Betfree247 made an interesting comment to my last post, prompting me to think a bit more about what building a bank actually entails and how to go about doing it. I started trading primarily to see if I could generate a full time income from it and 'retire' from the rat race. Some four years on I can safely say that, yes, you can generate a full time income from it.
You can. I can't.
I simply don't have the right mindset to do it ~ and it's no good trying to pretend otherwise. Although my trades are generally speaking profitable I still, with monotonous regularity, get in too deep, let a loser run, panic out of a winner for fear of it becoming a loser etc etc etc. Sometimes, having committed one of those crimes I chase to recover. The reason I carry on is because I enjoy it and because I'm NOT dependent on it to help with my domestic finances, at all.
Having said that, who couldn't use a few hundred quid a month, tax free? So what's the best way of doing this and what do you need to to do to achieve it?
Other bloggers have written about the dangers of setting short term targets. The theory being that if you have a target of say, £20 per night, and the first trade loses £10 that you then enter another trade for the wrong reasons. The converse is that if the first trade makes £50 you then enter another trade for different, but still wrong, reasons. In both cases the smart thing to have done would have been to take the plug off your pc and sit with the missus watching Eastenders, tomorrow being another day. It would seem you can't win if you approach it in this way. I'm not 100% convinced by this argument, but as time has gone by I am concluding that there's a lot to be said for it.
So if you aren't trading to a financial or percentile target, how else can you make long term gains? The only other way, surely, is to only enter the right trades and to have in your mind one of two outcomes... 1) that the trade will either win or it won't and you'll live with the result or 2) that at the outset you set pre-determined exit points so that you make or lose an acceptable amount. If your immediate reaction is that 2) is similar to setting short term targets I'd have some sympathy with that viewpoint, but if you stop and think about it they are totally different in terms of mental approach. Both approaches, to be successful, depend on you making enough on the winners to outweigh the loss on the losers. That sounds like stating the obvious, but it leads nicely to my next point...
The other point that I would make is that to succeed long term, like it or not, you need to put effort into choosing your trades. Spraying money around across lots of different sports and markets without some clear strategy is a no hoper in my opinion. I know that IF I just restricted my trading to my favourite trade I would make money in the long run. I've honed and tweaked it just about as much as I believe I can now, although to be honest it hasn't changed in essence that much. My problem is, always has been and probably now always will be, a lack of discipline. I don't seem to be able to stick to the straight and narrow.
As Betfree247 concludes in his comment: 'Trying to work out the right theory for yourself really is the key to this I believe, we need to find out what we're comfortable with and try to implement that. It's definitely not a one size fits all scenario.'
I couldn't agree more!
Thursday, 12 July 2012
Sunday, 8 July 2012
The Eighth Wonder of the World
Albert Einstein, when he wasn't working on his theory of relativity and other matters of scientific import, thus described the phenomenon of compound interest. Those with long memories or the ability to delve deep into this blog will remember or discover that it was with an exploration of compound interest that I started writing in my little corner of the interweb.
I mention it again after reading Cassini's piece on compounding and the wisdom of having, or of not having, daily targets. I haven't read the article in Ian Erskine's newsletter that Cassini quoted but it got me thinking. In a nutshell someone wrote that increasing your bank by 2-3% per day should be achievable. A quick spreadsheet reveals that if that statement refers to a compounded bank that by day 365 at 3% per day your bank would be just shy of £5,000,000 from a start balance of £100! The daily target for that day would be a modest £141,211.80. Clearly, as Cassini says, this is not viable and if it were that easy probably both he, I and every other trader would be out of work on a beach somewhere laying 1.1 shots for a hundred grand!
If, however, the author was referring to a 2-3% increase in bank size in a non compounded sense then that is completely different. A bank of £1000 returning £20 - £30 per day is entirely realistic - in fact you could even argue that you are under utilising that bank. Trading in that way for 25 days per month grows the bank by a handsome £500 - £750 per month. Slightly better than sticking that grand in the Nationwide!
