The Slippery Slope

I only had time to trade 3 races on Sunday all of which brought small profits. Monday saw me erase double the profit I had chalked up on Sunday, so the slow but sure downward slide continues for the moment.

Losing is never a great experience, but this is a learning curve and at times like this I think back to the stories of many incredible traders who lost their entire bank many times before ultimately getting on to a winning path. Michael Marcus is one of those traders. He started with $1000 and lost it all in the space of 3 days. His next stake was $500, again lost in a a short period of time. He then started again with $3000, trading it up to $30,000. At that point he borrowed to add a further $20,000 to his bank, and quickly lost $42,000 of that $50,000, and eventually all of the remaining $8,000 as well. He summed up in his own words the period that followed that "It was the same old cycle of borrowing money and consistently losing it". Ultimately Michael Marcus became a phenomenally successful trader, growing a stake of $30,000 (plus a further $100,000 added a few years later) into $80 million over the course of 10 years, and that was with the fund managers withdrawing 30% of the fund every year for expenses!

There's a Lesson to be Learned

On Friday, rather than start off well and only later pull the plug out, I thought I'd get the big loser out of the way nice and early. I ended up trading Desperate Dan in the 16:10 at Wolverhampton (remember 4:10pm UK time is only 11:10am for me) and after opening with a successful 1 tick winning trade I quickly followed up with a 4 tick loser and then the daily monster... a 7 tick loser. Damn! My final trade scraped 1 tick back, but I had started the day with a $7.61 loss. I only managed to trade another 7 races resulting in 6 winners and 1 loser to end the day in profit (just!).

Yesterday (Saturday) was a disaster. Before Saturday my trading volume was just over $39k for a loss of $12.02 or just 0.03%. Saturday's figures were $5403 trading volume for a loss of $24.39 or 0.45%!! It seemed that no matter what I did the market quickly went against me. My confidence was dented and I should have stopped as soon as I began feeling that way, but I kept on going, ultimately losing in 7 of the 19 races I traded! Keeping with the silly multi-tick losers I have allowed to happen lately, 90.4% of Saturday's losses can be attributed to just 2 of the 19 races. Almost 79% of the losses came from just 2 trades!

My test bank has taken a bashing, but this is exactly why I am trading a test bank (possibly multiple test banks). If I'm going to lose money for any period of time, losing when playing to small stakes is the time to be doing it. And of course if I can't win using small stakes, increasing the stakes will only mean greater losses.

It means nothing coming from someone with almost zero experience, but the markets felt slightly different yesterday. Maybe I was the one who was different, or maybe the Saturday markets are indeed a little different from the remainder of the week.

Another day, another lesson learned. I'm not actually sure what the lesson is at this stage, but the greatest lessons tend to come from the worst experiences. It's at moments like this I wish I was capturing all of my trading sessions for later review. I am sure the benefits would be immense.

Tick...Tick...Tick... BANG!!

Well I did my usual again yesterday - making a tick or two here and there then BOOM! One trade on Aleatrics in the 16:00 at Beverley saw me lose 9 ticks!! This is a pattern which clearly has to stop. One bad trade should not regularly be allowed to wipe out all, or a significant chunk, of the winning trades executed that day. I read up on the stop loss functionality within BetTrader Pro, though I am not sure how much use it would be in the situations I have experienced. I could easily see the trigger price being reached, the order executed and by the time it hit the market it would be sitting there on it's own, outside of the current price action. I will also be looking to see what options Bet Angel Pro offers.

I have to say I am disappointed in the charting within BetTrader Pro. I feel the scaling is all wrong, and as a consequence you don't see much of a change when the price is changing, even during a significant upward or downward trending move. Bet Angel Pro looks much more powerful in this area.

Today I again experienced something I have experienced several times in the past when using the Betfair website (so I know it's nothing to do with BetTrader Pro). Take a look at this screen grab...


On a single scratch trade I somehow ended up with 1 cent profit. The only thing I can think of is the effect of rounding during the conversion from Canadian dollars to the "base" currency of British Pounds, then back again.

