Discipline is paramount if you are to become a successful trader. Everyone can have a successful day, even a week or a month speculating on a market but to consistently produce profits over the long term you need to think like a trader. Below are just a few rules you may want to consider when executing your Betfair trades.
1. Managing your bank ...don't put all your eggs in one basket
There is no right or wrong staking plan when trading but once you have decided how much you want to deposit in your 'trading bank' limit, you need to decide the 'maximum loss' on a single trade. Many traders will not risk more than 5% or 10%. Also be careful not to chase your losses. Should you have two losing trades and lose 10% (5x2) of your bank do not double up. There may be three winning trades just around the corner. It is not a sprint but a marathon. Wait until you have a healthy profit before you change your rules. If you are losing, you must be doing something wrong and therefore should not be risking more. Even consider reducing your staking plan.
2. Know your entry and exit ...and patience
A disciplined trader will choose his level, know his entry and exit...and he will stick to it. If it does not hit his level he will not make the trade. Chasing the market is a dangerous game. While it may not seem to be the case at the time there is always another trade. A trader is playing a percentage game that over time will deliver a profit because he makes more correct decisions than bad ones and has the discipline to exit losing positions as well as profitable ones. He will understand that he is not going to get it right every time but will be correct more times than he is wrong. His thought process may be 'I will take this position risking £1 to make £4'...a 4/1 chance (or 25%). This trader knows he only needs 1.01 successful trades in four under these rules to be profitable. This is the same psychology used by a bookmaker or casino owner. On a day to day basis they do not know if they will make money but over time they know, providing turnover is healthy, they will yield profits. When you have determined your levels, have confidence in your decisions and do not hesitate when placing the trade. Hesitancy will often leave you chasing the market and entering a trade at a worse level.
It is important to not only determine how much you hope to take out of the market if it is a profitable trade, but how much you would be prepared to lose should it go against you. Most traders can do the first part but when in a losing trade, they let it run and end up wiping out all of their profits! Also put your exit order in immediately and DO NOT move the goalposts! Below is a scenario which occurs if you do not do this.
You decide to back Man Utd against Arsenal at 2.8 with a view to trade out of it when the first goal goes in, green-booking for either a profit or a loss. Your analysis suggests if United go 1-0 up in the first half they would be trading at around 1.7. You do not put in your lay order. Rooney scores in the 30th minute. They are down to 1.67 but, having not pre-entered the order, you are mesmerized by the price continuing to shorten. You say to yourself '1.60 and I am out', then '1.50 and I will close my position'. You keep moving the goalposts only for Arsenal to score and you find yourself in a losing trade. There is no worse feeling. Good analysis but poor trading!
3. Never expect the market to do what you want ...be happy when it does
A junior analyst for a leading global bank strode confidently into his CEO's office and announced to him that, having analysed all his charts, Pork Bellies were cheap and a short term futures trade; just below $80 would yield sizeable profits in the near time. "We should buy them when they hit $78", he said. The CEO asked him to sit down and for two hours they monitored the market. When it hit the level, the trader reiterated the 'gift' of a buying opportunity. "This is the short term bottom; we need to take a position". His boss picked up the phone and put in a large SELL order. The price continued to fall. The trader sitting across from him went ashen. "Your technical charts may help me on my decision making but never tell me what the market will do next".
You obviously need to have an opinion, based upon your analysis, but never be so arrogant to believe that you will be right and that you can predict the direction of a market. There are too many different market forces and participants to know what will happen next - someone may be forced to sell an open position because he has a margin call; another may be required to hedge a large position on another product.
Many traders believe because price movement on a chart is a replica of one they have seen before that they know where the next move is. They may well be right but because it happened before, it is not certain to happen again unless the market and participants are EXACTLY the same as on its last occurrence. This is highly unlikely!
- Betfair Guide Step 1: Getting started
- Betfair Guide Step 2: Placing a Bet
- Betfair Guide Step 3: Lay Betting
- Betfair Guide Step 4: Making use of the settings
- Betfair Guide Step 5: Additional features
- Betfair Guide Step 6: Trading, Cold Trading and Trading In-Play
- Betfair Guide Step 7: Advantages of Exchanges and Sport Trading
- Betfair Guide Step 8: Ten common mistakes made by traders
- Betfair Guide Step 9: Trading with discipline