In the last blog post we discussed the advantages of trading over betting. Despite these advantages many people will find they actually lose more from trading than they do betting! This is partly because of the false security trading gives you and because of the way people panic in reaction to things they are seeing.
Here are 5 common mistakes that unprofitable traders make:
1) Overestimating chances of winning because you are watching
It’s very easy to overestimate the chances of things happening when they are already on the way to doing so right in front of your very eyes. Not many people feel comfortable backing something that doesn’t look like happening at the moment, no matter what the price or how long there is left for things to change. This causes people to over react to the team they thought would win when they are looking like they are doing so.
If what you thought would happen is happening and the market is in agreement then the price is likely to go too low to offer any real value. Not only this but people tend to overstake or top up their bets when this kind of affirmation happens. Similarly people will also see their original bet losing and increase their liability by switching and betting more on the opponent. You may get away with it a few times but it will be very destructive when it goes against you.
2) Going in big because you don’t intend to lose it all
We fully advocate trading stakes being bigger than those used for betting but many people still use too big a % of their betting funds for individual trades. Just because you plan not to lose your whole stake doesn’t mean you never will. If you trade tennis for example, retirements are very common and losing your whole stake is very possible. In most cases trading regularly with any more than 10% of your funds is likely to end in disaster. Assume the worst case that you could lose all your stake so that you can plan and you are prepared when it does happen.
3) The dip in and dip out trade
Sometimes when people don’t have much of an opinion on whether a price is value or which way a match is going to go they may be tempted by the ‘dip in and out’ trade. This is where you put a whole lot of money into the market to lay off a few seconds/mins later for a small but seemingly ‘non risky’ profit. The trouble is it is still very risky and the few times the market moves against you will far outweigh any profits you make doing this.
People also tend to do this with no thought towards value or what they will do if the market does go completely against them. In tennis trading people like to attempt this when a server is 30-0 up but the market has almost assumed the hold of serve and the price moves very little sometimes not at all even when the hold I completed.
So have patience and wait for real opportunities to present themselves and don’t be tempted to over trade.
4) Holding on to losing position too long
If you consistently cut your wins then cutting your losses is also important but it’s common for people to get out of a winning position too quickly and hold on to a losing one too long. It is hard to accept making a loss but having the discipline to accept this and perform with as little emotion as possible will only make you a better trader.
5) Manual trading in unsuitable markets – horse racing, darts, low liquidity tennis matches
Some markets move far too fast for manual trading to be effective. Surely nobody still bets manually on horse racing in running? If you are watching on TV you are many seconds behind the actual race and the refresh rates on Betfair are so poor that the only time you are likely to be matched is when you can get poor value. The cross matching system has somewhat mitigated just how disastrous the effect from this can be but it’s still not advised. You are trying to compete with very clever bots who are not only ahead of your pictures but who can react much faster. Sports like Darts also have periods that are too quick for manual trading and you have to be sensible with your entry points.
If liquidity is poor in a amarket then you also have to have your wits about you. There will be gaps between prices and although this can present opportunities for getting value prices you can’t guarantee being able to trade out very easily.
In the next couple of blog posts we’ll focus specifically on tennis trading and reviewing one of the best around in Dan from tennis ratings.