However, I take the time to rethink about my first trades of the year. The most annoying trade for me was in the match Wozniacki v Dokic. I backed Wozniacki @1.32 during the 2nd set when score was 3-1 for Dokic. I expected odds on Wozniacki @1.45, if she loses the 2nd set, but the odds drifted to 1.75, when she lost the 2nd set 1-6.
The first major mistake I made was not defining a stop loss mark, when I backed Wozniacki. I agree with many other traders, you need to know your stop loss mark when you put on a trade. So the question is:
How to define your stop loss mark correctly?
My trading is based on the knowledge about odds moving. When I put on a trade I can not say who will win the match, but I can say if there is a value for me of odds movement, e.g. in certain situations I know the odds will move only a few ticks lower, but there is a high probability that the odds will raise. If I can identify such a situation I will put on a trade, because more often than not the odds will move in my favour and on a long term view the losses will be smaller than my winnings.
During the match Wozniacki v Dokic I had two (maybe more) options to define my stop loss mark:
- I take the loss, if Wozniacki loses the 2nd set.
- I take the loss, if the odds on Wozniacki drift to 1.46 (because that were the odds I expected on Wozniacki, if she loses the 2nd set).
Let’s do a little calculation:
- Back Wozniacki €email@example.com, Lay Wozniacki €firstname.lastname@example.org
Total loss each way: –€12.28
- Back Wozniacki €email@example.com, Lay Wozniacki €firstname.lastname@example.org
Total loss each way: –€4.80
The total loss in the first case is very much higher, than the total loss in the 2nd case. The question now is, which method is the better one?
The odds during a tennis match can move dramatically, even in a service game. If the score in a service game is 0*-30 I think my 1st stop loss mark would be reached and I had to take the stop loss, even if the score would turn to 2-3*.
Generally I have more winning trades, than losing trades, so if I can apply a rule, that I take a stop loss, when the total loss is equal to the total possible win.
For the match Wozniacki v Dokic it means:
Back Wozniacki €email@example.com:
Total possible profit: +€16.00
Stop loss market: –€16.00, which is equal to a lay Wozniacki €firstname.lastname@example.org
Generally there is no need to wait until this stop loss market is reached. I think it is more a maximum loss mark. If you can identify earlier, that your trade does not pay off, you do not have to wait for the stop loss mark, you can take the red earlier. In the match Wozniacki v Dokic I should have made it each way red, when Dokic won the 2nd set and odds on Wozniacki moved to 1.75, because I have the rule not to trade during a deciding set.
What’s the conclusion for me now?
- I will define my stop loss mark before I put on a trade.
- The maximum stop loss is equal to the possible profit of the trade.
It is important to mention that the possible profit is not the profit you would gain, if would let the trade run as a bet. I will explain this:
Very often I back the favourite, if he loses the first set, but the stats are relative equal, e.g.:
Pre match odds: Player A: 1.52, Player B: 2.9
If player B wins the first set, the odds would be:
Player A: 3.00, Player B: 1.51.
I would close the trade, if player A wins the second set and odds would move to: Player A: 1.55, Player B: 2.80.
So the possible profit would be:
Lay Player B €email@example.com,
Lay Player A €firstname.lastname@example.org
Total profit: +€17.17
So the maximum loss is –€17.17 and not –€37.00, which is the possible profit, if you let the trade run as a bet.
I am not sure, if this method is the best method to take a stop loss, but I think this method is more adjusted to a specific trade, than a static stop loss mark like a number of ticks or a defined amount of money.
Would be nice to read some comments about this issue.
All the best and stay healthy!