When we are trading sports on the Betdaq and Betfair exchange analysing our trading results is key to us making money. Without cold, logical analysis of your results, actions, thoughts and the circumstances that surround every trade we make, we are not going to make it as a sports trader.
It’s that simple and if that sounds like too much like hard work for you then maybe you should evaluate whether you really want to be a pro trader on Betfair or you’re just up for a bit of fun now and again or somewhere in between; just bear in mind that the closer you get to being a pro and consistently making money then the more important analysis is.
Analysis is a very powerful tool, not least because our brains our perfectly wired via millions of years of evolution to analyse and extrapolate cause from effect. This is because the brain works heuristically, that is to say we use a rule-of-thumb way of reasoning, in evolutionary terms it looks something like this;
“Last time that bush rustled like that a sabre tooth jumped out and ate Dave, therefore; RUN!”
It is this simplified, heuristic thinking that can be our best friend or our worst enemy, it is our best friend when trying to spot patterns across a number of varying events, but if we don’t add empirical (observed) analysis to our heuristic reasoning then we can quite often get the wrong end of the stick.
The main problem with heuristic reasoning on its own is it can blind you to the facts at hand, it is the reason there are so many conspiracy theories on the net. Not because these theories are necessarily true, but because we are looking at them in a heuristic way, which as I said is great for getting the bigger picture, but not always so good for looking at detail.
So a trading example of heuristic reasoning would be;
“The last 25 times I have traded on tennis I've lost 18 times; therefore I will not trade on tennis any more.”
That sounds like a reasonable analysis and conclusion doesn't it? If you are consistently losing at a sport then cutting it out seems like the right thing to do. However if we use empirical analysis in the same situation then it might look a little something like this.
“The last 25 times I have traded on tennis I've lost 18 times; what was different on those 7 winning trades and was there a difference between the losing trades?
So the second way asks a question of the results, which in order to get the answer requires more analysis, whereas the first way just looks at the results as a whole and draws a conclusion about them.
On closer inspection you might find that the times you have won is because you've bet on the match and not each point like the other eighteen times, or maybe you were betting on the rank outsider those eighteen times and the two times you won you bet on the favourite.
Note: Analysing your data like this sounds obvious when you write it down, however I know many experienced traders who say stuff like “I'm never betting on X again” for no other reason that they had a losing streak betting on the particular sport or even team, but when you ask them why they lost, they can’t answer you.
So it is crucial that you apply both types of reasoning to your trading data, which of course, you are compiling in your trading notebook.
But as you know or will find out once you start regularly trading on Betfair, is it’s pretty painful losing money and it’s even worse when you have to document just how you lost it. I’m often sitting there wincing when I have to write up losing trades, it’s not fun and it’s in direct contrast to the joy of reporting a winning trade.
Analyse Don’t Dwell
It is painful to write down losing trades and it can be painful reading back through losing trades, especially if you've lost them due to a mistake either real or imagined, but it’s only painful if you don’t take the Zen approach to the matter and realise that you are not your mistakes.
You need to be able to look at your data and with no emotion whatsoever analyse what went right and what went wrong.
This is because as heuristic-thinking human beings we tend to make the same mistakes over and over again.
So the key to not dwelling on something is to look for differences in circumstances, when you look for differences you can end up finding similarities but not in such a skewed way; it’s like the difference between getting the gist of a story via reading the headlines or reading between the lines of the actual story itself.
Let’s take an imagined scenario:
John has had a long string of losses and the whole Betfair trader things is beginning to lose its shine. John opens up his trading notebook and because he keep’s such a detailed and neat notebook he can see at a glance that the start of his losses coincided with the start of Wimbledon and he can also see that a large majority of his losing trades have been in the week on the tennis and the winning trades have been on the weekend when he’s been concentrating on Norwegian football.
As John examines his losing trades he sees that a lot of times when he was unsure about a trade he went ahead and did it anyway, which really depresses him as he seems to be stuck in a cycle of self-sabotage. At the end of his grief session he concludes that tennis trading is not for him as he can’t trust himself to be disciplined and he should stick to what he knows; which is football.
John has just used heuristic reasoning to come to a conclusion that on the surface looks correct, it’s even cemented further when he open’s up the profit and loss page in his Betfair account and see’s that he’s up on the football but the tennis has swallowed all those profits.
John resolve’s never to bet on tennis again, he doesn't trade on tennis for the remaining week of Wimbledon and when the US Open comes around later that year he totally ignores it and sticks to what he knows; football.
So in the spirit of Groundhog Day or the excellent German film, Run Lola Run let’s rewind John’s day and get him analysing his data in a much more practical manner and focussing on differences rather than similarities.
After a long string of losses John open’s up his neat, well kept, trading notebook and see’s at a glance that he’s lost a load of tennis trades stemming from the start of Wimbledon.
Instead of (heuristically) jumping to the conclusion that he should leave tennis trading alone, he starts to analyse each trade separately looking for differences between the trades.
As he goes through looking for differences between each trade he start’s to find subtle similarities, he realises that he hasn’t lost all the tennis trades he’s made but the ones he has lost, there always seems to be an accompanying note about how he’s just spotted this one in the paper or just got a hot Twitter tip.
He then delves a little deeper and see’s that when he get’s a hot tip he’s not actually following the tip as in player A will beat player B, but rather he has tried to make more money by laying the tipped player, in hope of the player starting badly and then coming back, in some trades it has worked, but more often than not, it has failed.
