Variance is part of the trading

Lately I was more focused on the stock exchange than on Betfair. That was one of the reasons, why I didn't trade much. Beside there was not that much action during the evening hours. The whole week I just made six trades. Nevertheless it demonstrated, how the future could and should be.

First of all it showed that the variance is high. After five trades I was in the red zone, one good one helped me to reach an all time high.

Second the biggest profit is higher than the biggest loss. This is important. You have to cut your losses and let the greens run. This principle is implemented in my trading strategy. The average profit is lower than the average loss. This is not alarming, because it has to do with partly won trades. I have two targets after I opened a position. The first level is the breakeven value, the second one gives me in every case (it doesn't matter which player will win the match) a good profit with a risk-/reward ratio above 1.00. So, when only the first target is reached, normally results a small profit (and sometimes a small loss, when my forecasting was too progressive what doesn't happen that often). This fact deforms a bit the comparison between average profit and average loss. This is also the reason, why I can't calculate the yield anymore. Because of stop loss levels, my liability is higher than the real risk. So it would be very complicated and boring to calculate this figure. Beside it results an over analyzing of my trades, which were a handicap in the past. In my opinion the chart and figures shown above are enough to control my trading activities.

Like I wrote in my last posts, I can handle now my emotional side. This helps to accept a bad run like I had after a promising start. Of course I just made six trades and you can't over-interpret that, but a promising tendency is here. I am happy with my new approach, and I start to make the right game selection. The main reason is an improved patience. Before I made a trade, even when the scenario was not the best. Now I am more selective, this is also a reason why I just made six trades.

Next week starts the US Open. I will focus more on the WTA tournament. First the volatility is higher than at ATP matches, because the serve is not that important. Second I don't have much experience with five set matches. In general I am happy that the last preparation tournaments are over soon. At the Salem Open (ATP) and in New Haven (WTA) you never knew if a high ranked player is enough motivated to give 100%. I saw some players tanking, for example Karolina Pliskova. It's quite annoying, when you lose money because a player prefers to have a break before an important tournament than proceed...

A mixed portfolio for diversification

Last days I recognized that only a very small part of my money is involved in tennis trading. The stock exchanges are tumbling, because the economy of China is probably not growing that quick like expected. To be honest, the nervous markets are not good for my portfolio. I lost a high four digits amount in the last days (well before I made a five digits profit, but losses always hurt). Unfortunately the stop loss orders didn't help much, because the markets (at least in Europe) bounced back today. Well, I expect another red day tomorrow. So it's probably better being less involved in the stock markets and concentrate more on the sports trading.

Well, to make a long story short, I saw that sports trading is just a very small part of my side income. So I decided to judge it in a main context. In the future I will invest a part of my savings in sports trading and a part is reserved for the stock exchange. Beside I will keep cash, my life insurance and of course my appartment. With this diversification I should have a good base for a growing fortune.

How this decision influences my trading? I will be more relaxed. Sports trading is just around 20% of my savings. Beside I prefer to trade and not to analyze. Unknown mentioned it already some weeks ago. I think it didn't help my trading to report and comment the KPI too often. I have a tight money management and a decent risk-/reward-ratio, that's enough. I will upload my trades to mybetlog (www.mybetlog.com), but not publish the KPI section anymore. For example it's very difficult to calculate the yield with so much positions and stop losses. The basic stats like average or biggest profit and the development of the bank are part of the mybetlog tool.

About trading itself. The last week I finished the setup. I talked about it in my last post. There are three different stakes and every position is not closed before I reached a risk-/reward-ratio of 1.00. With this approach a strike rate of 50% is enough to have a small profit. The theoretical stuff is done, now is about practice. In the future the posts will be again more about my time on the ladders and less about the approach.

Monthly budget and defined risk-/reward-ratio

I already wrote about the opportunity costs. This week I felt stronger than ever that they are too high with the current setup. It doesn't make much sense and fun to trade four or five hours for a possible profit of two or three Euros. Of course the sense of this approach is the protection of the bank. It's not recommended to trade with high stakes with an unproven strategy.

First I have to tell that the strategy is not that unproven. Sultan had success with it, and on the markets you can see that the method with mainly low lays are a famous and successful one. Second I recognized that the new approach works for me if I stay patient. Third you can define an amount, which you can afford to lose without bad emotions. It's definitely higher than the current stakes. Fourth the opportunity costs are lower... obviously you can lose more money (and then you have opportunity costs and real costs), but in the last weeks I always managed to end in the green zone.

I decided to trade with a monthly budget. Of course it's not the target to lose it, but with this definition I can trade with normal stakes (5 Euro = 1* trade, 10 Euro = 2** trade and 20 Euro = 3*** trade) and an adequate money management.

