Only losers average losers? But Is Averaging Down Bad For Betfair?
Only losers average losers? Find out why it has a place.
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Those of you who have followed me for a long time know that I always used to trade on Betfair with a multi-entry approach and target. My first entry was never my last entry into any trade I took when I traded manually. The Betfair Charity Challenge Supporting The Injured Jockey’s Fund is based on a completely automated horse racing strategy which reflects this.
Many could sneer and say that I am simply averaging down to hit a target, and as Paul Tudor Jones once famously said, “Only losers average losers.” But while there is great truth to that statement I take exception with calling what I do averaging down.
Typically when Betfair traders average down in their positions they do so out of desperation as they try to rescue a losing position.
The average down trade is often done reactively with little thought to the overall size, ultimate stop and target.
I, on the other hand, always know ahead of time exactly how many entries I will make, exactly how much size I will use and exactly how much risk I will bear. My systematic approach to trading basically assumes that I will be wrong on price but correct on the general vicinity of entry. I think it’s a more humble way of trading because you admit ahead of time that you will likely be wrong. In fact, often you are wrong more than once or twice and yet can still come out a winner by never committing all of your capital to a single price.
If Betfair markets are essentially probabilistic entities then it always amazes me why more people don’t trade this way. To me, it’s the height of arrogance to assume that you can pick a price with a degree of certainty greater than 50/50. However, you MAY BE able to pick a price area with a degree of certainty that often approaches 9/10.
Strategies are important, but even the best ones have a very tiny 55/45 edge which can quickly evaporate in the changing environment of market volatility. That’s why to truly improve your trading you need a multi-entry approach and a humble attitude.
You need the healing power of the repair trade.