Nuts, lightly roasted
I’ve been experimenting with a new strategy recently. I’ve learnt from past experience that data mining can be statistical deja vu. So whenever I make the transition from theory to practical, it always pays to be cautious. So on this occasion I have hedged my position on separate accounts to understand how the main strategy performs but without putting myself at too much risk.
Immediately the strategy started working, with a couple of glitches, so the main account started to fill up, but secondary account started to empty. So I switched accounts so save the other account from evacuating all funds. No sooner had I done that than the strategy reversed a bit and the account started to empty a little faster. Eventually I ran out of funds and had to stop the testing till I could add more funds to the account. I am typically very disciplined and follow a very clear and defined path in what I do on a day today basis, but this slip up gave me a clear insight into how people can completely do their nuts by not sticking to their plan.
Every strategy should have a defined payoff. From that you should be able to understand how much you can afford to lose. From there you switch to strike rate and how often something happens, but in there you slip into the realms of random. No matter what strike rate you have you will have runs of wins and losses, it’s how you deal with them that are important.
Of course what we are talking about here is one element of broader subject of money management. Some of your money management can depend on what you are trying to do. In this strategy I am following that new fangled strategy (NOT) of backing to value. As the football market has become more volatile before the off, value can be had. In outright traditional betting, you bank will flex a great deal. If you are trading or position taking it will be less wild. This is because you should only be aiming to win on lose a small part of your stake, not all of it!
The key thing to avoid the situation I have outlined is to get your staking right. If you get your staking to the right level you can withstand a bad run. If your staking is too high then, as you near a situation where your account is fiscally challenged, you end up changing the way you think. If you are hyper efficient you can actually predict the likely limits of a bad run and stake according to that, but that’s quite a specialist area. The general rule of thumb is that it just makes sense to stick to a limit of % of bank. So make sure you do that, whether you are testing or doing it for real.
Really looking forward to the Craven meeting today and also the champions league later this evening.
- I’d prefer them ‘unroasted’
Category: Psychology, Trading strategies
