Off Target

The author of one of the blogs on my blogroll had this to say in his most recent post:

I have done well today, considering my bank size and staking, I don't want to get ahead of myself too quickly, as I have been in this situation before and don't want to end up where I am out of my depth in terms of liability exposed to the market when it goes against me. Don't get me wrong it's been good making and increasing my Betfair bankroll by 10% a day but sooner rather than later I feel I would be in for a big shock if didn't start taking some out each day.

So what I have decided is that there are 24 days left in February so I am going to increase my bank by only 3% a day and withdraw the remainder of the profit at the end of each trading day.

Today I made £12.14 but I did get lucky by being on the right side of a couple of market spikes, not saying its all a bed of roses as I took a loss of £3.21 in the Lingfield 3:25 race, it wasn't a case of not accepting the loss quick enough, it was me getting involved in the market too early with too high stakes and market just plummeting away, I redded up but everything I tried just made it worse so I took the loss and moved on.

So bank increases by 3% and I take home £8.39

I have written before that the actual amounts people make is meaningless, since a £1 win for one person can be far more in real terms than a £1,000 win to someone else, but I don't understand what the writer of the above post is going to achieve by withdrawing a sum that is equivalent to about three pints of beer.

Nor do I understand the point of having a daily target, be it 10% a day (impossible to achieve for more than a few days) or 1% (equally impossible but achievable for a little longer perhaps). Targets just add pressure, and have the effect of either making you stop trading too early, or push you to make poor value bets. It's logical to stay on while the going is good and quitting when there's not too much happening, which is the complete opposite of what targets do for you.

But back to the subject of building a bank up, which is surely the goal of all of us. Fund your betting account with money you don't need - now or ever, and leave it there, at least until it can reward you with more than a few beers. The writer uses as justification that "I don't want to end up where I am out of my depth in terms of liability exposed to the market when it goes against me". This suggests that the bank reflects your liability, which is not true. Your liability is limited to what you put into the market, and if you lack the self-control to not risk your entire your bank on a trade, well, I'm sorry, but you shouldn't be trading. Leave the money alone, and slowly increase your staking in proportion to the size of your bank. You'll soon reach a level above which you either can't get bigger bets on, or you don't feel comfortable betting them. A stake of 2% is fine when you have a few hundred in the bank, but when you have say £50,000 in there, 2% might make you uncomfortable.

My personal preference is to pull out money only if (OK, when) my wife tells me I have a specific (and large) expense to cover. I typically have far more in my account than I will ever need, but in the event of a disaster, I like to have more than enough of a cushion to bounce back without ever having to top the bank up again.

Holidays, air fares, (and in recent months apparently windows, furniture, engagement ring and weddings) - expenses like that are legitimate reasons to me (if I know what's good for me) for a withdrawal, and I pull out round numbers occasionally (five times last year), which makes it much easier to track P&L.

And for married men out there, there's another reason to leave the money in your trading account. The wife can't see it or get her hands on it! Note to self - do not share news of decent wins any more.