Thursday, 30 July 2015

Scale up

The headline says it, I am thinking about scaling up. Not yet, but I am planning a smooth increase of  the stakes while I am still testing the system. It's better to rise the liabilities step by step and not from one day to the other. Of course the sample size is still to small to be sure about the edge, but the confidence is growing. It's not that you can judge a strategy after 1000 trades and with 999 trades not. It's also a smooth development, and I never traded so consistent before.

When I am still on the track after 100 trades, I will double my stakes. It's not a big jump, it will still be micro trading with a risk less than five Euros per trade. If the success story continues, I will be after 1000 trades at the level I like to reach (in a first stage). I expect that I need around one year to be there. It will be factor 100 in comparison to todays liabilities. I kept an eye on the markets last days, and I am quite sure that the liquidity will not be a big issue at the most tournaments for 100 times bigger stakes. We are talking about 200 Euros and not about 1'000 Euros or even more.

In general I am very happy about the development. It's getting easier to spot value (How in the hell Kudla could be 5.0 after he was a break down against Sock?! I saw him even as a pre game favourite...), and I am really comfortable with the strategy now. The biggest issue is still riding the "green waves". Despite I was confident about Kudla, I just made 1.07 Euro profit. It should be at least two Euros (even with hedging after the first set). Well, it sounds not a like a big thing, but with higher stakes this is a huge difference, which you can't afford in the long term.

I don't like to complain. Two weeks ago I would agree to this development without any hesitation. Of course it's still micro trading, but the procedure is (almost) the same with higher stakes. The only thing which I am worried about is the variance. It can be that I am only on a good run. The hit rate is really high (almost 90%), and I doubt that I can keep this number. 50% would be just random like at the casino. I think a number between 75% and 80% should be possible with this approach.

Unfortunately I can't do any backtesting, because I trade manually. When I consider a game situation as value I enter the market, if not I stay out. It can be quite boring, the most of the time I am just waiting for the right moment. Well it seems not a bad approach, I heard from some professionals that trading can be dull. Is a bit like in the army. Waiting, waiting, waiting and then running like hell and have stress. Fortunately I have a lot more fun at the tennis ladders than I had in my time as a soldier! :-)


8 comments:

  1. I also had Kudla as a tip, so glad he won as I had a really bad start to the day - think I went 0/5!

    Just be patient and take your time, the money will come eventually, just don't rush whatever you do! :)

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    1. Yes, you will have bad runs with your value based approach. I guess that you bet 80% on the underdog. If you are right, you make a lot of money. This helps you to cover losing streaks. Your record is amazing so far, in my opinion the beginning was good variance, now probably bad one. The truth is somewhere between.

      My approach is different, I need long winning streaks, because I can't afford losing 3-4 trades in a row (average loss is bigger than average profit). It would hurt a lot! At least at the moment, because I am still bad in compounding during the matches. If I can make 4-5 Euros or even win one jackpot (20 Euro) it's a different story. It think it's completely possible to do this, but at moment my experience and luck is not sufficient.

      Yes, I will take my time. I mean 1000 trades are a lot. Especially when I work full time again (I start next Monday), I don't have the possibility to be on the ladders 10 hours. I would be happy to make in average around two or three trades a day (included weekends).

      Perhaps you were on Berankis? Johnson is out of shape... his defeat (at least is looking like he loses) is not coming out of the blue. I saw him against Ito a week ago. That was terrible and against Lacko he also needed three sets. Beside Stepanek could have a chance against Isner. The value is definitely on his side... In my opinion he is the better returner than Big John and if the US guy has one bad serving game, Step will be ready. His last matches were quite okay.

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  2. You know my opinion about thinking long-term, so it is very nice looking at your evolution and noticing that your confidence is increasing!

    About the Kudla match, my advice is to relax and be happy with your result, 1.07EUR doesn´t seem a lot but your profit was above 50% of your average stake. My point here is that although it is good to analyse all your trades and search for ways to improve not only the reds but also the greens, there is a thin line between healthy analysis and over-analysis. I searched a lot for the perfect trade and it doesn´t exist as you can always do better (or worse also!!), what I found was frustration even when I was profiting which in some phases was detrimental to my evolution. Like the old saying says "the perfect is the enemy of the good!".

    Then you say an interesting thing "the procedure is (almost) the same with higher stakes", to which I generally agree, for the amounts you are talking about. The tricky part is that although the procedure is very similar, your mindset can be different and that can change everything. The challenge of scaling up includes a big psychological sub-challenge where you must trick your brain in order to trade as relaxed with 2EUR as with 200EUR stakes.

