Outrageous risk – Part three
I have finally got round to the last part of this mini series of posts. Sorry for the delay but we have been busy working on some completely new tools for Bet Angel and that has drawn a lot of my attention. For my sins, I’m always the front line when it comes to testing. Thank fully the new stuff is all working well and we forward to bring you something, just a little bit different.
To reprise, as an experiment we thought we would enter the market at random by backing the favourite at 1pm in the afternoon and leaving our position completely exposed. We only closed out at the official off time. For reasons too complicated to explain at this time, this is one of the riskiest strategies you could adopt.
First off, I don’t recommend you do this, but you can see that we didn’t do too badly. Our stake was £1 per tick or a maximum of £100, so we only lost a tiny part of that in return for taking unbridled risk. The reason this happened is that when the market moved in our favour that helped us, when it didn’t work for us the downside wasn’t actually that bad. If we would have limited our upside to one tick the P&L would have looked significantly worse but by catching the swings we have benefited. Volatility can help as much as it hinders. You can also learn a lot from this P&L, as striking out one of those bigger errors would have made us profitable on the day. Closing out good trades before they turned would have also helped. In short it wasn’t a massive leap to profitability. We just needed to minimise our mistakes.
Compare this P&L to one where we have managed our risk, we also limited our stake to £10 tick sizes.
By managing our risk, I mean we have avoided trying to get a move out of a race that is unlikely to produce one, we changed strategy. But we were also focused on cutting our losses where we get the direction wrong, riding our profits when it is right, and closing out as best we can. You can instantly see the difference. A big improvement from the random version. Rather than just adopting a one fits all strategy by varying our outlook on the market and using a bit of intelligence we have turned things in our favour.
Obviously I’ve had many years of practice, but the same elements I use can be adopted by others. It’s really as simple as making sure you maintain your discipline and avoid obvious errors. Imagine teeing off on an 18 hole course, in your hand a putter. You will no doubt perform worse than somebody with a full bag of clubs. That is why I suggest that when you look at a market, you don’t wave a putter at it. You will keep moving forward for sure, but not as fast as somebody who has just driven the ball 300 yards down the fairway! It’s a competitive world out there so make sure you do your best to compete.
Category: Using Bet Angel
