Keeping to this weeks theme Trading Tennis. Tennis is one of the most popular sports to trade because no matter the outcome of the match, if you hold your nerve and keep your discipline you can almost always make a profit. This doesn't mean that you will but if you follow these top tips you will increase your chances.
1. Do your research - you wouldn't buy shares in a company without doing research on that company so don't trade a tennis match without doing your research. If you are using the Back the Server strategy, its important to look at the Service Stats for each player, a strong server will win around 80% of their service games and you can also see what percentage of points each player wins on both their first and second serve. These stats are available at http://www.atpworldtour.com/Rankings/MatchFacts.aspx and then you can also look at each player's profile on this site to check all their stats.
Write these stats down and use them to draw up your strategy, if you know for example that a player wins 80% of their first service points and 58% of their second service points then the Back the Server SHOULD work well. This same player may also have fairly weak return stats so you may come to the conclusion that you can adopt the Back the Server strategy on both players.
If a players odds look too high or too low before a game, ask yourself why, if you have good knowledge of the market then there will be a reason why the price is not as you expect. For example, Nadal was playing Tsonga earlier this year and his odds before the match were 1.36 which we thought were very high, it turned out the reason they were high were because he had a fever! You all have access to the Internet, there is no excuse for not doing your homework. Check out sites like the one below:
2. Write down your strategy - We find that if you physically write down what you are going to do it helps because it is visible and keeps you focused during the match. An important part of this strategy is your Exit strategy, know what this is before you ENTER a trade and do not deviate from it.
3. When starting out, only trade on a couple of specific points eg. only back the server at 0 - 0 before a service game starts or Lay the Server at 15 - 40. This can be boring as you may not enter many trades but it is good for discipline and you will learn a lot just by watching how the odds move on each point when you're not actually in a trade. Remember its quality of trades not quantity!
4. Give yourself the best chance of success - use the technology available - use a Trading Tool such as ISI Trader so you can instantly see whats going on in the market. If you can watch the game live on TV then all the better, a live scoreboard is OK but it doesn't give you things like a players facial expressions, or you can't see if a player is struggling physically for example. If you intend to trade tennis then its worth getting the satellite channels, most of the tour events are on ESPN.
For live scoreboards, the best ones are:
Pro Tennis Live, this can be found on the ATP or WTA website under Scores and Stats Tabs or
sometimes there is a lag on these scoreboards but they are usually good enough and when you get used to trading tennis you will know the outcome of a point by looking at the market anyway.
5. Liquidity in the market is Key - do not trade on matches that do not have at least £60k matched on them before the match starts. This is very important as remember you can only Exit a trade if someone is willing to match your trade. If things go against you in a match that has low liquidity you can find yourself unable to exit the trade or having to take a ridiculous price to exit. Remember its better not to trade than to trade the wrong market.
6. Remember to switch ladders - Tennis is a two competitor sport so as one players price increases his opponents will decrease. Always trade on the favourite's ladder at the start but if he is losing and his odds go above 1.9 then look at his opponents ladder as you will find that the majority of traders will always be trading on the players ladder with the lowest odds at that time. Remember to hedge out on one ladder before you move to the other players ladder. Don't worry if you have a red figure on the favourite you can still make this up on the other ladder.
7. Never be afraid to leave a match with a loss - some matches just don't go the way you expect them to - that's sport. Maybe a very strong server just has a nightmare day on serve or maybe the underdog plays the best tennis of his/her life. If you are following a strategy with discipline but the points just keep going against you then sometimes you just have to accept that its not your day. Move onto another match. Its actually incredibly satisfying to leave a match in control with a small loss and then if you continue to trade with the same discipline, you invariably make the losses back and finish the day in profit. Remember minimising your losses is the Key to Successful Trading.
8. Only trade the first set of a match - even for experienced traders I would recommend this for several reasons. If you only trade the first set then you can trade several matches in a 3 hour trading session with fairly low stress levels and still make good profits. Consider this scenario: would you rather trade one match until the end and make £100 or trade 5 matches for the first few games of the match and make £20 per match - same total of £100?
The latter is much lower stress and the more games you trade the more opportunities you have open to you. If you trade 5 matches you may Back the Server on 2 of those matches and have made your profit in the first 6 games if both players hold serve, you may trade 2 matches that are extremely one sided so you Back the player on top and leave the trade open with a Stop Loss that will get you out at your minimal profit level. You can then leave that match and just keep one eye on the scoreboard in case of a dramatic change but even then your Stop Loss would get you out for a profit.
If you trade a match all the way through then not only are you missing out on other opportunities but you are exposing yourself to unnecessary risk as the odds fluctuate much more wildly the closer you are to the end of the match, these odds will fluctuate massively if its a deciding set especially as remember one players odds has to end up at 1 and the other 1000 so imagine a scenario in a deciding set where the score is 4 - 4 and Player A has a break point to go 5 - 4 up, his odds may be trading as low as 1.2 but if Player B saves that break point and goes onto win the game so the score is 4 - 5, Player A's odds may be as high as 2.8, do you really want to expose yourself to that risk? This is too much like gambling.
9. Discipline, discipline, discipline....you can never say this too many times. If you trade with discipline and follow our strategies you will make profit but 9 times out of 10, when we analyse why traders are losing its because they are not trading with discipline. To help with this use Stop Losses as a matter of course and only trade with small stakes until you feel you can control your discipline. Work on percentages, if you are trading with £10 and you are consistently making £2.50 profit (25%) on each match you trade that is excellent, if you are trading with £1,000 and use the same discipline you will make £250 per match!
10. If you feel your blood pressure rising and you start thinking about doing stupid things like increasing your stake to claw back losses take a deep breath, hedge out and go and take the dog for a walk. This will give you perspective back and when you come back you will trade much better with renewed discipline.
Oh and nearly forgot, get a lock on the door in the room in which you trade! Maybe this is a bit extreme but distractions can be very dangerous so only trade when on your own and when unlikely to be interrupted.
For more Sports Trading Insight, visit www.interactivesportsinvestor.com