Play it Again, Sam

Today I was more patient and cautious. One immediately obvious difference was the number of scratch trades I was doing (opening and closing a trade at the same price), implementing a key rule in any form of speculative trading, namely getting out as soon as you sense things may not be quite right. I started the day by trading 7 races with no losses, not even a single losing trade, so all was good. Then it was like revisiting yesterday! Holoko Heights in the 18:50 at Kempton was the turnaround point. I opened with a bet of $60 @ 5.3 and about 5 seconds later the market gapped up to the top of the ladder. It then stabilized and the Weight of Money indicated a possible downward slide, but it didn't last long and of course I hadn't closed out. So I was once again diving to get out and incurred another 9 tick loss!! I managed a 2 tick winning trade to reduce the loss a little (from $11.19 to $9.15), but it was still a big loss in percentage terms. Two of the three races I subsequently traded ended with profits while the other was level (6 scratch trades believe it or not). It's hard to believe that one trade can turn so bad so quickly and wipe out a significant percentage of the benefits gained from an otherwise flawless pile of trades. Clearly I have a lot to learn.

Sudden Market Moves

I was able to trade 12 races yesterday. Things started well until Samarinda in the 16:20 at Kempton. I had been watching the market for a while and struck when I thought things looked right to catch a tick or two with a bet of $80 @ 7.6, but almost immediately the WOM (Weight of Money) inverted and the market shot up. I bailed out at 8.6, so was looking at a $9.30 loss. The momentum switched around just as quickly and still within that first minute I opened another trade with a bet of $80 @ 8.2 and was able to lay it back at 7.8 (only a 1 tick loss from the entry point of my initial bet!). That reduced the damage and I closed out the race -$6.15. I got almost all of that back in the next race and things continued along quite nicely until disaster in the form of Safin in the 18:00 at Towcester! I opened with a bet of $80 at 4.7, and a lay at 4.6 or 4.5 was looking likely when in a flash everything was swept up and the market gapped up by about 6 ticks. I tried to be patient and saw a gradual slide back to 4.8 which I was going to close out at when the same damned thing happened again...BOOM! The market gapped again and kept moving swifly up forcing me out with another big loss (-$12.86). I should have got up and taken a break at that point, or maybe stopped altogether, but I didn't and lost on the next race (-$8.61) and the next one after that too (-$2.92). I tried to refocus for one final race, making a mental adjustment to hang back just ever so slightly, proceeding a bit more cautiously. Not sure if that made any difference, but I managed to claw back $7.38.

It stands to reason that if I'm making an average of between 1 and 3 ticks on winning trades, losing trades that suck back 10 ticks are going to have a major negative impact. I need to look into the options offered by BetTrader Pro and Bet Angel Pro in terms of stop losses, as I know a stop loss would have saved me at least a few ticks on both occasions when the market gapped up significantly in the blink of an eye.

Buying Some Time

Following my lessons from Saturday trading, I depleted my BetTrader Pro "Ladder" minutes during the 4 races I traded yesterday (Sunday). And in preparation for the weeks ahead, I just bought 2000 more minutes at a cost of £20. Until I am more certain of my trading patterns, and I have had a chance to try both of the market leading trading applications, I feel buying minutes is the most cost effective approach for me.

Don't Let Go of the Ladder!

I traded 16 races yesterday and all went well except for two mistakes, one of which proved costly. Thankfully the absolute loss incurred was small as I am only trading a small "tester" bank of $100 Canadian (about £56), however as a percentage of capital the loss was significant. The lessons learned came in the 18:00 at Nottingham. My first mistake was even trying to trade the race as my immediate reaction when I opened the market was - too many runners, market leaders are long odds, and too little money spread around. I should simply have shut the market down and waited for the next race. Instead I sat and watched. I eventually bet $80 @ 8.2 (yeah I know!) on Racoon and went to lay back at 8.0 but then saw the WOM (Weight of Money) and decided to try to nick 7.8. Next thing I know I am staring at 8.2, 8.4, 8.6, 8.8, 9.0. Now I should mention the other lesson here and the reason for the title of this posting - I was sitting in the "Grid" interface of BetTrader Pro rather than the proper trading "Ladder" interface! This makes it slower to exit a trade and thus easier to keep missing exit points when there's strong market momentum. That is what kept happening. Eventually I just clicked on the hedge button when the price hit 9.0, BUT... the hedge function was still at it's default to use the last traded price so a lay was entered at 9.0 rather than 9.2, and as you can imagine there wasn't much price action at 9.0. At this point the market was pressing home my errors in the harshest manner by rocketing ever upward. I eventually got out at 11.5!! My loss was $22.92. The other loss I mentioned earlier was also greatly magnified by my use of the "Grid" rather than the "Ladder" interface.

The honest truth is I was getting low on my free trial minutes (which only deplete when using the ladder interface) and was simply trying to save them. How stupid is that?! I saved the minutes alright, but I lost probably 17.5% more of my bank than I would have if I'd had the benefit of the fast exiting one-click functionality of the ladder!

