Where is the edge?

This is the 100th post of the year! Time for a review? Not yet, I will wait until the end of the year. There are still two months to go, one of them with some tennis highlights. Especially for Switzerland and Roger Federer will come interesting weeks. Can he be the oldest number 1 ever? Will Switzerland win the Davis Cup for the first time?

In the last weeks of the tennis year I will work on the strategies. There are still some issues with a bad risk-/reward ratio I have to figure out. Lately I started to accept losing trades. I stopped to hope for a turnaround. The word "hope" doesn't exist anymore in my trading vocabulary. In the book "trading in the zone" was mentioned the fear of losing a trade. In the past I often lost more than I should because I was afraid to exit with a negative result. Now I can close a trade (normally after the first set), and I am not interested anymore in the final outcome of the tennis match. At least not, when there is not a new trading opportunity.

I am still searching for the edge. I think this is the hardest part to become a professional trader. Sultan changed his strategies, and after a while he became successful. I tried his approach, but it didn't work for me. Probably his (biggest) edge is the good feeling for tennis matches. I am looking for a strategy where I can trade more the charts (market) than the players. In the end it's probably a mix of both. The game selection should be part of the trades, but in general the strategy should work without a "crystal ball". If the hit rate is "only" based on a good selection of the games, the variance can be huge. The best tipsters have bad runs and latest with the premium charge, a system without a real edge will not work anymore. The best tipster can't beat a 60% disadvantage...

Until the strategies are stable, I will not document my trades at mybetlog.com. The following weeks are good to make a fine tuning of the approach. At this stage I can trade with small amounts. The crucial point is the risk-/reward-ratio. If a hit rate of 30-40% it's enough to make profit, the pressure is a lot smaller than with a need of 80%. At this point I am working at the moment.

Trading in the zone

This weekend I read the book "trading in the zone". To be honest, I think it would be possible to write the book with less pages. It's not a bad one, but some chapters are really hard to read. Especially the chapter 10 "the impact of beliefs on trading" is a bit philosophical. In general I like the ideas and you can summarize it to this facts (you find on page 185):

1. I objectively identify my edges.
2. I predefine the risk of every trade.
3. I completely accept the risk or I am willing to let go the trade.
4. I act on my edges without reservation or hesitation.
5. I pay myself as the market makes money available to me.
6. I continually monitor my susceptibility for making errors.
7. I understand the absolute necessity of these principles of consistent success and, therefore, I never violate them.

Some readers of this blog already mentioned it. First of all I have to proof my edge. So far it's missing. I just guessed that my strategies work. The author suggests a risk-to-reward of at least 3, which means you are only risking one dollar for every three dollars of profit potential. I don't know if it works similar at sports trading, but it seems an issue I have to consider. At the moment I probably don't reach this value. If I take a look at Sultan's figures, he makes big profits despite a "low" strike rate of 40%. That's a sign, that he also works with high risk-to-reward-ratios.

I recognized while reading the book that I predefine my risk, but I am not willing to accept it. That's a clear sign of overstaking. I can remember when Sultan lowered his stakes. Suddenly his results started to improve. He became self confident because he identified a real edge. After some months of being profitable he raised his stakes and it still worked.

After reading the book, I know that is not enough to halve the stakes. I have to test the strategies with amounts which really don't hurt. Only with the proof that there is a real edge, I can trade with the self confidence you need to be successful.

Mark Douglas, the author of the book, also mentioned that you have to set small targets. He wanted to run five miles, but had no chance in the beginning. So he started with smaller stages. I will do the same. The only target for this year is to test the strategies with small amounts. Instead of 1% of the capital per trade, I will lower it to 0.1%. So it's quiet easy to scale up the results to see, where I would land with normal staking.

Let's set back the clocks...

Some readers already mentioned it. My mindset is not at the level it should be. In comparison to my bank the staking is correct. I don't risk more than 1% per trade. So far so good, but probably my bank is too big for my trading skills and especially my lack of discipline.

