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Betfair Trading: Why is trading so hard? Trading horse racing on betangel

August 25, 2019


So why do a lot of people struggle with
trading? Well I can give you a really quick answer which is that it’s very
counterintuitive but there is a longer answer and that’s what I’m going to talk
about in this video please like and comment on the video below that will
allow me to produce better quality videos and more of them in the future so
let’s look at a market and we start with the price over here you think well this
price is going to go up and the price goes up so here and you make serie plans
or whatever your target a value was so that’s quite symbol price starts here
and it goes there that’s how most people think that the market works but the
reality is completely different so price starts here and at this point we you can
make a judgement at any point from the open to the close of the market now the
curious thing about the way that the market works is the average result in
the market tends to be zero so the distribution of gains and losses tends
to center around zero and that would tend to occur if you’re in a market
that’s producing roughly random returns so you look at the bell curve and up
here you would see a certain level of return you see a lot of returns around
the middle and then it would sort of tail off a bit towards the end at the
terrible papel curve hopefully you get the idea of what I’m saying so you would
sort of say well actually I think it’s going to finish here for any particular
reason and you can you know get that with a reasonable degree of certainty
and various other degrees of certainty as well but the interesting thing is if
you trade at random over a very very long period of time you know you’ll get
positive results and you’ve got negative results and they’ll balance each other
out and you’ll end up at zero overall but of course you’ve got to pay a bit of
commission so that you know detracts from your positive values and you’ll end
up net negative overall but if you trade at random you’ll end up and down in
roughly equal amounts and we’re talking in the context of a whole
taking a position in the last ten minutes closing in a post time that’s
how the market behaves now let us say that we’re looking for a particular
setup and that’s what you should do you shouldn’t go into the market and say
what’s the market doing you should be saying I think the market is going to do
the following for the following reasons so we’re looking for a set up where the
price is going to drift there are a number of setups that you can use to do
this so we know the price is going to go from here to here and we can be pretty
certain that that’s likely to happen or on average it’s likely happen every now
and again we’ll get it wrong it will end up in a loss every now and again we’ll
get it right and we’ll end up at a profit in a positive territory but of
course we’ll get it right more times than we get it wrong and that’s where
we’ll make our profit in trading however and there are many reasons why you may
never see that profit because the market doesn’t actually do what it’s when I
said on that previous slide it doesn’t sort of just go like that and heads
towards that particular price that that is the path of desire so we know it’s
going to end up there for a particular reason this is the path of desire that’s
pulling it in that direction but what actually happens in the market is the
market never goes in a straight line the market will go up it will go down it
will go up and down it will test your patience and then it will finally end up
at that particular point that is the status quo of the market that is the way
that the market tends to work it doesn’t tend to go in one direction people do
things they change their mind the market changes their mind things happen and it
varies all over the place it walls all over the place so the thing is if you
actually open the position automatically and closed it automatically using this
trade you make a profit but if you are actually watching the position now
various points within the markets you would come under pressure so initially
the markets going in our direction and we think this is great and then the
market turns around and abruptly starts to go against us so at this point
there’s a load of pressure on you in the market to get out do you hold your
position do you have the faith to keep your position knowing that it’s going to
end up over here so when you see me trade I’m looking over in the other
direction I’ve got a list of things in my head that basically say what I want
to happen and if all of those things are intact I
will hold my position even if it starts to go against me but a lot of people
can’t do that so let us say that we actually join the
market a bit later let’s say that we actually join the market right here and
our position goes again to just immediately then the problem that we’ve
got it looks like heading in the rupturing you cut out only to see the
market move back in the other direction so this is why trading is hard people
find it very difficult to cope with these little bumps that occur within the
market you’ll call your decision that you made in the market may be completely
correct but the fact that the market is moving against you creates a major issue
for you psychologically that is so let us say that we join the market here and
we’re still expecting a little bit of price movement so expecting the price
movement if I draw roughly here to give us this gain in this area over here the
problem that you have is on this occasion it’s not where you plunge to a
lot immediately you cut a position only to see it go back in the other direction
you actually start to make money but then you fear that you’re going to start
losing money so you cut your position at only say a turn and go back in the other
direction for a brief period of time it feels like you made the right decision
because it starts going even more negative and then it surges back and
then ends up back in this position so what’s actually happening here is the
market is shaking you out the markets wobbling one way and the next and while
your decision is correct if you traded this completely rendom you’d get it
right a lot of the time but if you’re actually sitting there watching the
money go against you at certain points in the market you tend to drop your
position it tends to cut out so the way that I overcome this is I basically say
these are all the reasons that I think that the price is going to go higher you
know we’ve got X number of reasons we’ve got you know 1 2 3 4 5 reasons that we