I mention it again after reading Cassini's piece on compounding and the wisdom of having, or of not having, daily targets. I haven't read the article in Ian Erskine's newsletter that Cassini quoted but it got me thinking. In a nutshell someone wrote that increasing your bank by 2-3% per day should be achievable. A quick spreadsheet reveals that if that statement refers to a compounded bank that by day 365 at 3% per day your bank would be just shy of £5,000,000 from a start balance of £100! The daily target for that day would be a modest £141,211.80. Clearly, as Cassini says, this is not viable and if it were that easy probably both he, I and every other trader would be out of work on a beach somewhere laying 1.1 shots for a hundred grand!
If, however, the author was referring to a 2-3% increase in bank size in a non compounded sense then that is completely different. A bank of £1000 returning £20 - £30 per day is entirely realistic - in fact you could even argue that you are under utilising that bank. Trading in that way for 25 days per month grows the bank by a handsome £500 - £750 per month. Slightly better than sticking that grand in the Nationwide!
Monday, 2 July 2012
Farewell, Euro 2012
And what a great tournament it was, on the whole. The final itself, whilst not a classic, was a highly entertaining affair, enlivened by the relatively early Spanish goal. I had a feeling goals would be coming in the game after the quiet semi between the Iberian nations, and opted for a trade based around 1-1,2-2 and 3-3 staked 3:2:1. However, on looking at the correct score odds before kick off I just couldn't resist a semi-punt on Any Unquoted - available at a quite incredible 21!
I could have left a free trade on the above draw scores after the first Spanish goal by laying the AU off, but for some reason let it run. Needless to say I did green at 2-0 - genuinely not even really considering the possibility of a 4-0 result and convincing myself that laying the trade off at 4.4 represented great value. Ho hum, as they say, our old friend 20/20 hindsight comes to the fore again! Never mind, the trade rounded off a most profitable tournament for me, the only real downside being a completely stupid / idiotic / crazy bit of trading during an Argentinian match which completely wiped out the considerable profit I'd made on the first two group games with all those lovely 1-1, 1-2 2-1 games. It seems I'm destined never to learn!
The two goals that took Spain into the Any Unquoted territory were both scored by Chelsea players. I'm extremely pleased that these two have started pre-season training already. I've a good feeling about the prospects for my team in the forthcoming season, and am wondering to what extent my opinion that they offer good value at 6.4 in the Winner's market is down to good old fashioned bias! One trade (or, probably more accurately, punt) I will be entering, if I can find the damned thing, is to put a few quid on Torres to be the leading scorer in the Premiership - anyone know where that market is? I can't find it!
Finally for today I'd like to wish Lambretta all the very best in his forthcoming return to the gravy train. If you aren't familiar with his blog I'd strongly recommend it as an interesting and worthwhile read. I don't know if he will continue to trade in his spare time or indeed if he will continue to blog. Personally I hope he does both, but whatever he does he has my best wishes.
I could have left a free trade on the above draw scores after the first Spanish goal by laying the AU off, but for some reason let it run. Needless to say I did green at 2-0 - genuinely not even really considering the possibility of a 4-0 result and convincing myself that laying the trade off at 4.4 represented great value. Ho hum, as they say, our old friend 20/20 hindsight comes to the fore again! Never mind, the trade rounded off a most profitable tournament for me, the only real downside being a completely stupid / idiotic / crazy bit of trading during an Argentinian match which completely wiped out the considerable profit I'd made on the first two group games with all those lovely 1-1, 1-2 2-1 games. It seems I'm destined never to learn!
The two goals that took Spain into the Any Unquoted territory were both scored by Chelsea players. I'm extremely pleased that these two have started pre-season training already. I've a good feeling about the prospects for my team in the forthcoming season, and am wondering to what extent my opinion that they offer good value at 6.4 in the Winner's market is down to good old fashioned bias! One trade (or, probably more accurately, punt) I will be entering, if I can find the damned thing, is to put a few quid on Torres to be the leading scorer in the Premiership - anyone know where that market is? I can't find it!
Finally for today I'd like to wish Lambretta all the very best in his forthcoming return to the gravy train. If you aren't familiar with his blog I'd strongly recommend it as an interesting and worthwhile read. I don't know if he will continue to trade in his spare time or indeed if he will continue to blog. Personally I hope he does both, but whatever he does he has my best wishes.
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