I decided to halve my liabilities for the moment. It takes away some stress, and I can do more mistakes (they are normal at this stage of learning) for a smaller loss. One reader was right, I pressured myself too much because I lost money with the scam. I have to split these two issues. It's difficult, but is the only way to get my focus back.

Beside I will stick to same strategies for a longer time. Before there were still too much adjustments, and the results have not much significance. Now we are on a level which seems quiet stable. Caan wrote some months ago about different trading styles: http://caanberry.com/trading-personalities-ascot-on-betfair/

I recognized that I am more the short term trader. Scalping some ticks here and there fits my personality better than going for (big) swings. I tried this already at Sultan's trading academy and it didn't work for me. Lately I put some scalping greens on expected swings. In the most cases i reduced the profit... 

I will set the profit&loss of mybetlog to zero again. The clocks have a new start. The last weeks of the season should help to find some routine with the strategies, the discipline and the trading in general. Small things like a good preparation of the day, can make the difference. If everything works fine, I will rise the stakes again for the season 2015.

Petkovic: She did it again...

A new strategy is born: Never trust Andrea Petkovic. Last time I made a terrible trade: http://brucelaytrading.blogspot.ch/2014/10/bad-habits-are-still-here.html

Today I didn't enter the market. To be honest, I was not on the tennis ladders today. The early games didn't fascinate me for different reasons (low liquidity, service battle, no good TV coverage). So I took a look at soccer and found an interesting match: Brazil against Japan. I couldn't resist and made a trade. It was looking well until the last minutes... I ended in a medium size red instead of a big green. Yes, let's call it indiscipline again or boredom. At least I saw a Neymar which played in beast mode. He scored all (four) goals and could make even six or seven! Amazing performance... if he would stop to simulate and complaining all the time, I would see him (almost) at the same level like Ronaldo and Messi.

With this loss I was not in the right mood to return to the tennis ladders. I watched some soccer games for fun and recovered with small bets around 2/3 of the amount I lost with Brazil.

What should I learn out of  this? First it's the work and then the pleasure. It's not always fun to watch tennis (especially with a small bet365 picture), but if I want to be a professional trader I have to be on the ladders with average matches. It's not every day a Djokovic vs. Federer spectacle. 

I ordered the book "trading in the zone" like I reader of my blog suggested. I hope I will receive it soon. It should help me to improve my discipline. I wrote in the comment that I already have a better level than before. Actually was not difficult to improve from nothing... :-)  Beside I have no winner mentality. How I read in the summary, this topic is also addressed in the book.

Next days (Wednesday and Thursday) I will be back on the tennis ladders. I am quiet motivated after the day I missed. Sometimes it's good to take a break... better would be a real free day and not one with soccer gambling. :-) 

Soccer is (not) made for trading!

In the last seven days I made a profit of 324.51 Euro. Actually I should be happy, but I am not. How you can see at the printscreen below all the green came from soccer. What's wrong about it?

Football bets are a hobby for me, it's just gambling. There is no real system behind the profit. It's a bit of luck and game reading, nothing more. In my opinion it's almost impossible to make sustainable money with soccer. There are a lot of betting disadvantages. First of all the odds react abruptly. When a goal is scored, we see a huge movement. The referee has a big influence with (red) cards and penalties, which can affect the trade in a negative way. Beside there are less swings. Often the time clock is running against you (for example if you need a goal). In the end the liquidity not often reaches the level of big tennis matches. That's the reason why I am not really interested to become a soccer trader. I just bet it for having an additional excitement while watching a football match.

My target is still to become a tennis trader, but the figures are looking disappointing so far. Is it alarming? I can give an answer with two letters: No! First of all the sample is too small. Two or three good trades, and I will return in the green zone. Second I made some terrible mistakes, especially the Petkovic trade was weak. Beside the strategies are not yet at the final stage. Two or three bets I would win with the last corrections we made. Today's trade (Lopez) was a clear "no bet-situation", and I should not enter the market, at least not so early. I made the necessary corrections in the strategy guide. In comparison to the Petkovic trade I could reduce the loss with tighter money management.

