99% Of Us Chase The Lottery Model When Trading On Betfair
99% of Traders Can Do Better If They Just Do This
Many Matchbook and Betfair gamblers like to jump in and go all or nothing. Sometimes they just let it ride. They want to go big or go home.
I know many stories like this.
Indeed, I just read again Gambling For Life which was kindly signed for me by the author Harry Findlay at the Matchbook Traders Conference and he gives some examples of this in his own life.
The emphasis in all these stories is always on winning it all.
In real life however, and especially in trading on Betfair or Matchbook, success goes to those who seek to win, but more to those who learn how not to lose. Like Warren Buffett. The difference in approach is illustrated by what I call the two models of trading. The insurance model and the lottery model.
99% of us, whether we admit it or not, chase the lottery model. Have a hunch bet a bunch. Double your account in a week! My very own Charity Betfair Challenge to take £100 To £3,778.02 in a year even had an element of this. Why? Simple. Challenges make good reading. Which builds our readership here on JuiceStorm. Guilty as charged. There have been hundreds of challenges during my time on Betfair.
But you know deep down in your soul that it’s bullshit. The lottery is the ultimate suckers game, yet we all fall for it. Because we are all greedy.
When I used to trade manually on Betfair I tried to spend all of my time being fearful. I now love my automated trading models. I have no fear! I don’t watch. 😉
But here’s the thing. I never, ever, trust the market. Through the school of hard knocks, I learned that markets can always do the unexpected and they can always push prices beyond all reason and sanity. So I used to spend all my day passing up, rather than taking trades.
On any given day I would pass up at least 5 to 10 perfectly good opportunities to make money. On Betfair and other markets. Why? Maybe the price action looks a little too violent. Maybe the horse looked bad. Maybe the market just missed my entry price which happened so frequently when trading manually and still does today on my automated models.
I’ve mentioned many times before that you can either predetermine your entries or your exits, but you can’t do both. I focus on entries because I can’t predetermine exits. I exit early almost every time because of fear. Is that stupid? Maybe. It’s certainly easier to make 10 ticks from one trade than to wring 10 pips from 5 trades that you closed out too soon. But you need to focus on the goal.
So, what’s the goal? The goal is to make 10+ ticks! On as many markets as possible.
Neither the market, nor your mother nor your family cares how you made your 10 ticks on each market. They just care that it was done.
In the markets of this past week I have, unusually, been watching two automated trading accounts trade side by side. I used to have three. Now I have only one. Betfair rules. The other is set up by a friend. My account is traded like the meekest of accountants, blowing out trades at any sign of trouble. Usually by frequently hedging the loss. In my friend’s account the strategy is just to let it ride. My friend’s account had some really nice swings – up as much as 2% on some days. Like the guy who hit 5 blackjack hands in row, he is living large!
But by the end of the week, guess which account was ahead? That’s right. In real life the meek little accountant beats the big swinging dick every time. Because in real life the lottery is for suckers and real money is made by the insurance companies who spend their every waking moment making sure they don’t lose.