Saturday, 19 June 2010

Trading not to lose

The best advice for a new trader, in my opinion, is to trade not to lose. The worst advice for an experienced trader is to trade not to lose.

Trading not to lose is an expression I use where you set up a trade with the belief that the market will go against you. Therefore, at the slightest twitch, you look to scratch to avoid a major drift, or at the slightest sign of profit, you take it. However, an experienced trader should really not be concerned with looking to lose but rather taking a long term view. A losing trade does not a losing trader make more than a winning trade makes a winning trader.

It is an issue that has plagued my decisions, ironically, the more succesful I have become.

I strongly believe that the biggest skill a trader needs is confidence and the ability to make mistakes. Very few trades are strictly linear. Most will have the odd bump in the road but an experienced trader should be able to deal with that but it seems that the more I trade, the more cautious I become.

For instance, in Bradford v Warrington tonight, I strongly expected the Bradford price to trade below 1.2 prior to kick off. All the trading statistics I hold and market data I have pointed to this. However, despite backing at 1.23 in the early morning, I made a neglible pre match gain. This was due to my reticence to use large sums of money and my unease whenever the price held firm. And when the game went in play, I became more cautious - bailing out of my 1.0 First Half lays in the 1.1s just to avoid red - treating each trade as one that needs to be "won" despite actually "losing" by greening too soon. What could have been a very large position on Bradford became nothing more than a pleasant Warrington position.

It's an annoyance that is near enough impossible to explain to my non trading friends who remain incredulous at my ability to earn my current profits and consider my negative reactions to be absurd.

It's also nothing new. Regular readers will be aware of my issues with red. At the moment though, my trading stinks. Fortunately, my monetary results do not equate to my performance with the premium charge popping back on my radar, but I am becoming more cautious without reason and my net scoreboard position is becoming almost crimson.

There was an excellent point made on the excellent Flutter F1 that the worst feeling is the winning trades that are cut short, and that is definitely my main issue. I've explored possible reasons for this previously - hypothesizing that this may be due to a "need to win every trade" and a desire not to "throw earned money against the wall" but I need to remember that red is my friend and that green is the enemy.

At the end of the day, what I need to remember is "so what if a trade goes against me?". Firstly, I am not dealing in obscene sums of money. At no stage would my liability ever be in excess of three figures and my results show that trusting my instincts would actually lead to much greater results. Secondly, so what if I am wrong. At the moment, I appear to be trading with a thought that I "cannot be wrong" which is complete crap and lending itself to my trading not to lose / scared trading approach.

As usual, imagine if I ever did trade with confidence! Then, there would be no stopping me...

And as usual, any comments would be gratefully received - especially if anyone can offer any advice that can assist me!


  1. nice post!

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  2. This is probably one of the best blog posts i have read recently!

    This has been precisely my problem recently, and the phrase "losing by greening too soon" is something every trader should remember.

    excellent advice, i may even bookmark this page for future inspiration/learning curve!

  3. Thanks for the comment. As you know this is also a problem I have sometimes but have tried to make myself deal with it in a controlled manner. If I’ve understood your problem correctly the main point I pick up from your post is the comment ‘my unease whenever the price held firm’. Whether you want to accept it or not (I still have problems accepting it) the truth is you are out of your comfort zone. Like most actions taken when done in reaction to feeling ‘out of control’, greening up is an over-reaction.
    These day’s I take a more controlled approach. Let’s say my liability is £100 and I get the feeling of being out of my comfort zone for one reason or another (remember sometimes it may be a justified feeling, you could subconsciously be aware of a danger up ahead!). I will lay off £10 and then look at it again - do I feel more comfortable with my position now? Yes = great, let’s find another trade. No = lay of another £10 and then re-asses.
    You could still end up with a green position but this just tells you how little confidence you really had in the position in the first place. You may end up halving your liability which could be seen as losing some profits but if you keep doing this you will get more and more comfortable/confident at leaving the positions open WHEN you are justified to do so. Just don’t get too confident and leave every position open as then you would be a gambler.....

  4. Trade out only when it is value to do so. Novice traders cut their winners short and let their losses run. The trick is to do it the other way round, but learning to take a loss is probably the hardest lesson to learn. Good luck.

  5. "It is an issue that has plagued my decisions, ironically, the more succesful I have become."

