Trading software

Sunday, October 24, 2010

Oh dear...

Have a read of this from Peter Webb's blog:

http://www.betangel.com/blog_wp/2010/10/23/fat-fingers/

Unreal stuff. Someone's account absolutely destroyed there.

Just started...

reading The Disciplined Trader which arrived the other day and I have to say that I'm enjoying it immensely. When I realised that it written over 20 years ago, I felt dissappointed but most of the themes are still quite current and I'm getting a bit out of it. He deals with a lot of psychological aspects of trading which is something I enjoy. The guy who wrote the book is a trader himself and, rather refreshingly, admits that he once lost his house, car, missus and everything he owned due to trading - even filing for bankruptcy. It's nice to see someone be honest that has hit rock bottom and came out of it. So many trading books seem to be written in that positive, self help American style way and I sometimes doubt whether the authors are actually proper traders. Anyhow, so far so good with this book although I've only read a couple of chapters.

With regard to the trading, it might be a while before I get some decent sessions in. I've decided to spend this weekend working in the back garden (making a patio) before the winter gets in. I've promised the missus I'd do it for years and I really want to get it done before the cold weather. I've had a look at my work schedule too which is very busy so I don't really know when I'll get a full day at the computer again - it may be a week or two if I'm lucky.

This is one of the frustrating things about part time trading. You can read up about it in the evening and be raring to go with the money at the ready but you often just don't get time when you have a full time job and a family to look after. If I nab a few hours here or there I'll post it up.

Saturday, October 23, 2010

Saturday

Was hoping to get some trading done today but got stuck into some work in the back garden and decided to stick it out while the weather was good. May try get to the computer on Sunday or Monday if I get time.

Friday, October 22, 2010

Good and bad luck at Dundalk

A very good day overall with a profit of €126.40 which is very pleasing indeed. Dundalk was a bit mad and one race went in running while I was talking to my daughter which meant I had to get out for a loss of seventy quid.

On the other hand, Fortuna must have been looking down on me as a later trade there went extremely well, earning me fifty quid. I got matched then the price came in quite a lot. Even though I was scalping, I let it ride and closed out for a nice profit.

An up and down evening but a satisfactory one nonetheless.

***

The Challenge: to increase my trading bank by 5% per month.

The story so far...

Starting bank: €1,000 (beginning of May 2010)
Target for end October: €1,340.10
Today’s opening bank:
€2,017.30
Today’s closing bank: €2,143.70
Today's profit/loss: +€126.40
Today's turnover: €37,676.83



Wednesday, October 20, 2010

Clearing the deck

I’ve had a few days away from trading due to work so this has given me some time in the evenings to think about my trading challenge; where it’s going well, and where it’s going bad. I guess the fact that the bank has passed the 2K mark also makes it a good time for review.

Even though I’m ahead of targets set at the start of the challenge and doing quite well, there are a few niggling issues that I want to nail on the head before I move forward further. Despite the profit levels, I’ve one or two things bugging me and I’ve decided to put them on paper and address them as I’m not entirely happy with my trading as a whole. I think I’ve become more erratic and have started to enjoy the good days too much. Maybe they got to me and I’ve come to expect them. When I don’t have one, I’m finding myself overly-disappointed. At one time, a profit of twenty quid for the day would have been fine but now I’m getting a little greedy - leading to chasing and in-running trading on occasion. This has to be brought under control as protecting my capital (keeping in the game) should be my first priority. If I keep to these principles, the bank should grow safely (albeit slowly) and over time I should be successful.

I’ve went back through my records, my blog, and my p&l with a fine tooth comb to see what I can find and I’ve noted down a number of changes that need to take place. Most relate to discipline and staking.

Being honest, my staking has become haphazard (especially as the bank grew) and I’m probably risking way more than I should on certain trades. When I started this, I would always trade in ‘tick sizes’ and I need to get back to doing this. I would always have a certain amount that I was prepared to lose on each trade and I’d stick to it. Lately, I’ve let this lapse.

For example, I notice last week that I opened a trade with €200 on a horse priced 1.51 to back. This is fine and the trade went well as I layed it again at 1.50. Nothing wrong there.

However, in the following race, there was a horse priced 2.14 and I opened a trade, again using €200 as the stake. This is a problem.

On the first trade, the prices move in increments of 1% (1.51, 1.52, 1.53 etc) whereas in the second trade, the prices are moving in increments of 2% (2.14, 2.16, 2.18).

