blog

Unrealistic Expectations

Mon, 13 Sep 2010 16:34:23 +0100

Beginner sportstraders are frequently burdened with the baggage of unrealistic expectation.

It is understandable how these unfeasible expectations can be formed in the psyche of the novice trader. He may have seen websites that promise enormous returns; adverts that extol some trading programme which claims to have a success rate of 97% on all trades. He may have read an article about some trader who pulls in $10,000 a week by working one hour per day from his palatial shoreline home.
Being exposed to nonsense such as this, it is easy for the beginner trader not only to believe the hype is possible, but to actually expect that unrealistic level of success.
The beginner trader has become a victim of sales gimmickry and embarks on chasing the dream without pausing to realise that the adverts and websites are simply engaging in promotional pimping to ultimately sell something. The "services" these adverts promote will only emphasize the "possibilities", and will always ignore the realities.
If trading was as easy as they purport it to be, everyone would be doing it.
If the beginner trader saw an advert "You too can become a neuro-surgeon with our easy Two Hour Learn-At -Home CD and immediately earn $10,000 per week" he would imediately dismiss it as preposterous. Conversely, a similar advert where trading is concerned promising a similar monetary return can persuade him that such is possible.

Unfortunately, sales pitches like those outlined above can cause monetary and psychological difficulties to the beginner trader. The unrealistic expectations engendered by such material will lead ultimately to disappointment and rash trading actions.
I firmly believe that trading with unrealistic expectations is a guaranteed way to lose your entire trading bank.

The Fear Of Losing

Sat, 21 Aug 2010 11:49:03 +0100

The Fear Of Losing has an evil twin brother at the other end of the spectrum -- Unrealistic Expectations.
Recognising, understanding and dealing with these two siblings is the first essential step to a succesful trading career.

The Fear Of Losing is a natural fail-safe characteristic in us all. Without it in everyday life we would be rash and hasty in our decision making. The Fear Of Losing makes us more prudent which can only be a good thing.
Unfortunately, in trading, fear of losing can suffocate initiative. It stifles impetus and enterprise; it can be a motivation killer. You become paralyzed by the fear of losing to the extent that you become afraid to execute any trade.

At the outset, the beginner trader needs to realize one essential truth in order to overcome his psychological fear of losing. And the truth is that IT IS NOT ABOUT THE MONEY. At least not at the beginning. Money will be the benchmark of a trader's success at the end of each month, but the focussing on win or lose on each trade is defeating. At the beginning, the novice should concentrate on the methodology that he learned and practiced during paper trading. Trading is a process, an implementation of proven methodologies and strategies and timing. If these are in place and being used correctly, the money will follow.

Tomorrow, perhaps we can take a look at Unrealistic Expectations.

Psychology and Trading

Sun, 15 Aug 2010 11:18:19 +0100

Along with a trading plan, every successful trader also has -- consciously or sub-consciously -- a trading psychology plan. Making the transition from paper trading to real money trading is as much about a psychological capacity as about a familiarity with the mechanisms of trading.

The greatest psychological hurdle to cross is undoubtedly the Fear Of Losing. Fear of losing is the elephant-in-the-room -- the great destroyer of many a trader's dream of "making it".
Fear of losing -- not to be confused with a sensible caution and respect for risk -- inculculates in the beginner trader a fear of taking on potential trades in a market.
He becomes overly selective, entering only those trades which he believes offer the highest potential for profit taking. At the start of his trading day he lets two or trades go by without playing; he suspects they might be "bad trades". During his paper trading initiation he would have unhesitatingly entered these trades. Invariably these couple of opening trades win.
He is now a little bit nervous and disappointed at losing out on some decent profit, and jumps into the next trade. You've guessed it; this trade goes against him, and he loses. So does the next, not because the market went against him in a significant way but that he got out unnescessarily early. Fear of losing has caused this avoidable loss. Erosion of confidence is the consequence of a fear of losing.

Our beginner trader has lost sight of the fact that some trades WILL lose. It is a fact of trading life that even the most experienced and successful sportstraders on the betting exchanges and on Wall Street cannot and will not ever achieve a 100% success rate. Our beginner trader is psychologically wired into a mind-set that allows him engage only in those particular trades that he believes will move in a particular direction. On my website, and it is worth repeating here, I emphasize that it doesn't matter which direction a market is moving -- as long as it is moving, and that you are on the right side of that momentum. The only market that you don't want to waste your time and effort with is a market that is flat and static. Our beginner trader doen't see this anymore; he only "plays" those markets in which he thinks offer an overwhelming chance of profit taking.