In Switzerland an apprenticeship has normally a duration of three years. I have to compare it with a serious education, but without a teacher. It takes time, and the negative happenings will help to improve the strategies and my trading behavior. The financial figures are not the most important for the moment. When we continue with the hard work, the good results will come for sure. Perhaps it will take another half year or more, but the direction seems okay.

Next week we will start a serious controlling of the executed trades. At the moment it's just a reporting of the financial outcome and a small comment of the trade. In the future we will have exact numbers which strategy is the most successful and where we have to make adjustments.

Small recovery

Since the the disastrous trade of Petkovic (see at my last post) I could recover a bit. Today was a decent day with a highlight trade of Ferrer against Murray. How in the hell Murray could be 1.05 favorite after he won the first set against the "never give up Ferru"?! Normally value is not that obvious like here, nevertheless I would say my strategies start to work if I am disciplined.

In the comment section we had a discussion what is more important, the knowledge of the players or the markets. I am 100% sure that a decent professional trader (no matter what he trades) will make money with tennis, even when he doesn't know the players. Probably it takes a bit of time to learn the markets, but he/she will succeed. Actually good knowledge of the men and women on the tennis tour can be a burden as well. Who in the hell is going against Djokovic or Nadal? I have not a proof, but I am quiet sure that low lays against the very best ones often pay off. I don't say that is bad to know the players, but if you like to read from the past the future, it can't work in my opinion. Goran noted it correctly, it's all about risk-/reward ratio and not about player's name.

Back to my results... how you can see below, it takes some time to recover the loss of the Petkovic trade. To be honest, it's not very meaningful after 20 trades, but it gives an indicator what I have to improve.

My problem is obvious when you take a look at the numbers. The losses are big and the profits small. Some of the winning trades are scratches, so the real average would be slightly higher. Beside the average loss would be smaller without the Petkovic trade. Nevertheless I can't be happy and that's an alert sign. The strike rate (77%) is around the expectations, but the win-/loss ratio is with not even 15% a real problem which has to be addressed.

One reason for it, it's the bad variance. I had 3-4 trades which would generate good greens with a different outcome (for example Fabio Fognini or Rafael Nadal). Here I can't do much, it's just bad luck which will be offset in the midterm view.

Another problem is the second stage of the trade. Instead of compounding the profits, I lose the profit with too risky entries. I trust too much the favorites - here we are back to the topic I wrote about before - instead of trading the market.

The last problem is a common one which everybody knows. I close green trades too early and let the red positions too long run. It should be exactly the opposite way. It's difficult to change this behavior. The only way you can manage it is to define entry- and exit levels before the match starts. I don't like to make a classical stop loss during the trade. In my opinion it works better to lower your initial stake and accept the full loss. I would say it's a personal preference, but I like to have a (small) chance to make profit with a bad looking position. In the opposite case (let the greens run), you need a clear plan when you hedge which amount. If you don't decide it before you open the position, your will be driven by emotions...

Bad habits are still here...

What a disastrous day! Everything started well with a good entry at the Fognini game. He played against an unknown Chinese (Wang, world number 553), which absolved his first ATP match ever. In the first stage of the game I made an all green profit of 50 Euro. The most of it I placed on the Italian. I expected that the Chinese can't keep his level. Fabio didn't play bad, but not on the level he would need to win against a Wang on fire. Well, this can happen... I was on a "comeback trade" which often pays off.

Afterwards I was not sure if I should trade the game between Bacsinszky and Cepelova or Roger-Vasselin and Janowicz. I have decided to go for the men match. It was a rollercoaster duel and a real thriller, but my system didn't let me enter. So I didn't earn a penny despite an up and down fight. Also the WTA match brought a lot of swings. This match would be good for my strategy. In the end I just was on the wrong place. The learning I made... Watch two matches parallel (it needs concentration, but is not impossible) and enter where the opportunity appears.

The last trade was a disaster. I entered too early to lay Giorgi. I should know it, the young Italian seems a nightmare for Petkovic. It was the third defeat in this year against Camila. Like at Dubai she lost 1:6, 2:6!

Beside the too early entry, I didn't follow the stop loss. In the end I lost more than 1% of the bank. That was a lack of discipline (like the too early entry!), even when the loss was not much more than the mentioned level...

