I have just put this screenshot from yesterday as this race asked some serious questions of my trading. As you can see I made a nice profit from the race, however I did some things that I think may cost me in the long run. I thought the horse was going to come in a bit so I backed at 4.8. The opposite happened but I was still convinced the horse was going to come in so I backed for another £100 at 5.4. I was then out of my comfort zone as every tick that went against me was costing me about £4. I wanted to get out but froze and part of me still was sure the price was going to come in. Then the price did come in and the move was quite strong so I was able to make a nice profit. However this doesn't always happen and I could have been left with a hefty loss.
After this race I am left with these questions
Is it always good to go with your gut feeling?
At what point do you realise you were wrong and cut your losses?
Would this type of strategy work in the long run?
Is it a good idea to risk more money when the initial trade goes against you?
Hi Drifter. I'd say why give yourself the stress of hoping the market will turn? Get out as quickly as you can for a small loss, then wait and see if the market does indeed turn and get back on.
ReplyDeleteIn doing this you will probably lose a tick or two initially and maybe a tick or two getting back on, but in your example you lost at least 6 ticks before the market turned (4.8 to 5.4 or did the market go even higher?). If the market hadn't turned it would have been even more.
I'd agree that you should go with your gut feeling (and without hesitating!) but it's prudent to be wary of drifts because the reason could be that the horse is sweating badly or playing up etc and nothing is going to stop the drift for a long time, no matter what the charts looked like beforehand.
I do also risk more money when the initial trade has gone against me, but only really when it appears the market is being distorted by one large bet and so I can have a reasonable expectation that it will bounce back after being matched. Cheers, MG
Thanks for the comments MG
ReplyDeleteI think you are right. The horse did actually drift up to 5.7 before it came back in.
I think I wanted to put this race up because whilst I was happy with the result I was not happy with how I achieved it.
Drifter
I'd echo MG's comments, as long as you had some valid reasons for believing the overall direction would go in your favour there's nothing wrong with going back for more just because the trade doesn't initially go in your favour. Personally I'd be looking for something more than a gut reaction though.
ReplyDeleteOnly you'll know if you're tradings good enough to be getting it right on a consistent basis. Too many traders cut and run at the first sign of trouble but short term drifts can occur for allsorts of reasons you need confidence in your own abilities to make it pay.
As soon as something is out of your comfort zone you should be looking to get out though as it's not worth messing up you mindset for the sake of one race, plenty of races out there and you can always go back in to lessen losses etc.
Is it always good to go with your gut feeling?
Ummm no always base your trades on something solid, your gut feelings may change day to day and ultimately be akin to chasing if that gut feelings starts getting it wrong which it will do at times.
At what point do you realise you were wrong and cut your losses?
Set yourself stop losses and stick to them , whether thats in terms of ticks or set amounts of £'s stick to them. They'll increase the better you get at trading.
Would this type of strategy work in the long run?
Probably not as you were out of your comfort zone and basing it on your gut feeling.
Is it a good idea to risk more money when the initial trade goes against you?
Of course it is just cos a horse goes out a few ticks doesn't mean it won't come in hell of a lot more, thats where experience and confidence in your abilities comes into play.
Thanks MF for the wise words. I think it was a bit more than a gut reaction. However I wasn't certain it was going to work, although you never can be sure what is going to happen next.
ReplyDeleteDrifter