Beside I could finalise the often discussed topic with the risk-/reward-ratio. I analyzed a lot, and decided that every single position need at least a rate of 1.00 (after commission). This means that I risk one Euro to win at least one. As a consequence I "only" need a strike rate of 50% to trade breakeven.

The biggest change I made since last week are the addition of different levels I hedge a trade. While you can green low odds quick, you have to be more patient with odds around 2.00. I had to make this adjustment, because I recognized that some trades had a terrible risk-/reward-ratio and crashed my profit and loss statement.

With the mentioned adjustements I start again to report the trades to mybetlog. I will write from time to time on this blog about the financial development. Beside I will think about a reintegration of the KPI section. Like a reader mentioned, it's my blog and I like the numbers. I just couldn't handle the pressure as good as I should.

Week 4 in review

At Thursday I already talked about it. I made a change of the strategy, which gives me more flexibility. I differ now between 1*, 2** and 3*** trades. Dependent on the time, the trust and the downside potential I risk more or less. I don't use something "complicated" like the Kelly criterion for calculating my stakes, but as bigger I see the value as higher I stake. In general it's a change in the direction to a more intuitive approach.

Beside I rised the target risk-/reward-ratio. The first principle of trading "Let the profits run and cut the losses." is now more integrated in my strategies. With the newest update a 45% hit-rate is sufficient to reach a breakeven result.

Last week I didn't analyze my results at mybetlog.com. It's still too early for an ultimative test. That's also a reason, why I didn't publish anymore the KPI. The nice feedbacks convinced me to do it again in the future. The only negative feedback was the one of Cassini, and I don't care anymore about his opinion.

In general it was a good week with a small profit, and the above mentioned changes will (hopefully) be the base for a bright future. Since I started my new job, I don't have that much time to trade anymore. Some matches are too early (before 6 pm European time) and some take place too late (after midnight). Unfortunately the weekend is extremely low of action (only the half finals and finals). On the other hand you can find soccer matches in every corner. Nevertheless I will stick at the tennis ladders. With rising the stakes, what is planned in the future, qualitity (often half finals and finals bring balanced matches with a lot of swings) goes even more over quantity.

Next week a masters 1000 tournament take place at Cincinnati (WTA and ATP). Again we will see the major players in action. Even Roger Federer returns to action. I will use these days to stabilize my new trading approach. Beside I will start again to report the outcome of the trades at mybetlog.com. It's planned to give an overview about the results in next weeks review. Beside I will think about reintegrating the KPI section on the blog. When I feel 100% confident about the strategy, it shouldn't be a (mental) problem anymore.

More flexibility is needed...

First of all I like to thank all readers for the nice feedbacks about the debate with Cassini. It seems that he has nothing more to write since he doesn't bash me anymore. Well, that were my last words about him. Trolls live from feeding them, so no more talking of this topic.

This week I traded not that intense like before. Mainly I watched the markets and made a kind of virtual backtesting. I recognized that there is a big potential with flexible stakes. Before I didn't consider the combination between the absolute risk and the liability. The best example was the match between Isner and Johnson. Big John was a break down, and there was almost no downside risk anymore. It was the perfect opportunity to scalp for a service hold of him, especially when he was 0:15 behind. With this scenario you had around five ticks risk, and you could make five ticks profit. That's an amazing risk-/reward-ratio, because the chance that Isner holds the serve - even when he loses the first point - is at least 70%. On the other side five ticks are not a big swing, so a small stake doesn't bring much money. In this scenario a rise of the stake makes sense.

Beside I have to be more patient. It's better than some months ago, but I still take a lot of times only the second best opportunity. I recognized that often better value is coming, when you are patient. In general I would say that I trade now more freestyle (intuitive) and less like a (mathematic) robot. Of course everything is still inside the strategies, but with more flexible stakes and stop losses.

With the defined risk-/reward-ratio I feel okay. In general I risk one tick to win one. To cover the commissions and the hedging costs, I need a hit rate slightly above 55% to be breakeven. With this setup I should not have too long losing streaks, and if I have a bad run, it doesn't take forever to return in the green zone.

The sense of this blog

My blog is getting famous, every third post of the "big Cassini" it's about me: Green all over. It's a bit weird of a guy, which says that he is not interested in tennis trading, and that my blog it's not a good read. For me is strange that he has a (negative) opinion of "all" people around him. It was not different, when Sultan was an active blogger.