This is because between 2.0 and 3.0 the move in twos, whereas prices below it move in ticks of one. There are a number of key prices on Betfair you need to be aware of when trading where the increments are different: 2.0, 3.0, 4.0, 6.0, 10.0, 20.0, 30.0, 50.0, 100.0

What does this mean? Well effectively, I wasn’t managing my risk. On the first trade, I would potentially be losing €2 every time the price moved away from me. This is fine as long as I expect that. On the second trade however, I would be potentially losing €4 for every tick the price moved away from me (as the price increments are in twos). It’s not acceptable to take double the risk (on a whim really).

This is something I’ve let slip lately so I’m going to address it. Firstly, I’m never going to risk more than 1% of my bank (to the nearest thousand) on any given trade. So at the moment, I wont let myself lose more than twenty quid. Generally, I set my stop loss for ten ticks away so if a horse was trading at 1.5, I should use €200 stakes for that trade. If the trade went wrong and drifted ten ticks away from me, I would lose €20 if the horse went on to win. If the horse went on to lose, the book would be settled at zero. Of course, I don’t always let it drift ten ticks away, I’d often get out earlier for a much smaller loss – but setting the stop at this point means I can be absolutely certain that €20 is the most I can lose on any given trade. Hopefully, that can be something I can accept psychologically as it’s pre defined and a set amount. Lately, I’ve been trading where the potential loss has varied, often going into the hundreds. Not good.

I’ve printed off a chart for the stakes I should use for each price (it gets smaller as the prices increase) and I’m vowing to stick to it. If, over time, I feel confident that I should increase stakes a little, I’ll do so – but will still keep in mind the price increments and how it affects potential loss.

Knowing exactly how much I may lose on any given bet (and knowing that it’s only 1% of the bank should help my discipline issues and there is no need to go in-running hopefully. I can accept a loss of €20 and move on.

The downside is that I may find my bank growth slow down a little as I’ve been using far too big stakes lately on certain trades. Some of these trades reaped nice rewards but the downside was that I was tempted to chase losses (as bad trades cost me dearly too).

The other thing I want to combat is over-trading – trading for the sake of some action, rather than waiting until the market conditions are right. This is a lot harder than it sounds! It can get very boring watching a market and sometimes you feel that you are missing out if you don’t open a position. However, I’m making a vow to overcome those urges and will sit it out if conditions don’t match my criteria. It’s best to trade rarely but very well, rather than trade moderately and often. I know that I have to turn over my money as much as I can to churn a profit but the focus will have to be on quality rather than quantity going forward.

Another thing I’m going to do is review my targets but I’ll wait until the end of the month for this. At the start, I hoped to earn 5% per month and set my targets as such. I was making more than this but left the targets alone. Rather than plug away rather aimlessly, it would make sense to re-set my target at the end of each month, aiming for 5% of the rolling figure – rather than the figures I produced at the start of the challenge which have already been met.

Regarding trading this weekend, I hope to get some done on Friday evening, Saturday daytime and Monday daytime. I may trade a little on Sunday but I want to make sure I spend some time with my family over the bank-holiday too so I’ll see how it goes.

Tuesday, October 19, 2010

Just finished....

The psychology of trading by Brett N. Steenbarger.

As mentioned before, I'm trying to read up as much as possible on trading so I'll give a quick review of each book here when I'm done.

I'd give this one a seven out of ten. Basically, this guy is a therapist by profession but also trades in his spare time. He uses stories about his patients' troubles and relates them to the problems we face in the markets.

Some of it was fascinating and I found his theme very interesting that there is more than one person (or trader) inside of us, each trying to express himself. You have the disciplined guy, the wreckless guy, the gambler etc. Each is trying for control of your mouse and you need to let the right one through.

One of the downsides is that it was quite Americanised. Not sure if I can explain what that is but most of his patients for example, all seemed to have problems that stemmed back to their youth, and blaming the parents was a common theme. That kind of crap they go on with bores me sometimes and they don't seem to have the 'get on with it' attitude we have over in Ireland.

To be honest, some of these people that go to therapy over there should just cop themselves on, simple as that. Those are the negatives but I enjoyed most of it.

He describes how we need to become our own 'internal observer' and this theme is something similar I wrote about before - about stepping away from the situation and kind of observing what you are doing from 'afar' .

It probably could have been shortened but overall, it was a pretty good read.

I've started reading High Performance Trading: 35 Practical Strategies and Techniques To Enhance Your Trading Psychology and Performance

So far so good. I've read some other books on the topic and will try review when I get time.

Last night, I ordered The Disciplined Trader so I await that one in the post.