The beginner real money trader has abandoned the methods and approach which he developed during his paper trading period, and succumbed to the fear of losing. He now begins to question his paper trading records and doubt his strategy. Nothing wrong with his strategy whilst paper trading, simply that his psychological attitude has changed. If his paper trading profits were proven and valid, then the same should apply to real money trading. Only the fear of losing has conspired against him realizing a successful transition.

From Paper Trading to Real Trading

Thu, 12 Aug 2010 19:05:14 +0100

The tyro trader now decides to make the jump from paper trading to trading with real money.
He has looked at the different sports markets available, has identified those in which he is most confident and comfortable with. His paper trading practice dry runs have revealed a few startegies that show promise -- a decent profit overall with around 80% of his trades coming out on "the right side." Now it is time to reap the rewards with some real money trades.

However, the first few trades show a loss. The trader feels the first very slight sense of self-doubt. Why did a strategy that worked so well in simulation not work with real money?
Losses continue into the following day. And the losses get bigger with each trade. Emotion and Fear have now entered the equation. The trader begins to skip some trades which he would have unhesitatingly entered when paper trading. These trades would actually have shown a profit if he had traded them. Worse, the trades he does enter into just throw up more and more losses.
Despairingly, the trader begins to question his entire methodology. Maybe, he wonders, was his paper trading testing completely in error; did he incorrectly interpret the results?
After a week of mounting losses the trader decides to conclude his real money trading and return to further paper trading testing.

Is this just a scenario?
No, it happens every day to somebody somewhere.
And there is a single indentifiable cause for this calamitous turn of events.................. although the trader has learnt the structures methodologies of trading whilst paper trading, he has not learned the psychology of trading.
Tomorrow, a review of the psychology of trading.

Becoming A Trader

Tue, 10 Aug 2010 14:45:24 +0100

The first installment of a series of related articles.

The first nervous steps.

You've read a few tutorials, looked up some websites, and you would like to try your hand at this trading game.
For a few years you have made regular bets on your particular sport of interest -- horseracing, football, etc. On the rare occasion you may have made a Lay bet. Now you would like to execute a few "trades" on sports about which you consider you have a certain level of knowledge.

Immediately two options present themselves.
Do you "paper trade" or jump straight in with "real money" -- albeit in very small amounts to begin with.
Experts and commentators in the trading field are equally divided as to the merits of paper trading. No doubt trading with virtual money in a simulation mode does serve as a good learning process with no risk whatsoever to your capital. You cannot lose money. With paper trading you have a risk-free environment to put into practice what you have learnt, to test your ability, to try out different strategies.

On the other hand, the risk-free element of paper trading can mask the realities of trading in a real money situation.
If I gave you £1,000 to trade, would your trading behaviour be the same as if your were trading -- and risking -- your OWN money? Would you be more flippant and adventurous if your own money was not at risk. In real money trading you will most likely incorporate a stop-loss mechanism in your strategy whereby you will get out of a trade if it goes against you. Paper trading, conversely, will usually see you "hang in there" until the price recovers and comes back to your position for a profit. Emotion and fear are absent in paper trading -- in real money trading they are always present.
And finally, does one really learn from one's mistakes in paper trading. Or if we do, is it quite possible that we learn MORE from our mistakes when trading with real money? Human nature being what it is, we learn more from mistakes that hurt us financially than those mistakes which cost us nothing at all.

There is a middle way, and it is a route I would recommend. Begin your trading adventure with minimum stakes in a real trading environment -- £2 each trade with a stop loss of 5% giving you a typical up-and-down spread of two ticks. A losing trade will cost you ten pence at the most.

If you are running a 32-bit computer (doesn't work on 64-bit machines) and If you would like to try simulated no-risk-to-capital trading, there is an excellent real-time Betfair simulation platform from "Betfair And Square" available for Free download HERE.

Tomorrow .............. making the jump from paper trading to real trading.

