Milestones Galore!

The last couple of weeks have produced my best results since I started trading, with several new milestones reached along the way. These are all very modest in the scheme of things, but for me they are gauges that I am slowly heading in the right direction. In the last two weeks I have had:

* my first $100 session
* my first $200 session
* my first $300 session
* my first $500 month
* my first $300 week
* my first $20 pre-race green book

The $100 session had been a long time coming with so many $60-90 days, so I was relieved to get that under my belt, before taking it further on each of the next two Saturdays. However, I am not getting carried away, since both of the biggest sessions included in-play successes that I am not keen to repeat, despite the success. The last one involved an unsuccessful trade that I hoped to profit from in-play, but the race ended up going in my favour and it became clear early in the straight that my horse was going to win so I held off closing the trade to record what amounted to a successful back bet. Still, it would have been a record day regardless, but this last race added a bit of extra gloss on it.

Aside from the $100 sessions, the biggest relief for me was to finally get a $20 net green book. It had been eight months since I recorded my first $10 success and had recorded more than fifty in the last few weeks, one of which was a $20 gross, but not net. So to finally get that monkey off my back was a big relief.

I am determined not to get carried away by these successes and am equally determined to heed my own advice from my previous post and curtail this growing propensity to go in-play to get out of a poor trade. Thankfully, the poor trades seem to becoming few and far between, with strike rates hovvering around 80% lately, so I can move forward with confidence.

With little to occupy the evening, I have also started researching bots, with the aim of finding a couple of modest profit grinding strategies to take some money out of the UK markets overnight to help top up my weekly profits. It's very early days yet so will no doubt post more on this another time.

4 Point Plan for a Healthy Trading Mindset

The more I trade and read around the subject, the more convinced I become that the key to success lies in the mindset of the individual trader. I believe the major difference between successful traders and the rest of us is not only their ability to enter any market in the right frame of mind but, more importantly, maintain that balance throughout the course of the session, irrespective of whether they are winning or losing. However, I do believe that it is possible for any of us to achieve this awesome level of mental strength. This is my first step in my attempts to do just that.

Firstly, let me re-iterate that I have only been trading for a few months and am neither successful nor particularly experienced, but I am determined to improve my understanding of markets and my trading attitudes. Documenting these thoughts I believe to be an important step in helping me address issues I know to be there and, hopefully, improve my trading performance in the long term.

I have a very limited academic understanding of market theory and am yet to be convinced of the necessity of studying technical analysis to any great level. What is the point of knowing all there is to know when no two markets behave the same? You could find yourself trading an event that bears all the classic hallmarks of a particular strand of theory being impeccably observed (and set up your positions accordingly), only for a sudden large order to come in and catapult the market in a completely different direction. Where does your theory get you then?

Don’t get me wrong – I don’t think there is anything wrong with striving to learn more about the activity you are undertaking. It makes perfect sense to gain some fundamental knowledge of technical analysis, particularly an understanding of some simple charting devices; however I don’t believe you need to understand all the dynamics of candlesticks to be a successful trader.

I have spent plenty of time blaming the market for my own poor performance or freak events for ruining my daily totals, just as I have blamed maniacs with deep pockets for sending markets off in directions contrary to the one was I was expecting, causing my losses. Like many new traders, I need to shake off the shackles of taking things personally. This is a victim’s mentality and one that can only inspire continued under performance.

I have come to realise that I have only been making excuses for myself. The blame lies squarely with me. It is time for me to take responsibility for my own actions so that I may learn from my mistakes.

So I have developed my own four-point-plan to develop what I believe to be a successful trading mentality. This is nothing new and is probably second nature to most people but actually documenting it will be a useful exercise for me, as there are a lot of things I know I need to overcome.

1. Take Responsibility

You are responsible for every decision you make. Whether you let an order slip in-play or fail to close out, whether the power goes off or your computer crashes, or whether muppets at the operations centre send events in-play or suspend markets prior to the race starting – your trades are your own responsibility. Markets have no emotions. They have no sense of right or wrong, of justice or sympathy and, if you did something you didn’t mean to, they will not feel inclined let you off the hook. It doesn’t matter what happens, the result will stand. You opened the trade and you are the only person who can close it. You made the decisions and you live and die by them.

