Loss Recovery Systems

[Derek27]

You make an interesting point Derek but am I right in thinking that you are advocating having say a fixed lay liability in your example with your £100 and then instead of a one hit or two hit process you are spreading with entries of say 10-10-10-10-20-20-20 instead of say 40-60??? The problem I have been experiencing is that my plan of several entries that I have spread out over a significant distance has still been struggling in 1-2 races per day on average where the price has simply moved in one direction and never retraced enough to offset the additional spreads and losses. Then the market tanks as it approaches SP and I am looking at a big red. I can't see how in long trending markets that don't retrace how a gentle spread like that can offset a red screen without being aggressive. Another problem with my approach is the scalability of it as aggressively increasing stakes will also hit liquidity problems especially in weaker markets.

Am I missing something or as Peter says, should I just take my losses like a man

I'm not advocating anything, there are a million good ways to trade and organise staking. I'm just saying where you open trades and how much you stake must have firm logic and reasoning. Any strategy that involves adding to a trade with increased stakes when it goes against you, either to recoup losses or any other reason, is highly risky to say the least.

Personally I don't often add to a trade but adding to a trade that's going my way sounds far more appealing to me than doubling down on one that's gone against me.

[Morbius]

Another issue I am realising with regards to increasing stake levels aggressively and placing multiple entries without using stop losses is that I am unsure at this stage how scalable it is. For example starting with say £100 and then placing £200 followed by £400 etc would run into liquidity issues in many markets or it certainly would do if you scaled up your first entry size but this would be far less of an issue if I used a one hit entry and traded conventionally with a stop loss.

I am torn between these two approaches and I know many people on here would say choose the latter in a heartbeat but I can't help but think there is something in the former that I am just not understanding well enough.

[Morbius]

You make an interesting point Derek but am I right in thinking that you are advocating having say a fixed lay liability in your example with your £100 and then instead of a one hit or two hit process you are spreading with entries of say 10-10-10-10-20-20-20 instead of say 40-60??? The problem I have been experiencing is that my plan of several entries that I have spread out over a significant distance has still been struggling in 1-2 races per day on average where the price has simply moved in one direction and never retraced enough to offset the additional spreads and losses. Then the market tanks as it approaches SP and I am looking at a big red. I can't see how in long trending markets that don't retrace how a gentle spread like that can offset a red screen without being aggressive. Another problem with my approach is the scalability of it as aggressively increasing stakes will also hit liquidity problems especially in weaker markets.

Am I missing something or as Peter says, should I just take my losses like a man

I'm not advocating anything, there are a million good ways to trade and organise staking. I'm just saying where you open trades and how much you stake must have firm logic and reasoning. Any strategy that involves adding to a trade with increased stakes when it goes against you, either to recoup losses or any other reason, is highly risky to say the least.

Personally I don't often add to a trade but adding to a trade that's going my way sounds far more appealing to me than doubling down on one that's gone against me.

Thanks Derek, you have basically pinpointed what my dilemma is but what I couldn't get my head around was if this was only risky if it wasn't being executed correctly and I wasn't doing it right. I have got myself into some very tricky situations, many have worked out but several didn't but was unsure if this was just my bad trade management or not. Could I be so bold as to ask you Derek if you have learned through experience not to add to red screen positions?? Because financial traders in many types of securities do not baulk at doing this or in your opinion, is this much more difficult to achieve based on the rapid time decay in the pre-race markets and the fact that the market will eventually range around its SP and this is the ultimate Achilles Heel in such a strategy??

[Kai]

One of the best books on Volatility I ever read was by Sheldon Natenberg which you can get online in pdf form for free and its called Options Pricing and Volatility but it takes that leap to juxtapose some of the theory across which I am not entirely sure is the right way to approach this problem but have to start somewhere. If horseracing markets were options, they would have tremendous value because of the key metrics in the Black-Scholes options pricing model is the volatility and the greater the volatility the more intrinsic value is in the option. I have a copy of William Ziemba's book The Efficiency of Racetrack Betting Markets and Ziemba came into horseracing because of its similarity with options markets and especially the time expiry issue.

Eh, I'm not much of a bookworm, the only thing I sometimes enjoy reading is the markets After all, aren't all those same things written in the markets as well?

