Saturday, 22 August 2015

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.

1 comment:

  1. First time I commented in a blog! I really enjoy it. You have an awesome post. Please do more articles like this. I'm gonna come back surely. God bless.