So my lessons from the day were:

1. For fast moving markets like horseracing, NEVER trade using anything other than the ladder interface

2. Be more cautious of the markets (and the horses within those markets) you choose to trade

Transatlantic Penalty?

I live in Canada, so one factor I have thought about is the potential impact of being 3000+ miles further from the Betfair servers than the majority of traders (based predominantly in the UK). The Betfair API Refresh Delay displayed within BetTrader Pro indicates there is just a 218 to 234 milliseconds delay in the application requesting an update from the Betfair server and it actually receiving the update. I was pleasantly surprised by that, however that was on a Friday evening Canadian time when few UK Betfair users are active. Today during peak usage, when everyone knows the Betfair site, including the API, is under load, the response figures were still not terrible at between 250 and 300 milliseconds. I can't comment on what the range is for the average user, but given my distance, these figures could be worse. However, while checking out the RacingTraders.tv website today I watched a video by MikeyB and could see that his response figures spend most of the time in the 40 to 70 milliseconds range! Now I think that kind of response rate is an exception to the rule (I could be wrong), and it might not seem like much, but all other things being equal, that could have a big impact when trying to get to the front of the queue (assuming the response time from the API server is a fairly accurate indicator of the time taken for an order I submit to be received by the API server). Not much I can do about it though, but that doesn't mean it should be entirely ignored.

If anyone happens to be reading this and has any info on Betfair API response times within the UK, I'd be grateful if you could post a comment.

Preparation - Part 2

Continuing the list I started in "Preparation - Part 1" of essential or useful things to consider for successfully trading the Betfair markets...


5. Trading Software

There are quite a few packages out there, though it seems to come down to two leading contenders - BetTrader Pro and Bet Angel Pro. There's another option I found that looks quite slick - Bfexplorer Pro, but I have struggled to find out much about the software in terms of reviews, existing user feedback, etc. For the moment I have BetTrader Pro, though basically only because I still have minutes left from a free trial I got a while ago. I need to give some throught to the pricing model as Bet Angel Pro is the more typical subscription model where you pay for x months (the more months you buy the cheaper it is per month), while BetTrader Pro offer the same type of subscription, but also offer the option to purchase a number of minutes (and your minutes only deplete when using the ladder interface). I am not likely to be trading regularly in the early days, so the minutes based model may be more cost effective to begin with. Both packages offer unlimited access for 1 year for £150. I will definitely try both before signing up for a significant subscription period.


6. UPS (Uninterruptible Power Supply)

This device is really just a big powerful battery that charges up with electrical power and will kick-in if the mains power supply goes out to support key devices for a short period of time (long enough to close out any trades). This falls into the same category as the secondary internet connection - it isn't likely to be used too often, but a relatively small investment could save the entire bank in certain unfortunate circumstances. As well as the more unlikely stuation where the power goes out and stays out for a while, a UPS will also guard against annoying blips where the power may be out for only a fraction of a second, but your computer still reboots, requiring you to wait for the start-up process to complete, launch your trading software and log back in etc. UPS units come in many sizes with a price range to match. I'm looking to get one with enough power and battery backup outlets to allow all the crucial components required for trading to coninue to function for at least a few minutes, so cable modem, router, KVM, primary trading computer and primary monitor. Not decided on the exact model yet, but likely cost is in the region of £150.


7. Secondary Trading Computer

Yet another weapon in the war against seemingly unlikely but very possible disaster recovery situations. This will most likely be a laptop with the plain old Betfair website open and logged into my account. Just a backup method of being able to exit a position should the hard disk crash on my main system, or for one reason or another Windows decides to throw a wobbly with a blue screen of death, etc, etc. This, combined with the secondary internet connection and UPS mentioned above, should dramatically improve my odds of being able to survive an untimely problem.


8. Secondary Monitor

Initially I doubt I will have this in place as I will not be making use of live video from the racecourses. All my trading will be pre-race and I will always be doing my best to have all open positions closed prior to the scheduled off time. My primary monitor is a 24" model so I'm certainly not short on desktop real estate, but I could still see a 2nd display being useful, possibly to display customised charting and other indicators via Microsoft Excel if I ultimately end up using Bet Angel Pro (which offers tight integration with Excel).


I think that covers most of the key items, though if anyone else happens to be reading this and can add to the list, feel free to leave a comment.

Now I need to work at ticking the items off the list and working towards being ready to begin trading.

Preparation - Part 1

I've been making a list of some things I see as being essential or useful to trading successfully in Betfair markets. They range from the obvious (as in "duh...really?" kind of obvious), to some far more subtle ones.

