Emotional Discipline

Thanks to those of you who offered suggestions and ideas on obtaining closing prices on football matches, specifically Jamie A, Sheva Wigwam (quite possibly not his real name) and Marco Mattes. 

Steve, of Daily25 fame and fortune, wrote in a comment on following certain tipsters, specifically when to drop them:

But also it is a psychological issue too, once we decide to invest real money (and in my case, big money), into something, our brains then tell us that we must have made the right decision. To then go back on this and admit you were wrong and therefore stupid is a hard thing to do. There is a saying in the start-up world which goes "Hire slowly, fire quickly". It may be a mantra I need to follow in regards to tipsters too.

This is very similar to the error that many traders make, of emotionally attaching themselves to a selection, and being unwilling to admit that they were wrong and cut their losses quickly enough. As I have written before, cutting winners short and letting losers run too long, is probably the biggest trading mistake. 

The reason a trade is entered, or a tipster service is subscribed to, is because you are looking to make a profit, so it is human nature that this is the part you are most focused on. However, neither trading nor following tipsters is ever going to be all smooth sailing, and you need to have a plan in place in the not unlikely event that things don't go perfectly. 

Most traders don’t want to acknowledge that a trade could turn against them. They enter the market assuming they’ll be successful, refusing to look in the rearview mirror. It’s also common for emerging traders to use a calculator to predict how much they’ll make and how they’ll spend the unrealized profits!

Losses are part of the game but especially beginners have difficulties in accepting this. A loss creates frustration and you become “upset” on the market. You have the feeling that “the market” took something which you feel belongs to you: your money. You are determined to get your money back and you put on a position three times your normal position size in order to make the loss back. You do not stick to your trading plan, you are upset and want to take revenge for the previous loss. These kinds of trades are called “revenge trades” and can lead to huge draw-down’s as you can easily imagine.

Another mention for the fact that finding value doesn't mean that all decisions are profitable. Trading is about making money overall, not every time, and the lesson that profitable betting is about finding value, not winners, continues to elude some people.

Betfair Forum member Zazu who, after three years should have learned, responded recently to the wisdom that "When betting you try to find value, not pick winners" with:

Losing bets don't pay any bills

Needing to win bets to pay bills, or staking too high, leads to emotionally driven, less than optimal decisions. Bet (staking 'sensibly'), with money you don't need, and your trading / betting will be all the better for the removal of the emotional element.