Becoming A Trader

Tue, 10 Aug 2010 07:21:23 +0100

You've read a few tutorials, looked up some websites, and you would like to try your hand at this trading game.
For a few years you have made regular bets on your particular sport of interest -- horseracing, football, etc. On the rare occasion you may have made a Lay bet. Now you would like to execute a few "trades" on sports about which you consider you have a certain level of knowledge.

Immediately two options present themselves.
Do you "paper trade" or jump straight in with "real money" -- albeit in very small amounts to begin with.
Experts and commentators in the trading field are equally divided as to the merits of paper trading. No doubt trading with virtual money in a simulation mode does serve as a good learning process with no risk whatsoever to your capital. You cannot lose money. With paper trading you have a risk-free environment to put into practice what you have learnt, to test your ability, to try out different strategies.

On the other hand, the risk-free element of paper trading can mask the realities of trading in a real money situation.
If I gave you £1,000 to trade, would your trading behaviour be the same as if your were trading -- and risking -- your OWN money? Would you be more flippant and adventurous if your own money was not at risk. In real money trading you will most likely incorporate a stop-loss mechanism in your strategy whereby you will get out of a trade if it goes against you. Paper trading, conversely, will usually see you "hang in there" until the price recovers and comes back to your position for a profit. Emotion and fear are absent in paper trading -- in real money trading they are always present.
And finally, does one really learn from one's mistakes in paper trading. Or if we do, is it quite possible that we learn MORE from our mistakes when trading with real money? Human nature being what it is, we learn more from mistakes that hurt us financially than those mistakes which cost us nothing at all.

There is a middle way, and it is a route I would recommend. Begin your trading adventure with minimum stakes in a real trading environment -- £2 each trade with a stop loss of 5% giving you a typical up-and-down spread of two ticks. A losing trade will cost you ten pence at the most.

If you are running a 32-bit computer (doesn't work on 64-bit machines) and If you would like to try simulated no-risk-to-capital trading, there is an excellent real-time Betfair simulation platform from "Betfair And Square" available for Free download HERE.

Tomorrow .............. making the jump from paper trading to real trading.

If only it did "what it says on the tin" ............

Mon, 09 Aug 2010 11:07:42 +0100

Discover Your "Risk Intelligence"

Sun, 08 Aug 2010 09:14:05 +0100

Every bettor is acutely aware of Risk -- the level of which usually being mathematically represented by the odds of the selection which the bettor backs at. A 100/1 outsider is a more risky proposal that the Evens favourite.
An every trader is -- or should be -- aware of Risk Management in his trading. Effective Risk Management limits the trader's exposure to adverse market movements, and aids him in identifying and prioritizing potential profitable trades.
But how do you see your own risk-performance? Could you put a value-figure on your risk-management ability? Are you even aware of it?

Dr Dylan Evans (PhD, London School of Economics) is Lecturer in Behavioural Science at University College, Cork, and is at the forefront of research into risk and risk-taking patterns.
Dr Evans believes that successful gamblers – "those rare people who manage consistently to profit by making informed bets, judge risk in a different way to most other men and women" – display a group of traits that aren’t found in other people."
"Unlike leisure gamblers and problem gamblers, the expert gamblers do not get a great kick out of winning, whereas less successful gamblers get a real buzz. However, the expert gamblers find losing much more painful. An expert gambler is likely to enjoy numbers, be a good decision-maker who is adept at judging risk and unlikely to be anyway arrogant. Last, but not least, the expert gamblers know their weaknesses, unlike less successful gamblers who tend to be overconfident".

As part of his research, Dr Evans has developed a test for evaluating risk intelligence. Do take the test and discover your own Risk Intelligence. It may lead you to seeing your trading methodology in an entirely different light. Go to www.projectionpoint.com and take the test.

The Future Is Grim

Sat, 07 Aug 2010 12:07:06 +0100

Gamblers go on strike.

Last weekend French poker players again re-instated their strike in protest against a new government tax of 10% on rake.
Groups of players organise themselves to join online poker tables, and then refuse to play by sitting out each hand.

What has this to do with the theme of sportstrading, exactly?

Well, whilst the Obama administration seems locked-in to a policy of denying the citizens of the Land Of The Free the basic freedom to wager on betting exchanges, governments across Europe seem to be actively encouraging the online gambling phenomenon. Eurpean governments are looking at the online gambling industry and the billions of euro wagered annually as a cash cow to be milked by by the bucketfull. It is a source of revenue that cannot be ignored.