It's hard to fall back in old (bad) habits, but probably it's part of  the development. At least I recognized that is too dangerous to leave the strategy path. I am sure also other traders lost with Petkovic, but probably they closed the losing position earlier than me. That's probably the biggest difference between a professional trader and me. They let the profits run and stop the falling knife. 

Well, at least I stopped the habit to chase the next "best opportunity". I try to stay patient and make it better in the future...

It's a long way to go...

Since years I attempt to unlock the secrets of sports trading. Now I start to recognize that I didn't work enough dedicated in the past. I wanted to take a short cut. There are no crash courses to become a trader. Perhaps professionals like Sultan or Caan can give you an idea, but in the end your are alone at the ladders. There is no free lunch, it's hard work to become a successful trader. It's a competition against people which have the same target (making money with trading) and Betfair with high commissions. How many traders are successful? I would say 0.1% will reach the super premium charge and everybody likes to make it so far. Obviously not the extra commission is the goal, but the profit you need to reach this level.

With my partner together, I am developing a huge database. That's the only way to understand the markets and find patterns. It's not about players, it's about charts and probabilities. It's still missing the financial breakthrough, but I am convinced that it's just bad variance at the moment. Sustainable profits are (hopefully) only a matter of time. I recognized that the strategies work in the most situations. I need good trades which offset the worst case scenarios that you can't avoid. If I reach this target, the average trades will stay as a profit.

I lost money at Betfair before (over years...), afterwards I was scammed. It needs time to find trust again. As a consequence I trade too cautious. Often I miss good opportunities. I hope that the database will help to bring back the self confidence. It's not good to be worried to lose (more) money. With this attitude you can't win. You have to be positive. At the program "Traders millions by the minute" (https://www.youtube.com/watch?v=07XwNQrFd50) was a black guy... he made one trade in a week. At the moment I feel a bit like him. :-) It's the opposite of overtrading, and it's not good neither.

At least I know at which point I have to work. It's a psychological one: "afraid to lose". I have some ideas how I can solve this problem. I will reduce the stakes for the moment and will not focus anymore on the worst case. It's allowed to take some risks...

Tomorrow is the final day of different tennis tournaments. I will take a look if I see some opportunities. If not the next ones will come for sure following week with the big tournament at Shanghai. The nice thing with tennis is the fact, that the next big swing game will come sooner rather than later.

Small adjustments

The last two days were a rollercoaster. After a disastrous trade of Maria Sharapova, I lost a bit of trust. A bit later I recognized that a bad scenario can be a chance as well. This match showed that there are some small lacks in the strategies. With a light correction I made afterwards, I would not even lose the half amount. Beside it's a psychological aspect to close a trade too early. In the end Masha won (I was on a lay position), but in the second set she had to fight really hard. It would be enough time to turn the red position in a profit or at least to cut the loss.

Today I just made one trade. It showed that the strategies work well. Even when a match is quiet one sided - obviously traders like swings - it's possible to make a profit. Despite the financial result of the first five days with the new strategies are not looking impressive, I am happy with the progress.

One of the problems is the ratio between average profit (15.53 Euros) and loss (-39.54). Is nothing to be concerned about, but I have to keep an eye on it. If the situation will not improve, the strategies need more adjustments. For the moment I think it's just bad variance. There were two matches (both of them with Andy Murray) with good swings which I didn't trade well. So it seems more a problem of my trading skills than of the strategy. With the strike rate (70%) I am more or less happy. A value of 80% is the target, but 70% is not an alarming value. Beside the sample is too small to make any conclusions.

I often read that you need around 10'000 hours on the ladders to become a master. Here you find a good article about it: http://sportstradinglife.com/2013/12/what-is-the-secret-to-winning-on-betfair/

It's still a long way to go, but things are improving. After the first shock of being scammed, I am back on the right track. Summarized the above mentioned link tells us: The secret to winning on Betfair is Patience, Discipline and Dedication. Overall, this equates to “bloody hard work”. You might find it odd that “having a winning strategy” is not listed in there. But then again, when has making money ever been easy?