But anyway, if your Achilles Heel is a bit of greed then that's pretty normal, we're all greedy bastards by default. I'm pretty decent on the ladder and my edges come from it directly, although now that I think about it I probably average a bit too much but it keeps the variance at bay and makes trading much easier I guess, and it works both ways, if you open yourself up to catch that juicy upside then you have to open yourself up for bigger losses as well, so in the end you're the gets to chose your variance, it's all entirely optional. I know I need more losses on my P&Ls and it's a work in progress.

My biggest weakness or Achilles Heel if you will are value-based approaches (like Psychoff jackpots), don't really have the ability to find value in every match like the big boys but only when it's obvious, since I never punted I never had the opportunity to practice that skill and when I started to trade I was always too much of a purist trader to give it a serious consideration. So I probably perceive value a bit differently, from the ladder perspective mostly, after a while it certainly gets more obvious which prices scream value and which ones don't, so I try to position myself as best as I can.

Overall I do agree with you, a lot of people just run away from volatility but I like to run towards it and I get excited by it, so far I feel that's where some of the best opportunities lie.

[Morbius]

One of the best books on Volatility I ever read was by Sheldon Natenberg which you can get online in pdf form for free and its called Options Pricing and Volatility but it takes that leap to juxtapose some of the theory across which I am not entirely sure is the right way to approach this problem but have to start somewhere. If horseracing markets were options, they would have tremendous value because of the key metrics in the Black-Scholes options pricing model is the volatility and the greater the volatility the more intrinsic value is in the option. I have a copy of William Ziemba's book The Efficiency of Racetrack Betting Markets and Ziemba came into horseracing because of its similarity with options markets and especially the time expiry issue.

Eh, I'm not much of a bookworm, the only thing I sometimes enjoy reading is the markets After all, aren't all those same things written in the markets as well?

But anyway, if your Achilles Heel is a bit of greed then that's pretty normal, we're all greedy bastards by default. I'm pretty decent on the ladder and my edges come from it directly, although now that I think about it I probably average a bit too much but it keeps the variance at bay and makes trading much easier I guess, and it works both ways, if you open yourself up to catch that juicy upside then you have to open yourself up for bigger losses as well, so in the end you're the gets to chose your variance, it's all entirely optional. I know I need more losses on my P&Ls and it's a work in progress.

My biggest weakness or Achilles Heel if you will are value-based approaches (like Psychoff jackpots), don't really have the ability to find value in every match like the big boys but only when it's obvious, since I never punted I never had the opportunity to practice that skill and when I started to trade I was always too much of a purist trader to give it a serious consideration. So I probably perceive value a bit differently, from the ladder perspective mostly, after a while it certainly gets more obvious which prices scream value and which ones don't, so I try to position myself as best as I can.

Overall I do agree with you, a lot of people just run away from volatility but I like to run towards it and I get excited by it, so far I feel that's where some of the best opportunities lie.

Running towards volatility as you call it is the only way IMHO. The markets because of their liquidity issues are incredibly volatile for that reason but this in my mind makes the horse racing markets profitable or potentially so for someone like me who isn't doing it yet. The key I think is in the nuances of that volatility in horseracing markets compared to financial markets and learning to handle the differences.

In terms of "value"...I think we all look at value differently. I have a long horseracing background from a punting perspective and studied it for years. So my original concepts of value probably held me back because the exchanges increased the efficiency of the markets and it takes someone with knowledge that I don't possess to know than a 3/1 shot should be 5/2. But to a trader value is seen differently and especially when it comes to volatility and whether the horseracing markets are primarily structured for traders to sell or buy volatility.

I know Peter remarked in one of his videos how he essentially sold volatility which is a tough concept to get your head around until you get a grip on the theory which it took me a while to do. But if you are making money over time then you are finding value in the market which cannot be argued against but value is subjective I think and has a habit of allowing us to see mirages

[Derek27]

Could I be so bold as to ask you Derek if you have learned through experience not to add to red screen positions?? Because financial traders in many types of securities do not baulk at doing this or in your opinion, is this much more difficult to achieve based on the rapid time decay in the pre-race markets and the fact that the market will eventually range around its SP and this is the ultimate Achilles Heel in such a strategy??