think that this is going to happen and I score the trade as I go through so if
there are 5 things that make me believe that this is going to happen and that
suddenly decreases to 3 then the trade isn’t so good any longer and I’ll start
thinning out my position if the all of the characteristics exhibit themselves
strongly all the way through that trade then it’s a great trade but if my
internal score card of the trade rises or falls in other words and not seeing
the things that the setup requires then my confidence in the trade goes down and
I’m likely to exit for a loss or I’ll spin out my trade if all of them
remain intact for a long period of time then I’ll probably increase my trade as
the market moves up towards this position so this meandering in the
market that’s typically the way that the market works and when you look at it
from a psychological perspective there’s been loads of studies on this but
basically a loss feels twice as bad as any gain again so the problem is when
you feel like you’re about to lose money it really hurts and it checks you out of
the market and this is why people find trading hard because you may have
actually made the correct call you may have been looking at the market here and
it ends up here but somehow you lost money over the
course of the trade simply because the market was shaking out of that now the
unfortunate thing for you about trading on sports markets is that is the natural
behavior of the market so say for example you know we’re looking to buy
something at odds of two and then they move to odds of three now from a value
perspective obviously getting odds of three instead of two is a huge tick so
you know why would if you were looking back at two and you can get odds of
three you were definitely back here free if the odds get shelter and they go down
to one point five then from a value perspective that just doesn’t work if
you’re going to back it also to and it’s now available at one and a half the bet
is not on but if the price gets bigger then obviously you would take that bet
so imagine your favorite football team is playing a team from a much lower
division and you can back the my odds of two and you’re not sure about what is
their value or not if we replayed that market and gave yours of three it almost
certainly back then but if they were much shorter odds then you probably
wouldn’t back them and this is the way that the market works so if you actually
look at the way the odds progress say we had a starting point of two and the odds
started to meander all over the place and then start going to odds of three
the thing is that we’ll pull in people that are trying to get there people may
have orders above the current price that they’re waiting to get filled but even
if they haven’t and the price starts to arrived
rise up what do you think’s going to happen if the odds are getting bigger
and bigger and bigger is more and more and more likely to attract backers so in
which case then we’ll start to head back in the other
direction and the opposite happens in the other direction as well if they are
coming in and coming in and coming in games a very very short prices then it’s
very likely that layers will step in and start to push the price back in the
other direction or it could be matched betters it could be bookmakers hedging
on the exchange it could be any manner of things so these X bits of activity
that you see in the market the natural order of the market is for the market to
move around quite a lot it doesn’t go in a straight line
there’s no reason to believe that it should go in a straight line sometimes
it does or a slightly bumpy straight line is probably the word I’m looking
for but typically as the market moves in one
direction it gets good value for one side of the book or the other for the
backers or the layers and therefore the market will start to head back in the
other direction and whether it’s on the one that you’re trading or not that’s
critical as well so say again we’ve got odds of two and they drift to odds of
three their head up in that direction then if you’ve got something on the
other side of the Bukit let’s assume this is a perfect market and we’ve got
two things at odds of two if this one moves up two alters three the only way
that the market can remain in balance is if the odds on this one come back in the
other direction let me go to ODEs of one-and-a-half so whatever happens in
the market one outcome will directly affect the other because that’s the way
the markets price that’s what we are telling you the chance of something
winning the odds of something drifts the odds of something else have to come in
so the natural order in the market is that as the price moves up it will
attract backers and as the pricing moves down it will get good value for layers
and therefore that will cause the market to meander up and down but also prices
are interrelated so that’s going to cause the markets meander as well so
whichever way you look at it the market is going to meander so you have to have
an opinion when you first arrive in the market about what’s going to happen you
have to decide where the bias is but in the market which direction is it pushing
in it may be a strong bias it may be a weak bias but when the price starts to
move it’s unlikely to move in a straight line it’s just not going to happen like
that very unlikely what will most likely happen is it will
meander around and eventually find a point somewhere near and sometimes it
may not quite reach the poor which should do for a number of reasons
but it’s going to be and on its way to that particular point so one of the
reasons that people find trading so hard is this constantly plays on your mind
you’ll take a position it turns into a loss at some point this could be pre
play or in play we’re talking typically pre play here and as the position goes
against you the temptation to cut your position is incredibly strong because
it’s human instinct to fear a loss but as you travel down this path towards the
closing position it may have been actually better to hold that position in
the market for a period of time so yeah if you wanna know what trading hard that
is why it’s hard if you want to know what to do about it keep an internal
scorecard how things change from the moment you entered the market has your
opinion change what is actually changing within there you could be unlucky you
may never get to that particular point but the fact is if you do it enough
overtime you win more than you lose and that’s one of the reasons and trading is
hard and what should do about it you

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