Not trying to say that we can learn everything from books - far from it - but I usually find a couple of useful bits of info in each and definitely feel I've learned more since I started reading up as much as I can.

Sunday, October 17, 2010

Stressful day

Although I made a profit today, it was quite stressful and I'm disappointed with myself over two races in particular which I chased my losses in-running. In the last at bath, I left €300 exposed before I snapped out of it and reddened up the book for a loss of €71. It was a stupid thing to do and could have ruined some great recent days.

It's weird but losses seem harder to take for me after I've had a great day. This is something I'm going to have to think about more and work on.

I got lucky in the last race of the day but to be honest, I'm not happy about that either! The bumper at Naas went off early. This is just not acceptable. The market went into dissarray and I had some open positions. I think people panicked a little and exited their positions. I waited about ten seconds and then greened up for sixty quid. While I made money in that race, it was just lucky money really and I cant see how these things are allowed to happen in Ireland.

On a positive note, the horse that won, Raise The Beat, is trained by Colm Murphy and owned by one of the the Winning Ways syndicates.

I part own a horse with these (as yet unraced) so I'm delight for the lads with their win and it's good to see Colm get some good winners lately.

The other positive is that the bank is now over double what it was at the start which is well ahead of target.

A good day on paper but in my heart, I know I was lucky and I'm disappointed with my indiscipline. I also over traded a little, taking positions just to get some action rather than waiting until conditions were ideal. So a weird day really that I'm not entirely happy about, despite the profit made.

***



The Challenge: to increase my trading bank by 5% per month.

The story so far...

Starting bank: €1,000 (beginning of May 2010)
Target for end October: €1,340.10
Today’s opening bank:
€1960.24
Today’s closing bank: €2,017.30
Today's profit/loss: +€57.06
Today's turnover: €78,496.73

Saturday, October 16, 2010

Best day yet

An absolutely brilliant day, my best ever as part of this challenge. The profit was €271.40 and I turned over a whopping 90K .



I don't want to get ahead of myself or get over excited about a great day - but I'm wondering if it's time to review my targets. At the start of the challenge, I set myself a challenge of increasing my bank by 5%. This was a fairly conservative figure but I didn't want to set it so high that I couldn't meet it. I'm well ahead of target so perhaps it's time to change the target to 10% per month. Had I started off with a 10% target, I would have been hoping that the bank was around €1600 at the end of Ocotber and I've surpassed that now.

I'll plug away with the current targets until the end of the month and review then.

As my bank grows, I'm finding numerous advantages, not least that I can trade in bigger sums. I also find that I can get in early 2,3 or even 4 races ahead at the key prices. Of course I set an automatic tick offset and stop loss when doing this but it's proving fruitful so far getting ahead of the queue. With a smaller bank, this is not really possible as you need your capital to trade.

I feel pretty darn good about today so I've treated myself to a nice bottle of Ch√Ęteauneuf-du-Pape to celebrate a good days work.

***

The Challenge: to increase my trading bank by 5% per month.

The story so far...

Starting bank: €1,000 (beginning of May 2010)
Target for end October: €1,340.10
Today’s opening bank:
€1,688.86
Today’s closing bank: €1960.24
Today's profit/loss: +€271.40
Today's turnover: €91,608.21

Sunday, October 10, 2010

Figuring out the best stops loss

The Challenge: to increase my trading bank by 5% per month.

The story so far...

Starting bank: €1,000 (beginning of May 2010)
Target for end October: €1,340.10
Today’s opening bank:
€1,643.47
Today’s closing bank: €1,688.86
Today's profit/loss: +€45.39
Today's turnover: €15,517.84



Only traded four races today as I went out for dinner with my family. It was a very good day all considered with a profit of €45.39. As the bank builds, I find that I can use bigger sums to trade which has positive and negative sides. The positive side, obviously, is that each successful trade is worth a bit more. The downside is that when a trade goes wrong, the loss can be harder to take. Again, I'm trying not to think in actual money figures, just percentages. It's easier said than done though!

Today, I tried trading without an automatic stop loss and while I made a profit, I didn't feel entirely comfortable. Perhaps I don't yet have the discipline to get out of a bad trade by myself and I let one or two run on longer than they should have. Trading with an automatic stop is great in one way as it takes out the emotion but it's not always suited to every situation. Sometimes you are fairly sure the market will come back your way but your stop loss has been hit in the meantime - this can prove frustrating. I haven't yet figured out the right stop loss yet. Perhaps I never will and it needs to be adjusted for each market, but I know that stops are something I must work on.