First of all I have a bit of understanding about the criticism of the KPI section. I never wanted to show a wrong picture, where I don't count trades, which I lost. It should be a guideline for me. I didn't consider good trades outside the strategy (like the injury trade) neither. Nevertheless it's better not showing these numbers anymore. It doesn't give an added value to the blog, and it opens discussions, which are useless. As a consequence I erased them.

In general I don't like it, when people judge me, without knowing me. Cassini didn't recognize the sense of the blog. Obviously is an up and down with mistakes and changing opinions. If I would be a settled trader, I don't need this blog or where are Sultan, Mark and all the guys, which made it? To learn from mistakes and share ideas, exactly this is the sense of it. It helps to have feedbacks like the ones of "Unknown" and is just poor to read posts like the one of Cassini. Yes, destructive feedback is not welcome. It doesn't help and so I ignore it.

I don't need suggestions like "Martin should focus on his day job, and walk away from betting / trading altogether". Even the best trader made mistakes in the beginning. Beside Cassini himself had not the best times lately. I don't give him the advice to retire. Perhaps trading is just a hobby beside his normal job (like it is for me at the moment), perhaps he just had bad variance. Live and let live...

Week 3 in review

The week is almost over, so it's time for the weekly summary. At Monday I started my new job. Obviously the focus was on it, and the trading was not that dominant like before. The beginning was delightful. I hope that the new job will have in the long term a positive influence on my trading results. The financial stability will be a lot higher than the last 18 months, where I just worked 50%.

Short term the 100% activity as en employee had a negative impact on my trading results. I traded less, and when I was on the ladders, I was exhausted and impatient. After a bad day, I blew almost 70% of my bank. I couldn't keep the discipline. After that event I decided to trade with a very small bank of 100 Euros. It's sufficient for the stakes I am working with. I swore myself that there will be no more deposits to Betfair in the future. As a consequence I only can scale up with an organic grow of my bank. With other words, I have to go the hard way with 100 Euros to a considerable five digits amount. That's the reason, why the capital on the right side is a lot smaller than some days ago... on the other hand the ROI is looking better, because the new base is just 100 Euros.

I recognized that there was a small mistake in the strategy, which had a bad consequence. In my approach I make something like averaging down the entry price. In the past a trade was more lucrative, when I won it after the second entry. Now I adjusted the strategy in the way that it doesn't matter, if I win the bet with the first or second position. It has two advantages. It's easier to win with the second entry and the risk/reward-ratio is better. Beside I decided to take a bit more risks. As a consequence the hit-rate will be lower, but the pressure to win "every trade" is smaller. In general I will risk one tick to win one. Before it was the half. With this change I adapt more the principle: "Let the greens run and cut the reds."

Without considering the accident, which cost me a medium sized 3-digit-amount, the week was okay. Obviously I couldn't make a lot of trades. I entered the market not even ten times, and the profit was just around one unit.

What will bring the next weeks? I am getting used to the new rhythm with part time trading and working 100% as employee. The USA/Canada tour will bring a lot of opportunities to test the latest adjustments. I expect a lower hit-rate (the mid term target is 70-75%) and a better ratio between average profit and loss. The yield is too good at the moment. With the mentioned parameters it will be somewhere between 10-15%. I think that is a realistic number. So I can't be worried or angry, when the current numbers are going down. In the long term view, I like to compound the profit during a match. Right now this topic is not in the focus. With the mentioned reinvestments, I hope to to refine the yield to 20%+.

Like "Unknown" mentioned is better to update the P+L not every day or week. So it's easier to keep the long term focus. I like this tip, so I will refresh the KPI on the right side just every second week. It will take away some pressure and beside I can save time.

Lack of discipline

It's really hard to keep the discipline with low stakes. Today I couldn't manage it, and I overstaked. Obviously I lost the trade... When some things don't work right during the day, the risk for irrational behaviour is quite high. Today I had some frustrating actions at the stock exchange, and it influenced my tennis trading. I was not patient like the last two weeks. After a trade didn't go the direction I wished, I tried to scalp offline with a high amount. My player started the 3th set with serving, so I decided to hold the trade for 15:0 to recover the five ticks, which I lost while the girls were on the toilet. Everything went wrong: 0:15, 0:30, 0:40, break... Putintseva rised her lead to 3:0, and I closed the trade. Murphy's law, McHale fought back and my initial trade (even if it was without discipline) would be a winner.

Just seconds after I lost the trade, I transfered a big part of my money back to my saving account. This lack of discipline was only possible, because there was too much cash at Betfair. Like you know, I just trade with two Euros... so I don't need a bank of 1'000 Euro! It only gives you the possibility to make bad moves, which you regret afterwards. Now I have a bank with 100 Euro, which is more adequate to my stakes.