You know the risks before you open a trade and must accept the consequences of failure. Every risk can be mitigated with a contingency plan (eg having a mobile phone ready at all times with the right Betfair number on speed-dial and TAN details on hand). However, I recognise that I have always had a bit of a problem taking responsibility for events I consider freakish or unfortunate, or things that I did not mean to happen (eg going in-play), even convincing myself it is okay to exclude them from my records because they were not truly reflective of my trading performance. I am only kidding myself of course and, from this day forward, I will take full responsibility for every trade I make, irrespective of its consequence.

You can’t learn from your mistakes if you don’t acknowledge them in the first place.

2. Love Your Losses!

Losses are inevitable, even for the most accomplished trader. There are too many variables in the market for anyone to correctly predict what will happen all of the time. This is why I don’t believe in spending too much time swatting up on the academic theories.

Losses evoke instinctive natural feelings of regret, annoyance and frustration, negative emotions that are fundamentally counter-productive to trading as they occupy our mind and cloud our objectivity. We all know we will have to bear losses at some point. We have already accepted that it is our own responsibility so there is no need for revenge and nobody (not the market, other traders or ourselves) needs to be taught a lesson. We must accept our loss without resentment and move on.

I think I generally accept losses in the right way and don’t have a problem with moving onto the next event without giving them a second thought. I am quite a philosophical person and I know it’s not possible to go through your trading career without making losses, so I don’t get hung up about it. But this really applies to losses incurred during a standard market when the actual trading activity went smoothly, only some trades were misjudged and I had to take a small loss. When something unusual happens (e.g. an event goes in-play causing a far heavier loss than normal) I know I can take it personally. I get frustrated when I make a mistake; especially one that I don’t think is justified or consistent with my approach and I find it hard in those instances to resist my natural urge to make amends or get even. The important thing to remember here is that the only person we are hurting with our negative reaction to loss is our self. Nobody shares our sense of loss and nobody rejoices in it. There is nobody we can hurt or get back at, so any attempt at redemption is futile. I recognise this is something I must work on as a priority.

You learn more from your mistakes than you do from your successes and every losing trade should be viewed as an opportunity to do better. This is why I believe investing in some screen recording software (e.g. Camtasia) is an absolute must for anybody who wants to improve their trading skills. If you record your sessions then go back afterwards and relive your losing events, you will be able to see exactly where you went wrong. Usually you will find the solution to the problem staring you in the face, the market practically screaming at you to do something which you didn’t because, at the time, your mind was focussed purely on the moment you were in and you were not able to view things objectively. Consequently you missed all the triggers.

Every time a trade goes bad, you have the opportunity to improve your armoury by finding out the reasons why it went wrong and adding it to your knowledge bank together with the solutions for ensuring that mistake is not repeated in future. So every losing trade should be viewed as a short term loss but a long term gain. If you don’t make mistakes, you don’t learn from them and you won’t improve.

3. Don’t Be Scared

Once we have learned to take responsibility for - and the consequences of - losing trades, we can start to work on eliminating fear from our trading. Fear can manifest itself in several ways:

• Fear of losing money
• Fear of being wrong
• Fear of the market
• Fear of other traders
• Fear of missing an opportunity

All of these factors contribute to poor trading performance, through hesitancy or spontaneous reactive trading. However, we can change our thinking to overcome all of these primal instincts:

• Think of losing money as the price you pay for the experience gained and lessons learned. Losses are the opportunities you need to improve. They will make you stronger.
• You will be wrong sometimes. It is unavoidable. The trick is to recognise it quickly and minimise the consequence.
• The market is basically abstract in concept. It is just a bunch of people trying to get bets matched at different prices. It is neither your friend nor enemy and certainly nothing to be afraid of.
• Big money orders often seem to come from out of the blue and leave you stranded. You need to react quickly and decisively to accept this and exit your position with minimal damage. There is no point in worrying about what other people are going to do because that is beyond your control. They don’t know you and are not ganging up on you and there is nobody there waiting for you to click your mouse before they launch their market altering position an instant later, even though it may feel like there is sometimes.
• Often you will miss big price movements and kick yourself mentally for doing so, particularly if you had predicted it but failed to act in time. Do not let a pigheaded determination to catch some of the action lead you to open trades at odds with your usual entry strategies. If you miss an opportunity, it is ok, because no damage has been done and another one will be along shortly.