Saturday, October 9, 2010

Wow - what a day

An incredible day overall. I had a good evening session of trading but an in-running bet on Resplendent Ace earned me over €800




Obviously, this €836 will not be included in my trading challenge totals.

I remember this horse hitting a big price in-running last time out before pulling it out of the bag and I thought I'd take a chance again with a few quid when he hit 25/1 in running. He actually traded around 34.0 at one stage. Low and behold, the gelding goes and pulls it out of the bag again!

This capped off a very good day as my Irish Independent column had a headline winner with Electric Waves at 7/1. I backed this one with cash in the bookies old style. Sometimes it's nice to get the real cash handed to you.

Sorry if I come across as boastful here, that's not my intention. It's just that these days don't come around so often so they should be enjoyed.

With regard to the trading, it was a cracker of a day with a profit of €82.36. I only traded a few evening races but it all went very well and I must admit that I'm feeling damn good about today.

I'll certainly enjoy my few pints tonight!

Don't think I'll get to trade tomorrow as my family want to bring me out to dinner for my 30th birthday.

***

The Challenge: to increase my trading bank by 5% per month.

The story so far...

Starting bank: €1,000 (beginning of May 2010)
Target for end September: €1,340.10
Today’s opening bank:
€1,561.11
Today’s closing bank: €1,643.47
Today's profit/loss: +€82.36
Today's turnover: €20,765.90

Friday, October 8, 2010

New all-time high

The Challenge: to increase my trading bank by 5% per month.

The story so far...

Starting bank: €1,000 (beginning of May 2010)
Target for end September: €1,340.10
Today’s opening bank:
€1,496.29
Today’s closing bank: €1,561.11
Today's profit/loss: +€64.82
Today's turnover: €27,814.60


A cracking day today which brings the bank to a new all-time high. I've decided to quit now as I want to watch the Ireland/Russia match and relax. Only one market went wrong which cost me a fiver but otherwise, it was pretty handy enough to make money.



It's strange sometimes - I don't know if it's the markets themselves or else it's the mindset - but some days just seem much easier than others.

By the end of the day, my concentration was starting to lapse so I decided to quit as the temptation to trade through boredom was arising. I'm starting to recognise these signals in myself and have started to act on them. If I'm feeling bored, for example, it's time for a break.




All in all, a very pleasing day. Let's hope a win for Ireland can top it off as I've layed the Russians for a ton:

Apologies, the video won't upload - I'll try get it up at a later time if I can. You will see from the days p&l screenshot later that I earned a quid. It wasn't too exciting anyway.

Filming a random race

People have asked me to put up some more videos and I promised to do so when I got time.



However, one person sent me an interesting email and asked if I was going to up any trades where it goes arse up. I found this interesting as most videos on youtube are of successful trades and this makes it look easy. Generally, people pick and choose what they upload so it's not a real reflection of the reality of trading.

So I’ve decided, time permitting, to film a random race picked out in advance. If the trades go well, that’s great but the video will also go up if the trading goes wrong.



I’ve pulled a race at random to film today – the 15:55 at York.


Win, lose or draw I’ll put the video up this evening and explain what I do.

'Out of body' trading

I’m sure most of you have read about people who have had ‘out of body’ or ‘near death’ experiences where they are floating above themselves and can somehow view their body from afar.

Yes, yes, yes – I know that the link between out of body experiences and trading is extremely tentative but bear with me while I try to explain a psychological strategy I use which often proves useful:

Let’s say you take a position where you hope to get a tick or two profit but the market is starting to go against you...

When faced with this situation, many people will start to panic and as they stare and stare at the screen, they wonder why it always happens to them. When faced with fear, it becomes hard to relax and let the markets do their thing and it almost seems impossible that the market will return to where you want it. Yet, very few people will get out for a loss at this point – they will sit there almost paralysed, urging the price to move their way. Sometimes it will, sometimes it won’t - but this paralysis can see very intelligent people watch their position deteriorate before their eyes and it can even destroy a bank. Why do we act like this?

The increased anxiety and fear when a position goes against you can become suffocating and the need to be right can make you angry at the market. This can lead to irrational behaviour where further bets are made (bets you never would have made had you not been in the negative position).

