Capital preservation
In one easy lesson. Thought I would share this with you. £12 greened up across the card. Not bad, err... no it's terrible!
It's moments like this that should make you unhappy about your trading. OK it's a profit but I really made a hash of things on this one. You can see from the 'my bets' area I actually put through the best part of £17k to get this stunning £12 profit. This example shows you one of the reasons why I say that capital preservation is one of the most important aspects of trading. Failure to manage your downside risk can be calamitous when using this sort of money.
Of course what you are seeing here is not £8.5k in one punt but nine trades on both sides. Even so, managing downside is often the key to the more favourable upside. If we had made a decent job of this trade the minimum you should have made was 1% or £85. There was plenty more in there if you did a decent job. But the downside is potentially as 'good'. This is where trading at low odds can help. At odds of lower than 2.00 you get a 1% move in either direction so to totally blow your entire bank you would need to see a 100 tick move against you. That just ain't going to happen, so trading at these odds does offer some downside protection. Trading at higher odds the odds move faster in both directions so losing £100 by trading at 4's, where the odds move 10% per tick, is much more likely than losing £100 trading below 2's.
It's moments like this that should make you unhappy about your trading. OK it's a profit but I really made a hash of things on this one. You can see from the 'my bets' area I actually put through the best part of £17k to get this stunning £12 profit. This example shows you one of the reasons why I say that capital preservation is one of the most important aspects of trading. Failure to manage your downside risk can be calamitous when using this sort of money.
Of course what you are seeing here is not £8.5k in one punt but nine trades on both sides. Even so, managing downside is often the key to the more favourable upside. If we had made a decent job of this trade the minimum you should have made was 1% or £85. There was plenty more in there if you did a decent job. But the downside is potentially as 'good'. This is where trading at low odds can help. At odds of lower than 2.00 you get a 1% move in either direction so to totally blow your entire bank you would need to see a 100 tick move against you. That just ain't going to happen, so trading at these odds does offer some downside protection. Trading at higher odds the odds move faster in both directions so losing £100 by trading at 4's, where the odds move 10% per tick, is much more likely than losing £100 trading below 2's.
posted by Peter Webb at
7:15 AM
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