The X-Trader Series – The Concept of Trading
Welcome to the first part of the X-Trader Series and I want to talk about the concept of trading, but before we get into that, I want to point out that despite being a professional trader since 2002, my knowledge is just scratching the surface of what can be achieved on Betfair.
If you ask any one of the 50 traders that I am currently mentoring, they will tell you that I keep my trading process as simple as possible. The difficult part is taking a simple process (which is effectively back high and laybet low) and putting into practice on an unpredicatble sporting event.
During my trading education I read what is classed the bible of financial trading ‘The Intelligent Investor’ By Benjamin Graham. The chapter that really caught my attention was ‘Mr Markets’ which I feel Graham explains the concept of trading perfectly.
‘The Markets are there to serve you, not instruct you!’
That line is cemented firmly in trading vocubulary and what you should remember the next time that you log onto Betfair to trade a sporting event, you’re trading the markets and not the event itself.
Yes; the markets are driven by the events happening on the field or court of play, some will argue that Betfair creates the perfect market, I am certainly not going to argue with the philosphy.
However, crazy things happen in sport, sometimes its complete madness and this is when the markets go all over the place as punters over-react to what is happening.
I am not interested who wins the match, just the point when the market presents itself with an opportunity for an opening position.
My approach is to take my cut out of the market by putting myself where the upside is far bigger than the risk. I know that the better I am at supressing risk, the more money I will make long-term from trading.
Trading is all about ‘Risk Supression!’
It’s this concept that many novice traders struggle with, their approach is flexible when taking a loss on a market. They will often stay in the market much longer than they should in the hope that their fortunes will turn around, only to lose more money in the end.
Then the flipside of the coin, they’re in-flexible when take a profit, put an order at a pre-determined point into the market and wait for it to be matched.
To achieve long-term profits you have to be in-flexible with your losses, if your stop loss is hit a minute after your opening position, you close. Your approach needs to be flexible on when to take a profit.
What you’re effectively doing is making a series of mini-trading decisions without actually putting an further money into the market (although its perfectly feesible to increase your stakes), once the price has moved in your favour and you have a profitable position.
Never be frightened to let an open trading position run all the way to end of the event if your in a strong profitable position.
In the next chapter I will show you one of two ways that you can add to your thought process when trying to pinpoint low-risk trading opportunities.
If you would like to know more about my mentoring program and trading alongside side me and 50 other Betfair traders within the X-Club, feel free to drop me a line at ProXTrading.
Chapter 2 – How to spot opportunities in the markets (25th November)
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Comments on The X-Trader Series – The Concept of Trading
Some excellent advice here, but I will take issue with the use of stop losses.
Professional traders know stop losses are a mugs game. They give the illusion of safety with the long term guarantee of losses.
I didn’t know people were using stop loses on Betfair, but it explains the behaviour I see in some Betfair markets. Now I know, I can use that information.
Thanks
Many thanks for your comments, like I said from the outset, my knowledge is just scratching the surface of what can be achieved on Betfair.
When you refer to professional traders, do you mean forex traders? Now I will not pretend that I know much about the techniques and psychology of that form of trading.
To me avoiding using stops, including any kind of mental stops in your trading, then you’re trading on your point of view. You take a stance that you will get of the market when your analysis is proven wrong, of course this may never happen.
To me thats a bet when referring to sporting markets.
If your good enough to make the sport pay in this way, then you get my utmost respect, if you have the track record to back up your views and the confidence, then please feel free not to choose stops losses if that approach works for you.
I have to use stop-losses with the vast majority of my trading as I am trading on signals in the markets. If you take trading the 10 minutes before the start of the race, the action is frantic and the patterns disappear as quickly as they appear, when these patterns have no meaning, this is my signal for exiting the market.
My whole trading approach is risking a certain percentage per trade, I just cant do it in the majority of markets that I trade without stops.
Thats what works for me, however I am open minded enough to adopt fresh ideas and develop as a trader and would welcome your views on how I could increase my profits without the use of stops.
I wish every success with your future trading.