Moreover he see’s that his most successful trading has been to lay the favourite as long as that favourite was seeded 11 or lower. He also notices that after almost every winning trade there have been a couple of losing ones.
Upon closer inspection these losing trades have been on point to point trading a fast volatile market where you can make or lose large amounts in seconds.
Finally John concludes that when he stuck to his plan of laying any favourite that was out of the top 10 seeds and listening to and following to the letter his favourite tipsters advice on Twitter he won, but as soon as he moved away from that he lost.
John also concluded that the reason he was departing from this winning strategy was because he was unimpressed with the small profit margins and was trying to make more money, which explained why losing trades often followed each modest win..
John decided to stick to the plan for the second half of Wimbledon, which helped him return a profit of 25% on pre-Wimbledon bankroll and later that year he made almost 400% at the US Open.
John couldn't extrapolate any real meaning in the first instance because of his heuristic approach; you are much more likely to dwell on something if you approach it heuristically saying stuff to yourself like: “Why did I go with that? I so should have gone with that instead” Often completely missing the point.
In the first instance John could have been said to have drawn a picture with crayons, in the second he used a fine millimetre thick pencil to create a much more detailed representation of the same thing.
John basically realised he was not his mistakes, making mistakes is human but our mistakes don’t define us, we are already defined via our genetics and surroundings. Our mistakes are just a reference point in our greater experience and that is why we must examine them in this pragmatic, practical way because that’s the only way we’re ever going to truly learn from our mistakes and become superstar, millionaire Betfair traders.
A Practical Process For Letting Go
I don’t like to tell people to do something without giving them the ammo to do it, so I'm going to give you a mental exercise you can do, in order to separate your being from your thoughts and therefore your mistakes.
The exercise is a simplified one taken from the Shambhala warrior training, Shambhala warriors were practiser's of Zen and the reason I like to use their techniques is because of the way they focus my mind to do and enjoy tasks, I would never have enjoyed before.
Because of Shambhala and Zen techniques in general I have become more proficient at researching sporting events, which has made me a better trader. If I lose I can analyse the results with impartiality and although I still get angry at my mistakes from time to time (I'm only human!) I can detach myself from the anger and analyse what went wrong.
I am probably the least spiritual person you’ll ever meet, whilst capable of giving love to my family and friends, I have a cold, analytical, scientific approach to most matters and that of course includes sports trading.
I tell you this because the techniques I'm about to explain below can to some people sound a bit hippy dippy or quasi-religious, as I say that is not what I'm about, I believe that we have the power within us to unlock what the religious might call miracles, but I call human endeavour. The Zen philosophers and Shambhala warriors of old devised methods to help us unlock those miracles.
OK, onto how to let go of your losing trades or rather, how to let go of the anger and disappointment surrounding your losing trades
This is called the Shambala sitting discipline; first either choose a large comfortable cushion on the floor to kneel or sit cross legged on with your hands resting on your knees, or as I prefer, a comfortable chair which you sit in without letting your back touch the back of the chair.
Lower yourself into the sitting position slowly and deliberately, feel your buttocks sinking down into the chair at the same time imagine you are being gently pulled from the top and centre of your head, you can even give yourself this feeling by gently tugging on a hair; if you’re bald there place your finger lightly on top of your head and just push your head up into your finger.
When you’re in the position your back will be straight and your chin will be pointing slightly down, focus on an area about six to eight feet in front of you on the ground, then lightly bring your attention to your breathing, don’t change the tempo of your breathing, just be aware of it.
As you sit there, various thoughts will spring up in your mind, get used to lightly examining them for what they are and then letting them drift on by.
When you first try this you will probably get lost in the first or second thought you have, that’s fine, just pull your concentration back to your breathing and let the thoughts drift by.
You can even say to yourself periodically, “I am not my thoughts.”
Do this everyday, do it before you login to Betfair, do it before you research your trades, the more you do it, the more you’ll become detached from your thoughts and the more you’ll be able to analyse them in a rational, empirical fashion and that will ultimately make you a better trader.
According to Shambhala warrior training, another component to letting go is honesty, as far as trading is concerned, especially when it comes to analysis, but no less important in research and actual trading, is honesty with yourself.
This is important neurologically and by that I mean that if you continue to lie to yourself or gloss over the truth about certain trades, then this will encourage a brain state called cognitive dissonance in which you’ll tell yourself little stories to protect yourself from the ‘painful’ truth.
Of course the most painful thing of all is to lose money because you’re ignoring something, so therefore part of analysis is writing down all your trades in your trading notebook.
An example of being dishonest with yourself would be to write down three winning trades that you've made in the last couple of days, but leave out those little £2 punts that you were just having a bit of fun with and lost.
This is why you write down your opening and closing balance at the top and bottom of each trade note, which in itself is a form of honesty, because your Betfair balance never lies.
Eventually writing down losing trades and analysing why they lost will just become second nature to you and you’ll do it without any feelings of resentment or disappointment. That will make you a better trader, which will mean you’ll be writing up a lot fewer losing trades.
Use analysis before and after your trades, use your analytical powers to determine whether a team or individual is playing on-trend and use them after to deduce where you went wrong and where you went right.
Record as much information you can in your trading notebook and make sure to review all the information, the good and the bad.
Don't dwell on the bad results, instead analyse why they went wrong, identify the problem and avoid it in future trades.
Do these things and you are on the road to becoming a disciplined and profitable Betfair sports trader.
Good luck and happy trading
The Zen Trader