Fear is another reason why I don’t advocate bogging yourself down in academic study. Information is invaluable providing you know what to do with it. To reach the level of competency where you instinctively process this kind of information can take years of study and experience and, when no two markets are ever the same, only you can make the decision as to whether or not you think it’s worth it. If you have too much information and are not skilled enough in its application, it will promote confusion, hesitancy and fearful trading.

4. Discipline, Discipline and More Discipline

‘Discipline’ is the main buzzword you see repeated ad infinitum in every trading course and every book. It has become something of a cliché; however it is vital that traders understand that it is one thing to develop a sound trading strategy but applying it successfully is another thing entirely. This will be the true measure of your success. Markets operate under extreme intensity that often breeds massive volatility but you must keep your head and make your decisions objectively, instinctively and consistently. It is very difficult to maintain this level of focus during the hectic scramble of the last minute before an event goes in-play and that is why there are so few truly successful traders on the betting exchanges.

Learn from your mistakes and stick to your strategy rigidly. If your tactic is to close prior to the off then you must never, ever let an event go in-play. It is easily done but equally it is easily avoided and it is a good indication of your self-discipline if you can apply this rule consistently. Consider setting yourself a punishment whereby every time you break the rule you ban yourself from trading for 48 hours, for example. You need to factor in some kind of disciplinary action, even if it results in a profit, because you need to deter yourself from letting it happen again.

Don’t get hung up on losses and, conversely, don’t allow winning streaks to translate to over-confidence and subsequent recklessness. Don’t allow either to affect your decision-making one way or another.

Remember that every market is different and every trade is independent of any that either preceded it or succeeded it. You need to re-group mentally after each trade, regardless of whether it was a winner, loser or scratched, because it will have no impact on the success of the next trade (other than on your confidence). You must absorb the market conditions afresh and repeat this process every time you open a new trade.

There is a constant flow of markets and opportunities abound for every one of us to take money (and plenty of it) provided we can discipline ourselves to follow our strategies and make our decisions consistently in the face of extreme pressure and with money on the line. Those that can do this will be rewarded with as much money as they care to take. Those that can not (the overwhelming majority of us) will continue to struggle.

I hope I do not sound too pretentious in this post. I recognise I am not an experienced trader and anyone reading this might think I should refrain from preaching about subjects I have little or no expertise in, but the primary goal of this blog is self-help and documenting my shortcomings together with suggestions for overcoming them is of great benefit to me. Successful trading is a skill that I’m convinced can be learned. Master the four points of this blog and I am sure success will be within reach. I know none of this is rocket science, but I think it helps to draw attention to it and I will be revisiting this post regularly to help drum home some of these points which I think can easily be lost in the flurry of a hectic session.

Trap for Young Players

First things first, August ended up better than planned with the $100 target doubled. Finding things are going well in the Aus horse racing markets, but it's very hit and miss with the UK greyhounds, which are really the only markets ripe for trading of a weekday evening in Australia.

Anyway, here's the final screenshot from my target tracker for August.

September has not started well, as I have not had chance to trade during the first week, due to a mixture of family commitments and also being sick. But I did get to trade one day when home sick and that is when something happened that the title of this pose refers to.

I was happily trading away, racking up modest if not outstanding profits, when something very strange occured on the sixth race of the day at Rockhampton. With more than 30 seconds till the off (on the Bet Angel clock), the event was suddenly called in-play. I had an open lay order at the time. The TV feed (which had been bang on the money all day) still showed less than half the field had loaded. From experience, this usually means the event will go in-play 30-60 seconds late. But in-play was the call and obviously all the open orders were cancelled.

I was trying to get my head around the confusion when, about 20 seconds later, the event was suspended. Still, the TV feed showed that a few horses were still not in the stalls. It remained suspended until the race eventually started, when the second in-play call came in, this time on cue.