I’ve been in this position many times but I definitely handle it in a very different way nowadays than I did when I first started trading. A couple of years back, my heart rate would rise, I’d move my eyes closer to the screen and, being honest, I'd often add to my position in an attempt to buy my way out of the situation at the next tick. I’d get so absorbed with the micro movements that I couldn’t see the bigger picture. If the price went further against me, I would be facing a very big red book and this could become quite depressing. The urge to go in-running becomes great in these situations and while you may get away with it the odd time, you will eventually bust your bank by letting your bets go inplay. Believe me, I’ve been there and have a cupboard full of those T shirts.

Nowadays, I don’t get myself into that situation and I let the market do its thing. This is easier said than done but one you learn to ‘switch off’ when your trade has been placed, it can become liberating in a way.

If a trade goes against me nowadays, I do three things:

Firstly, I set a stop loss in an area that won’t cost me a fortune if it is hit.
Secondly, I put in a ‘get out’ order for the desired profit.
Thirdly, I move the chair away from the screen and promise myself that I won’t touch the mouse until my profit or stop point has been hit.

The temptation to intervene can be huge but this is where the ‘out of body’ mindset comes into play. I sit there and breathe slowly to try make myself calm. Once my profit order and stop loss is in place, I step aside from the computer, and detach myself from the situation. Traders need to feel in control but you must accept that staring intently at the screen will not change anything so why stress yourself out?
Once you’ve learned to resist going back to the screen, you will often find that doing nothing is the best course of action of all. With luck, your profit order will be met and you will make money but sometimes your stop loss will be activated and the software will get you out for a loss. No-one likes a loss but a small one sure as hell beats the catastrophic ones as described above. It might be a bit far fetched to describe it as an out of body experience but i certainly find myself feeling detached from the situation. As mentioned, this feeling can be calm and liberating, as I'm safe in the knowledge that the inner 'panic Wayne' won't F*ck things up.

I’d urge you to try it when a trade goes against you. Set a get out profit point, set a stop loss – and then step aside from the situation. Don’t get me wrong, you need to manage the position if the race is about to go off but if you’ve time, take a little stroll around the room and forget about the market for a few minutes. You may be pleasantly surprised when you come back. Sometimes, you will be disappointed but one thing you won’t be facing is a busted bank. Protecting your capital is much more important than making a profit on a given race but so many traders can’t seem to see this.

**

This evening, I traded just one race but ended up stepping aside from my position a number of times. The good news was that it worked in my favour for the most part and I earned over €30. When the markets went against me, I simply put in my orders on both sides and walked away.

The need to feel in control can be almost overwhelming but there are times where you just have to let things take their course.

By the way, the thirty quid earned will NOT be added to the trading challenge total – I wanted to play around with some ideas today and had decided beforehand that any profit or loss would not be part of the challenge. I’ve a couple of hours off tomorrow so I’ll get as much trading in as I can for the challenge then.

I’ll probably just withdraw the thirty quid and buy a couple of pints over the weekend with it. It’s only a small amount but you have to withdraw a few quid now and then and spend it, even if it is just to make the money feel real.

Tuesday, October 5, 2010

September review

On figures, September was disappointing as the bank dropped down by around thirty quid.

This was mainly down to 12th September when I lost 80 quid by ignoring my stops and chasing a trade. It just goes to show that these simple lapses in discipline can have a big effect. Had I kept to my stops losses, I would have shown a very reasonable profit for the month but the oldies, fear and greed, ruined what would have been a good month.

In reality, I didn't get to trade much at all during the month - most of my weekends off were spent travelling and the evening meetings came to an end. I actually only got to trade for 4-5 days in September.

The target for the end of October is €1340.10 and even though I've surpassed that, this static period is a worry and I need to crack on with making money again.


Going forward...

* We are already into October and I haven't had a chance to trade as yet. I realise that I'm going to have to plan better and get more time trading. I'm going to have to look at the calendar and do as much of the all-weather evening, and also the weekend meetings as much as I can. I can't hit targets or make money unless I trade so I'll simply have to organise myself a bit better this month.

* A loss in September (my first losing month) is a bit sobering as it was purely down to a single day of indiscipline. I MUST knock this type of thing on the head going forward.

* I've had some emails asking me to put up more videos on youtube. It's been a hectic few weeks for me at home and work and I simply haven't had the time. I know I've said it before, but I do plan on filming some more trading sessions soon.

As for trading this week: There's evening racing at Kempton tomorrow but I do a wine tasting course on Wednesdays so that's out. I work late on Thursdays so I won't get to do Wolves that evening - however, they have late racing on Friday which should be do-able. I'm working during the daytime on Saturday but again, there's evening racing from Wolves so I'll try cover that and I hope to do daytime Sunday aswell. As usual, thanks for the comments and questions during the month.