Here goes...

1. Internet Connection (Primary)

Well I guess I obviously have this one covered, as I'm blogging! Though I could be typing this from a friend's house, my hip and hi-tech grandmother's basement, or my local Starbucks while sipping a Grande Caffè Mocha Latte (are you kidding me? The price could probably cover a small trading stake ;-)). Seriously though, I do already have a fast (10Mbps) cable connection which has served me well for several years and has generally been ultra reliable. Obviously having internet connectivity is one of the absolute must haves, and it should be a high speed connection. It may be theoretically possible to trade using a dial-up account, but I certainly wouldn't want to be risking any serious amount of money if dial-up was my only option. Thankfully broadband options are plentiful and relatively cheap these days.


2. Internet Connection (Secondary)

Errr...we already have an internet connection?? True, but doing things with a professional approach means covering all bases (as much as possible), and leaving as little as possible to chance. While the chances may appear slim, imagine losing your connection due to a problem with your chosen ISP (Internet Service Provider) just as you are about to click the button to close out a £500 bet at 5.2 with a £500 lay at 4.6 with only 45 seconds left on the countdown timer in a 5 furlong sprint. In the blink of an eye you've went from a 100% certainty of greening up across the board to a roughly 80% chance of losing £500 (or a 20% chance of winning £2100 for the "close your eyes and hope for the best" optimists amongst you). True you could grab for the phone, call Betfair, hope the race is running late, and frantically attempt to close out. But chances are, there wouldn't be enough time. Given the potential exposure in such a situation, I'd rather invest some cash and eliminate that risk (or reduce it greatly), so I'm looking at getting a secondary internet connection and hooking both up to what's called a dual WAN load balancing router. A long complex sounding name, but essentially it allows you to hook up two internet sources and the box will auto switch from one to the other in the event of failure of either connection. I've only just started to look into this, but the likely cost is in the region of £150 for the router and £20 to £25 per month depending on which Internet service I opt for (obviously with a different ISP than my existing connection).


3. Betfair Account

I have my existing account, though I am considering opening a fresh account that would be used purely for trading. I still have occasional bets on Formula 1, Golf and Ice Hockey, and every now and then I get asked by family members to place wagers for them on bigger events like the Stanley Cup or one of the golf majors. I don't want such bets messing up account balances, profit & losses, etc, so best to have an entirely separate account.


4. Funding the Betfair Account

As I mentioned earlier, when discussing the Betfair account, I want to keep all trading activity completely separate from anything else, so I would prefer to have a dedicated bank account to deposit my trading stake. That same account would then be used to make the initial Betfair account deposit, and all subsequent transactions to or from my Betfair account (hopefully almost all withdrawals!).


Quite a few things to think about, research, and act upon. I'll continue the list in Part 2.

Getting Started

So here it is... finally! My first posting, which I am sure nobody will be reading anyway. But maybe over time, one or two folks will end up stumbling across this blog and maybe even reading back through the archives to these very words.

I've traded on Betfair on and off for a while including pre-race trading in the horseracing markets, though almost always to small stakes and never very seriously. I've had a longstanding interest in all things trading and have read many books on the subject. I think it would be fair to question how much benefit books can be when it actually comes down to living the reality of trading tick-by-tick, though I personally feel the benefit is immense. There is indeed a large gap between reading about a concept and actually being able to put it into practice, but I believe if you know what you should be doing, then it's possible to work towards actually doing it when the chips are down.

Unlike previous casual ventures into Betfair trading, this time it's serious. I am going to spend time preparing, and I'll be documenting my thoughts and actions here. In that regard I think this blog will start out a little differently from many others, and with luck I may even get some feedback from people already 'doing the do' on Betfair.

I've always been a believer that writing things down or talking about them can help greatly in paving the way to a more thorough understanding. Sounds way too obvious to even bother mentioning, but many people just do what they do and end it there. Part of my day job is software development, and there have been times when I just can't quite come up with a solution to a problem I feel is ideal or optimal. In such situations explaining the nature of the problem to someone else has often led to that eureka moment. The reason is that while I may have a mass of information relating to the problem in my head, explaining it to somebody else forces me to draw everything together in a more logical manner, and in doing so, something will often click or jump out that didn't before. To that end, I am hoping that drawing my thoughts together in the form of this blog will help me in similar ways, and hopefully be beneficial to others (if anyone actually reads it that is).

So that's it. I'm up and running, well, more like preparing to start crawling.