Friday, July 8, 2011

To Take or Not To Take That is The Question?

A great question that many sports traders often asked us at ISI is when should I exit my trade.  There is no simple answer to this question as each sports trader will have his own trading plan, edge or niche and therefore a different exit point.

So how do we go about answering this very important question, well if we take a quick look at it from the many different points of view, hopefully we can unravel the mystery.

Earlier we touched on the point that the decision to exit should be based firstly on the trading plan you have set yourself and secondly the way in which you trade.  For example (name edited to Cassini after accidently calling Cassini, Paul - Sorry not sure how that happened) Cassini could not have said it better in his post over on his great blog Green All Over.  In a nutshell Cassini is a value trader and therefore his exit point is when the price you are trading no longer offers value.  Cassini has been trading on Betfair for a number of years and has created his own edge by working out whether he thinks a price on offer is value.  He does this with a combination of his own odds compiling and a great understanding of the games he is involved in and the phases they go through both on and off the pitch (the Betfair traders).  His edge seems to be very successful and he is passionate about his hobby that also makes him money.

However value trading is only one of the many methods available to sports traders.  You have sports traders nowadays using charting and pattern spotting as their preferred method of sports trading.  So your exit points should be in line with the re-occurring pattern formations.  Meaning if your style is to swing trade certain sports markets using advanced charting software like QuantSports.  Your exit points may be based on Candlestick pattern formations and or with certain technical indicators.  Or your sports trading style may be based on a particular market behaviour and its effects on the price such as football markets where in the right market we know that a price will decrease by 82 ticks in the first 45 mins if no goal is scored or in other words roughly 18 ticks every 10 mins.  In this scenario your exit point is based on your trading plan and style again.  Lets say with further research you decide the first 10 mins of certain games have the highest chance of staying goalless. Your trading plan may be based on exiting at the 10 minute mark once again nothing to do with value but more to do with patterns or behaviours.
So the key to assessing the correct exit point comes down to two key elements, your trading plan and the strategy you are going to adopt.  Once you have these in place, the final and most important part is match or race selection i.e. if you have chosen the correct match or race for your preferred strategy and your trading plan is a sound one, the question of exit is no longer a question.

As with all sports trading or trading as a whole a major factor in becoming successful and ultimately profitable is discipline.  Yes we may sound like a broken record but we cannot emphasise enough how incredibly important discipline is to your sports trading.  If you become too greedy or do not accept loses when they happen, you will never make it as a sports trader no matter how good your strategy or trading plan is!

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