The horse I was trading started badly and never came into the reckoning, meaning there was never an opportunity to trade out in-play. The green out figures on Bet Angel showed a big plus on the horse I was trading, but a hefty loss on the rest of the field. Of course, it ended with a loss.

On ringing Betfair, they admitted they sent the event in-play "earlier than expected" and were sympathetic about it, but stopped short of offering an apology or confirming that it was a mistake. They advised me the result stood and that their terms and conditions of membership covered such eventualities. They told me these things happen from time to time and that it is just one of the things traders need to consider. They also basically advised me to be a bit more philosophical about my trading.

I said even if I wasn't going to get my money back, at least an apology would be nice. The rep told me he could "understand that" but never gave it. I guess this is something else we need to prepare for. Power cuts, computer crashes, and now idiots at Betfair accidentally closing the markets a minute early.

Don't you love it when that happens?

Ok, so it was a very modest target, but it was great to hit the $100 in just 3 days. Having started on track on Wednesday and Thursday, I had the day off work on Friday to have a crack at a full afternoon's trading. It looked like it might be a bit of a washout early on, when the Muswellbrook meeting was abandoned after the third race - a race which represented the worst of the day, thanks largely to the reduction factor applied after the starter let the horses go when the jockey of one of the favourites was not on board. The horse ran round without him and was ultimately declared a non-runner.

Having hit my $20 target early on, I accidently let my best trading effort go in-play without greening up. Luckily the favourite won and I pocketed $43, rather than the zero that it would have been otherwise.

I finished the day with eleven straight profits (after the Muswellbrook disaster), finishing with $80.85 for the day, and $102.86 so far, which has achieved the target set for the last week of August. Screenshot of my spreadsheet tracker is below.

I will continue to trade the rest of the week and try to hit the remaining targets. Of course, if things go badly, I could end up failing to hit my target after all but, as I am still very new to trading, I need to keep practicing.

I had planned on trading the evening harnesses and greyhounds, but instead I will just have a couple of beers and watch the football.

Setting Targets

Like many wannabe traders on the betting exchanges, my Achilles heel is discipline. I can lose focus easily, letting too many orders go in-play and allowing losses to accrue quickly rather than cut them out modestly when I have the chance. To combat this, I have decided to set myself targets.

Now, targets are not for everyone. Some find them stifling while others set them unrealistically or find they put too much pressure on themselves. But I believe they can really help me cut out the silly mistakes. I think I would be less likely to let an order go in-play, knowing I could suffer a heavy loss, if I also know it will set my progress to target back dramatically. If I am half way towards my target (say $50 in a day), why would I risk a $30 liability by letting an order go in-play when I could close for a loss of only $5? Sure, I could be lucky and make $30, thereby hitting my target nice and early but, if I fail, I will have wiped out all my work so far that day. I don’t know about you, but I think I would be less likely to take that chance if I was chasing a target.

I also believe that, when they are broken down into tiny nuggets, targets look far more achievable. For example, you may set yourself a target of $1,000 for the month. For a lot of new traders, this kind of profit might seem a long way off. But, if you can work out in advance how many days you are likely to trade that month, and how many events you expect to trade in each session, you can break that $1,000 down into manageable amounts. I think, all up, I could comfortably trade 500 events a month. The $1,000 averages out at $2 per event. What’s more, I know I fare better in the more liquid markets of Friday and Saturday, so I can revise that $2 per event to be just $1 during the week (estimate 16 days during the month, 18 events per day, 288 events for $288), while Fridays I can get through 30 events (4 Fridays, 120 events, $2 per event = $240), and Saturdays I can hit 40 events (4 days, 160 events, $3 per event = $480) . $288 + $240 + $480 = $1,008. A grand, with eight bucks to spare!

I would approach this by telling myself that Ok, today is Monday, so I think I can get through 18 events, so my target for today is $18 profit. There needn’t be huge pressure, as $18 isn’t a lot, whether I make it or not. Some days, I might be lucky and reach the daily target early in the session. I can then decide whether to quit while I am are ahead, or keep going to try and create a bit of a buffer to make up for any days when perhaps I am unable to trade, or did so at a loss.