What else I changed? I recognized that not all the strategies have a low risk profile. Two of them are back strategies. When you enter the market too early, the trade can go very bad against you. Sometimes is tempting to back the favourite after he lost the first set, but if he/she continues to struggle, the position has a very bad leverage. With lays under 1.10 you can't make much wrong. The liability in comparison to the possible profit is very low.

It's normal that you have setbacks in my stage of a trading career. It's not the end of the world, if you make the right learnings out of it. The financial damage hurts, but in the long term these kind of experiences help to improve. Even the best traders made mistakes before they succeeded. It just shows that I am not over the mountain yet. I will try to fight back, obviously not with chasing losses, at the weekend. I will keep the KPI on the right side unchanged, because the mistake happened outside the strategies that I am testing at the moment.

Changing conditions with the new job...

Yesterday I started my new job and it couldn't be better. I am really happy and I am confident that I chosed the right company and position. It gives me a lot of financial freedom in exchange to less liberty. I had to consider that my trading is affected more than I thought. Unfortunately not in the best way so far...

Actually you would think that a job gives you financial security, so you can trade with less pressure. Obviously that't true. In this stage of my trading career the stakes and the money are not my biggest issues. If a trade goes wrong, I lose 2-3 Euros, that can't be a factor, which gives a bad impact. It's more the pressure to keep the right track. I hate to fail... so far in my life I achieved the most of the goals I had. Unfortunately trading is one exception, at least until now.

In my case the start of the new job had a bit of negative impact so far. I am really tired after a day in front of the computer. I don't have the same patience, concentration and passion at the ladders like before. Well, I traded just two days since the beginning, but I already can feel it. I am exhausted after 2-3 hours at the ladders, and I like to enter the markets quicker than before. Probably this behaviour is quite normal, because you want to use the limited time in a productive way. The danger of overtrading is just around the corner.

Probably I have to slow down a bit, just make a trade, when I feel fresh and patient. Beside I recognized that the pressure for a high hit-rate is too big at the moment. To be more relaxed to lose the one or other trade, I have to rise the ratio between average profit and average loss (risk/reward-ratio) a bit. Right now my target is 0.4, but 0.5 or 0.6 seems more adequate. It doesn't sound like a big difference, but it has a huge impact on the yield if I can keep the hit-rate more or less stable (-5% would be okay).

Overall the development is still delightful, but I have to take care of the warning signs. In this sense I will go to bed now. Have a good night and keep greening!

Week 2 in review

To make it short, the week two confirmed that I am on the right path. The quality of the WTA tournaments was not the best, so I executed less trades than last week. I made a profit of approximately 4.5 units (last weeks almost 7) and managed to win 15 trades in a row. This streak is still alive. The strike rate even climbed a bit, and it's over 90% after 43 trades. The yield is stable over 25%.

My long term target is 12% (without compounding at the 2nd stage of the trade, which should have a positive effect --> if not, I will not do it anymore). For this goal I need a hit rate of 80% and a ratio of 0.4 between average profit and average loss. The mentioned ratio is more or less fix thanks the strategy (at least without the impact of the 2nd stage), so I can concentrate on the strike rate.

Obviously it's still too early to celebrate. It's just a good start, nothing more and nothing less. I made this week some small adjustments (about entry levels and staking) which gave me additional confidence.

Tomorrow I will start my new job, so my trading hours will decrease. Instead of the whole day, I can be on the ladders only at evenings (at least we have USA/Canada tour now) and weekends. As a consequence the amount of trades will be smaller. Like I wrote, I will scale up the stakes a first time after 100 trades. Probably this will be the case around the start of the US Open at the end of the month.

I made the following conclusions this week:

• The liquidity for scaling up (and the courtsiders) will not be an issue with bigger matches and events. At todays final at Hamburg you could trade without any problems with 1000 times bigger stakes than I use at the moment! In average factor 100 is possible for sure.
• I created a concept for compounding during matches. The big profits are still missing (and overall I lost money in the second stage of the trades), but at least I have now a plan for trading with a green book. I am quite confident that the big profits are just a question of time. In the midterm the biggest greens have to be definitely higher than the biggest reds!
• Be patient and wait for the right matches. Trading is a marathon and not a 100 meter sprint. 
• Only trade matches, where you know both players. There are enough opportunities, you don't have to enter a challenger tour matchup.
• Don't over analyse the trades! This is an input of a blog reader, thanks for that.
• Don't hesitate too long. Often a great opportunity occurs only once. 

Probably the update interval of the blog will slow down a bit. It's difficult to find the time for writing beside a 100% job, daily routine and trading. I try to keep at least a rhythm of one post per week.