    Finally, yeah it gets dull! Eventhough, if i was told that, some years ago, i would have answered: "Dull, no way!" :)

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    1. Thanks for your comment, well appreciated to get some feedbacks!

      Well, of course 1.07 Euro in comparison to my risk (average 2.00 Euro) is not that bad. It's more the thing that I didn't stick to my first idea. Later I made a similar trade, but I lost part of the profit. That's okay, when you are confident about your idea. I was just disappointed about myself, because the value on Kudla was so obvious. Normally the market is quite correct, so I was really surprised. I mean it was Sock (a good player, but far away from a topstar, in my opinion currently not in the best shape) against a hot Kudla. In general you are right about over analysing. Perhaps it's in my blood, because I worked years as a financial controller and now as a CFO. :-)

      About scaling up... perhaps it sounds a bit arrogant, but for me 200 Euro is not huge money. It means that you trade with a bank of 20'000 Euro. You have to see the whole picture and in Switzerland the wages and costs are a lot higher than in other countries. In comparison to the poorest country in Europe probably like factor 10: http://www.auswandern-handbuch.de/lohnvergleich-europa/

      In the past I was not afraid to lose some Euros, it was more the feeling to fail. It's a bit like a dream to succeed and make in the future money with my passion. After a terrible 2014. I just prefered to have more security again. I think it's the right way to work at least five to years as a good paid employee and make a side income with sports trading and stocks.

      It was the best idea to trade with micro stakes to get the self confidence. I am quite sure that in my case scaling up is not the big issue. I know that for other people it is. I am also very disappointed and angry, when I lose two Euro. The feeling is similar to a loss of 200 Euro...

      Yes, a lot of professional told me that the biggest excitement was the path to getting successful and couldn't believe how dull trading can be, when you make a consistent income. I think I could live with this, because I enjoy the liberty which you have as a self employed person. What I don't like is the stress, that's the reason why I like a lot more financial security. I need a save side income of 4'000 to 5'000 Euro beside trading (like real estate or financial markets).

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  3. No problem, I´m well aware of the life standard in Switzerland as i have family and a friend living there! It´s a plus for you in terms of scaling up that I didn´t thought about. For me it was a problem, as everytime I increased my stake I noticed a change in my trading performance. I solved this issue with the scaling up plan that i told you some posts ago.

    The reason I talked about over analysis is because letting go the perception that i control everything when I´m trading, was very important in my evolution. Theoretical plans are very useful as a starting point but what really matters are the pratical decisions you take when you are trading. Sometimes these decisions have to be made in very short timeframes to catch value prices, which classify them more as intuitive-based decisions than rational ones. You may not believe me, but sometimes when i´m reviewing my decisions after a match I can´t understand some of them!

    In terms of spotting value, as you increase your experience and confidence levels I think you´ll start to see things like you described more often. If you are afraid or insecure, the value may be in front of your eyes and you will doubt your intuition and think it is too good to be true. It´s all a matter of perspective, that´s why trading is so interesting and complex.

    Finally, although trading may be dull sometimes the liberty that it may bring is far from dull, so I understand what you are saying!

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    1. I understand that there is psychological topic about scaling up. For that reason I will do it smoothly. Every 100 trades will give more confidence and experience to make this step with a good feeling. The other side is the money you can afford to lose. For me losing 20'000 Euro (a bank which allows me to trade with 200 Euro risk) would not be the end of the world... I lost a lot more last year with the guy, which scammed me.

      Yes, the speed of trading is incredible. I think that is the main reason to make wrong decisions during a match. I am with you, I make a kind of over analysis with good and bad trades. I am more the analytic and not intuitive trader... that is not the best skill for trading. I think is easier for people which have the trading in the blood. I am always looking for "logic" and sometimes you only have to trust your feeling.

      Yes, spotting value will get easier with more experience. Now I am unsecure, when I see odds like in the mentioned case.

      If I could make a stable 50% income with trading (included pension fund, insurance, holidays) I would go full time. Liberty and passion is so important. My future job will be okay, but nevertheless I will feel somehow like in the jail. I mean in the case of the rhythm (08.00 to 17.00 working hours) and about the fact that there are always people which tell you what you have to do.

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  4. Hi Martin, thanks for the post. Interesting blog here. I've added it to my list!

    Caan

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    1. Thank you for the nice words and adding my blog. You are an inspiration for every novice trader. I really like your blog and the videos, despite I don't like horse races ;-) Nevertheless - like I wrote at your blog - I see a lot of similarities in the aspects of trading.

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