I don't know anything about financial trading but as far as sports trading's concerned, I've probably made just about every mistake in the book, like most of us have. Some of them were so stupid I learnt instantly not to repeat, such as, when you're switching between win and place markets check you're on the right market before taking what you think is value! Others have taken longer to learn. Letting trades go in play is a common crime that most traders commit more than once but I knocked it on the head when I suffered a really big loss. Overstaking and not properly considering how volatile was probably my most difficult error to overcome and I still occasionally trip up there.

By the way, horses don't always range around the BSP, back and forth or reverse to the mean. Sometimes they can just go one way.

[Morbius]

Could I be so bold as to ask you Derek if you have learned through experience not to add to red screen positions?? Because financial traders in many types of securities do not baulk at doing this or in your opinion, is this much more difficult to achieve based on the rapid time decay in the pre-race markets and the fact that the market will eventually range around its SP and this is the ultimate Achilles Heel in such a strategy??

I don't know anything about financial trading but as far as sports trading's concerned, I've probably made just about every mistake in the book, like most of us have. Some of them were so stupid I learnt instantly not to repeat, such as, when you're switching between win and place markets check you're on the right market before taking what you think is value! Others have taken longer to learn. Letting trades go in play is a common crime that most traders commit more than once but I knocked it on the head when I suffered a really big loss. Overstaking and not properly considering how volatile was probably my most difficult error to overcome and I still occasionally trip up there.

By the way, horses don't always range around the BSP, back and forth or reverse to the mean. Sometimes they can just go one way.

Hi Derek, that post to me speaks volumes about you. Not just that you have been humble enough to admit your mistakes but that you stuck it long enough to push through the other side and learn from them because experience is arguably the greatest teacher of all. I recall some years ago reading about the recruitment process at Goldman Sachs and how they basically got fed up of seeing CV's from Uni graduates with 2:1s and Masters in finance and economics and basically binned them in favour of someone with actual trading experience even if that trader wasn't successful. They knew that this person had learned valuable lessons in what is basically trial by fire.

I knew I had to come onto this forum to fill the gaps in my knowledge and in my mind the best people to learn from are the people that have already paid their dues by going through this battle earlier. Any yes you are correct, I have noticed that prices don't always hover around the BSP and have gotten burned a few times with a good green screen and then getting in again late on and seeing it evaporate. I don't touch the final minute or two before the race for this reason if I already decently green.

[LeTiss]

In the 12 years of me being on this forum, I reckon the subject of differing loss recovery systems has risen more often than any other subject!

It basically highlights the reason why many people fail in this game.......accepting a red screen and moving onto the next trade is something many traders cannot deal with

There is ONLY ONE foolproof way of recovering losses......trade better

[Morbius]

In the 12 years of me being on this forum, I reckon the subject of differing loss recovery systems has risen more often than any other subject!

It basically highlights the reason why many people fail in this game.......accepting a red screen and moving onto the next trade is something many traders cannot deal with

There is ONLY ONE foolproof way of recovering losses......trade better

Hi Le Tiss, I think as was previously mentioned the title of this thread was a slight error on my part. In actual fact what I was doing was averaging while also escalating which isn't the same thing or at least I don't think it is lol But I was still getting into bother on maybe one or two races a day. But what you say about trading better is spot on and is why I came onto the forum after a while scanning it. I think the nuances of the horseracing pre-off market makes it a different breed of animal in many ways to other types of financial market....all great fun though and the learning never stops

[speedyhamster]

i once did a Martingale loss recovery system in practice mode , at one point my stakes were in to the millions , which ofc would not work in real mode even if i had millions to put on

[alexmr2]

I don't believe there is a profitable trader in the world that uses a loss recovery or martingale system

How about trying to trade defensively e.g. scale out so that your exit is at the breakeven point? I believe this is more a valid approach and will give you smaller but more consistent profits, which may be better for you psychologically

[speedyhamster]

I don't believe there is a profitable trader in the world that uses a loss recovery or martingale system

How about trying to trade defensively e.g. scale out so that your exit is at the breakeven point? I believe this is more a valid approach and will give you smaller but more consistent profits, which may be better for you psychologically

yes i wanted to see how crazy such a system would be on betting (not that i bet) so i tried it on practice mode