course!)
Anyway, on top of that I opened a specific account for this so all the transactions don't show up on my regular bank statement. And I'm also getting over 4% interest on the money in the account while it's there. Far better than leaving it doing nothing in my Betfair account and it all helps pay for the big day. :-)
Trading: amounts
I started with the 1k and obviously didn't want to lose a large part of that straight away. Combining that with the fact I had had a break from trading because of my mum's illness my initial trades were in blocks of £250. In other words I would back and lay the same result for £250. Once I was back into the swing of things I increased this to blocks of £500. (Naturally suffering a loss the first time i did it!)
Blocks of £500 is mainly still what I'm trading in. I do go up to £1000 occasionally (Again, losing the first time I did it!) and explain this below. Once I have (hopefully) built up some more profit I'll increase the standard trading amount again, maybe to £750, before ultimately using the full £1k.
Trading: Exposure and liability
While I accept losing as part of the game I don't like it! My biggest loss to date was £361.42 on a tennis match between Roddick and Baghdatis. It was my first loss once I'd started the blog. I had a long look at why I lost so much on that match and worked it out. And although I was pissed off about it I was ultimately pleased that I didn't blow a lot more and kept the loss managable.
So like I said I trade in £500 blocks. I almost always trade the favourite. So if I back the favourite my liability on the other runner is £500. If I lay the favourite my liability will always be less than £500. So as a general rule my largest exposure is £500. And that is the absolute limit I'm currently prepared to lose at this stage on a single event. Though in reality when things go wrong I tend to limit the loss to around the £250 mark as a maximum where possible.
I do sometimes trade in blocks of greater than £500. Even up to £1000. And although this isn't yet my normal stake level I'm prepared to do it where there are very short odds and there is no immediate danger of any real volatility. ie, The market may move against me but it will only be a few ticks and I will have plenty of time to bail. So although I may have a 1k red against a runner I would never anticipate losing anywhere near that amount on the event.
Anyway, apologies for rambling on a bit there (it looks bloody long from here!) but hope that answers some of the questions you've been asking. Please do feel free to leave comments / questions and I'll get round to answering them when I can.
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