    Have you considered the two may be linked? It's possible you may already be closing trades at that sweet '"mean" point already i.e. letting them run longer may result in some bigger wins but hanging on that extra could also result in lower profits/losses balancing each other out long term. The problem is unless we've some time machine we'll never hit those optimium points of when to close the market. It's only natural we'll see those times when we close for a loss early or close before the market turns as a success but the ones where we close and the trend continues as a failure.

    It's a fine balance to win at trading and that search for an extra tick or two may result in the opposite of what you want to achieve.

  6. Thanks for all the comments guys. Sure it must be a record and it's a good inspiration to blog further!

    To take the points in turn.

    Flutter - I agree I am out of my "comfort zone" but my principal issue is with green. I feel okay dealing when I have a red, but it's as soon as I can green up that I have issues.

    For example, in Monaco - with 2 minutes to go I had a three figure green on all drivers, with +150 on Webber. A similar position in Turkey, but I had +150 on Hamilton. (I had reduced my overall green by say £25 by backing realistic Pole contenders as they drifted.)

    Now, I then tried to equalise. With Webber, I got matched at around 3 for £50. With Hamilton, I didn't get matched (and he didn't get pole.)

    Given my already impressive position - why did I look to equalise? At that time, the market is ahead of me and I am merely throwing money away.

    It's almost as if a desire to be correct in every instance is driving my trades as opposed to being calm and maximising profit.

    Cassini - You've hit it. But, I am struggling to resist green just for green's sake. Without being too arrogant, I feel I am a very good judge on RL markets (nowhere else) - but I still look to green too early (whilst I feel safe to increase my red when I know the market is wrong and feel I am okay on going all red - it's just the green!). Is there anything you can recommend to help dealing with this?

    Betfair Trader - I think you are right. My cautiousness has definitely helped me to my current position. I would not be in my current position had I been aggressive early on. However, I am aware that I am now throwing money away.

    For example, I have a sub 1.1 rule in RL. Earlier this season, within three weeks I had three games which qualified for this rule. If I had left them as per the rule exactly, I would have earned £2,850. As it was, I earned £375. Throwing to one side the 5 - 10 instances where I would have failed, that is still a huge dent on my "net scoreboard".

    Once again, thanks for the comments guys.

  7. All red, all green or any other position it doesn’t matter. The overriding issue is fear of losing an amount should the position go against you. Take an example of Amy who on the Under/Over 2.5 goals as a terrible position of -£50 under and -£100 over. The game is currently 2-0 with 75 minutes gone – what does she do? Well as Cassini rightly states it should all depend on the value in the odds but if Amy is out of her comfort zone she will ignore that and most likely red-up for £75 all over. Bob on the other hand has a position of -£25 under and +£25 over, if he is out of his comfort zone he would choose to scratch and take £0 whatever outcome. Carl has a position of +£50 under and £+100 over – he’s fears a third goal and takes a green of £75. What is the difference in any of these actions?
    My point is there is an in between stage – it doesn’t have to be an equal book. It should only ever be a position taken because of value but if you are out of your comfort zone then adjust the book until you feel more happy with it. The more experienced a trader the more in the zone he will feel and that’s why experienced trader’s generally make more!

  8. Flutter - I agree with you to a point (especially the theory), but my situation is quite different.

    When I am red, I have no trouble in spotting value and keeping red where it is correct to do so and keeping green where it is.

    As an example, in China Qualifying, I had an overall red book but I had a very big green on the Mercedes which I could have laid off for a small red, but actually carried in play and converted to a small green, at which time I quit.

    Then, in Monaco Qualy, I had a very green book with a huge green on Rosberg. However, I laid this off at very poor odds pre play which I acknowledged as having no value only for his odds to drop from mid 20s to high single figures!

    The only difference in these situations was the colour of my book which leaves two possible explanations.

    Chasing - It's a possibility but I have chased before and I don't believe this was chasing but rather acting in accordance with value.

    Secondly - the fact that the ability to take green has an adverse impact upon my trading.

    I agree that it shouldn't matter - but it does appear to matter. And it creates an obvious issue in that if I am not cutting my trades when random chance dictates that they then shoot out but am cutting my trades when they come in, then all I am doing is minimising my potential profits.