Saturdays can be more demanding as I would need a profit of $120. However, I always have the second chance of a fairly liquid evening session to bail me out if I came up short during the day.

Hit these modest targets on a regular basis and, before you know it, you will be at or around your $1,000 target for the month. Simple, huh?

Well, yes, in theory at least. However I am not yet at the stage where I can guarantee myself $1 a trade during the week and $3 at weekends. I am in profit, but not by much, and my average sits at around 40 cents per event (60 on Saturdays). But I do put a lot of my mistakes down to naivety and ill-discipline. So I came up with a target, for August and September, to help give me some more focus.

We only have a week left in August, so I set myself the very modest target of $100. When broken down, this equates to $10 per day, $20 on Friday and $30 on Saturday. The project began last night and, after a very topsy-turvy evening on the volatile Aussie harnesses, I finally hit my target on the very last race of the evening to come out with a $10.54 profit. Now I need to sit down tonight with a target of $9.46 to stay on track.

My target for September will be $500. Again, I am determined to keep my goals low and achievable. I am only new to this, so if I can make $500 at the first time of asking, I will be very pleased. I estimate I will trade 26 days during September for 600 events, so my target profit will be 83 cents per event. Knowing my event target is only 83 cents should help me plan my exit strategies better and not keep over-trading or hanging onto positions in the hope of gaining more and more.

I am not planning too far ahead, so have not set any targets for October yet. At the moment, I would say if I hit September’s target, then it will increase, probably to $1,000, or, if I don’t reach $500 in September, I will probably keep the same target for October.

I am currently using $50 stakes on the bigger markets on Fridays and Saturdays and reduce this to $20 when I trade the lower liquidity of the midweek harness and greyhound meetings. I find the reduced stakes help me get matched quickly and losses don’t look so bad when the volatility moves against me. With these stakes, my targets should not be beyond me.

When setting targets for yourself, you need to make them achievable, especially when you are new and learning to trade. If you set them too high, you will fail miserably and possibly be tempted to go in-play and take more risks in search of bigger rewards to try and catch up. You will only compound your mistakes and end up further away than ever, possibly disillusioned with the whole thing. You need to start small and build up gradually making sure you hit each milestone along the way before you make the leap to the next level. Knowing your limits gives you the best chance of success.

Theoretically, at least.

Time to crank it up!

After barely having time to trade from mid April through to mid July, I have spent most of the last month learning and trialing various strategies and now plan on trading Saturday afternoons in Australia and some late Friday and Saturday nights on the UK markets. I am also trying to find strategies for trading midweek on the rather gappy and volatile evening races in Australia and greyhounds in both Australia and the UK.

I really want to make a go of this and feel confident I am learning more almost by the day and with a bit more discipline with my exit strategies I can make better profits and avoid the losses which continuously represent the biggest P&Ls of my days.

April starts with more of the same

I settled in for a day of solid training on Easter Saturday, only to have to abort early on after a last minute decision was made to visit friends. A little frustrating as I was in the mood for the kind of serious session I hadn't had for more than a fortnight and things had begun smoothly, pocketing solid - if unspectacular - profits of around $3 for each of the six events I managed to trade. Still, at least I was able to go and get pissed instead!

Easter Monday provided a more sustained effort, with 20 events traded all up, although the rustiness showed early on, as I jumped in too early on the first and ended up almost $10 down. A silly decision on the third at Eagle Farm (where I changed tactics to adopt a new scatter bet approach to the gappy, low liquidity market) cost me another $15 and I was nearly $25 down on the first four events alone. Luckily I steadied and grew in confidence after that with a few double figure profits, and only one howler of an event where I placed bets at the wrong end of four sudden and dramatic market shifts, losing $10.

I thought I had my second landmark moment on the 6th at Canterbury, where I greened up on Bet Angel for my first genuine $20 trading profit, only to see it reduced after Betfair commission to $19.88.

Overall I ended up $12.76 ahead, which was ok after the dreadful start, although the success rate of 60% was below par, however only 2 of the last 10 events were red, which was a reasonable comeback. I have reverted to $50 bets until the bank grows sufficiently to move onto $100.