Wednesday, 8 June 2011

When Bets Go Wild

Brian commented:

Good post there. Some big losses though. How did you recover form them and what % of your bank did they account for? What is the max % you would bet nowadays compared to in the past? Keep up the good work.
Alcohol? Lost £1,317.82 on 31st August 2006. -27%
Distracted? Lost £3,148.76 on 25th July, 2006. -54%
Tired? Lost £5,183.31 on 1st January, 2007. -29%
Chasing? Lost £2,841.59 on 4th January, 2007. -22%

The longest it took me to recover was 227 days after that New Year's Day debacle in 2007, a loss that was compounded by a losing February and April before I righted the ship, and steered a steady course to profit once more.

It didn't help that I had just started dating Mrs. Cassini, and my usual routine was somewhat disrupted. It wasn't really her fault, but if I have a shortcoming, it is that things are never my fault - it's always because of something out of my control.

What did help was that I knew what my mistake had been, and that there was nothing wrong with my strategy, only that I needed to stick to it. That discipline thing again.

My maximum exposure has always been £5,000. I've never asked for that to be raised, and as my style is more in laying at low odds, rather than backing at them, the limit isn't usually a problem. When a bot went wild at the end of a college basketball game earlier this year I did miss out, but that's the only time.

In the early days, the percentage of my bank at risk was higher than it is today. Right now I have a fair sized bank, so it's not possible for me to lose the percentages from a few years ago, and usually 2.5% is about as high as I'll go, which seems to be reasonable enough. I will occasionally commit the full £5,000 on an in-play trade but I would cut my losses if the market moved against me, and never expect to lose the whole amount.

While I don't consciously have an amount that I am comfortable betting, my body soon lets me know if I've over committed - and my wife can hear my breathing pattern change to heavy, so she knows as well and stays away! A side benefit of this is that I am able to watch hours of "When Girls Go Wild" videos without fear of interruption, although they are nowhere near as exciting as "When Bots Go Wild". So I'm told.

It also depends on how good the value on the bet was. Losing £1,000 on a good value bet is a lot easier to take than losing the same amount after making a stupid error.


Wayward Lad said...

I always find it interesting when reading the posts of Traders that they never actually commit to stating what return on investment they are targeting or achieving. This isn't a criticism.
One trader I'm aware of has a max exposure of £1250 for a target return of £75 per "play"; which he repeats 10 or 12 times a day, 6 days a week.
If you max exposure is £5000, what return on that are you hoping to achieve (you don't have to answer if you don't want too)?
I like your blog btw, but I'm not a trader.

Scott Ferguson said...

Wayward - part of the reason for that is that ROI doesn't really work for trading. From a bank of £200, I might turn it over 2x or 10x or 100x, depending on what event it is. Turnover (investment) is irrelevant - there's the absolute limit of what you are prepared to risk, although for most that is only a figure they temporarily use in the market to work back from, or I'd look at it more from the angle of 'what value is my time worth'. And there's also the angle of not setting a limit on what you want to win because every opportunity is different