The new French tax imposition of 10% on Poker would seem to be the beginning of a stiffer tax regime across Europe. Last Week Irish Prime Minister Brian Cowen strongly hinted that a betting tax will be introduced in his December budget. It would appear that this tax will be levied on a "per bet" basis and fixed at around 5%. This proposed 5% on top of the Betfair commission rate of another 5% will make for a very tough environment for the trader. It is the phrase "per bet" which raises the most alarm; a 5% tax on every Lay and Every Back in a trade. With a trader making multiple trades in a market, it doesn't take long to realise that the total tax would obliterate the profit taken on the trade.
The future is grim indeed.

Why Do They Do It ?

Fri, 06 Aug 2010 10:46:07 +0100

You visit a new blog on betting or trading, and you just instinctively know how it's going to pan out, don't you.
10 seconds into the introduction and the BIG mission statement is trumpeted. Yep, it's going to be yet another of those "£100 into £100,000 in twelve months" challenges.

You read on in mounting apprehension, but you allow yourself to be carried along by the guy's enthusiasm. There's a certain naive charm about his exuberance. His confidence is sky-high and unshakeable, though you know from past experience of reading such blogs that it will all end in tears sooner or later. Within three weeks that starting bank of £100 will have been whittled down to about £57; in two months time a project that was begun in fanfare will have crashed and burned. The author will quietly and discreetly exit the blogosphere to lick his wounds, and his now abandoned blog will linger untended and unloved as a sad testimony to one more busted dream.

"I've paper-traded my methods for the past year", the guy says. "The strategy I'm gonna use -- backing 1.07 in-running certainties -- is proven, My paper-trade records prove that I can make a 1,000% profit cumulatively within 12 months by staking 5% of my bank each time."
Let me get this right, he's only fantasy traded before and now he's confident of making ten thousand a month betting £5.00 a time on 1/18 shots.

Occasionally, he will make a new post about how yesterday his trades yielded a profit of 2.8% on turnover. Cool. So you've added £1.61 to your £57 bank ............... after 5 hours of anxious, nerve-wracking hard work trading the markets.
You can see the guy is chuffed to bits; he's saying that this is a long-term game -- many little steps to make an epic journey etc etc. And this latest bit of minor success has proved to him and (he hopes) to everyone that his system is sound, and with perseverance and maybe a little tweaking he will make that £100,000 target in the 10 months to come.

But you know and anyone with a working brain knows that the "plan" is unworkable, unfeasible and grossly unrealistic. If someone is putting £2 a trade and gaining 5 pence a "tick", the long-term outcome will always be smalltime. Each ten tiny steps forward will be cancelled out by a substantial knock-back on the one trade that went wrong. The guy is staking all wrong; he is making trades with undercapitalised funding ( making it even less effective by trading with just 5% of his bank each trade); and betting on 1.07 certainties that only take one losing bet to seriously indent his bank.
The future for him is bleak indeed. What he doesn't get ( among many other things) is that if you are calling the momentum trades correctly you should be maximising your profit potential by trading to your limit.
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Why do these guys feel this incomprehensible urge to publish to the world a record of their trading/betting activity? Do they honestly think anyone really cares. Does anybody give a flying fuck about someone else's bets? I know I don't. All that matters is whether OUR OWN bets won or lost. Okay, you might mention that sweet £10 Win double you had earlier today to your mate over a couple of beers down the pub. But that's it. Do you feel the need to blog the world about it?

So why do they do it? Either they are deluded to the point of insanity to think that anyone cares sufficiently; or as I suspect, they are looking at some future angle about turning the effort into a "pay-for" service. Yep, a private subscription whereby the "secrets" will be disclosed to a small and select circle. By invitation only, you understand, and directly to your email inbox. To this end, mention of and reference to losers will gradually disappear to be replaced by a constant trumpeting of winners. The grooming has begun.

And what is this particular blog on this site going to be about? Well, I don't know yet! But it certainly will NOT be chocked with after-timing posts about "how it went today" like the example described at the outset. More a review of sportstrading issues and interests.
(Hey, here's a crazy idea; how about having a blog that points to future profitable trades or value bets). Thinking that that might not be such a bad idea at all.
Do call back to this Blog, contribute your views, and together we'll see where this "work-in-progress" takes us.