Mistake 1: Not getting out instantly
Short term traders on the betting exchanges don’t realize just how short term you have to be to avoid the losses.
To trade without knowing anything about what is going on, you have to assume that any movement against you is going to carry on going against you in the most painful way it can. And this isn’t to drastic of an assumption, as anyone that’s held onto a losing trade only to see it get worse and worse will agree.
Without any knowledge to the contrary you have to assume the worst, and the only protection against this is not to be in harm’s way: The less time you’re in a position, the less can go wrong.
Take your profits quickly and your scratch trades and losses even quicker.
By quickly I mean instantly, profit scratch or loss you should be out, or at least have your counter trade in, within 10 or 20 seconds at the most.
Mistake 2: Letting losing trades ride as bets
To be a successful trader you must be taking profits and losses of roughly the same size, but having more profits than losses, with the scratch trade taking the place of the losses.
As soon as you start to let your losses get bigger than your profits you’re creating an uphill battle for yourself because then you have to have lots more profits than losses just to break even.
The absolute worst thing you can do is hold on to a bet because you were losing on it and let it ride as the race runs. Doing this is total insanity from a risk reward ratio and is gambling at it’s worst.
If you want to gamble then gamble but at least do it properly. Don’t do a hybrid mix of trading and gambling where you’re doing each one badly.
To make small one and two tick profits and then risk your whole bank on the outcome of a horserace because you couldn’t take a small one or two tick loss is stupid. You know that in the long run it’s going to end in tears so why do it?
There’s no point in winning 9 times and losing once if your loss is 50 times the size of your profit. Anyone with such a complete lack of discipline not only will lose but deserves to lose.
Mistake 3: Over thinking the trades
Most traders over think which way the market is going to go which has 2 drawbacks: firstly, they don’t do enough trades which cuts down their potential to make money and secondly when they do eventually pull the trigger they have put so much thought and effort into their trade that they fall in love with it.
They are unwilling to get out of such a trade with an almost instant scratch trade or an almost instant small loss.
It’s as if doing that would be to embarrassing after waiting so long and putting so much time into it.
This is why people ride their losses due to their inability to accept so quickly that they were wrong.
Instead of entering into a trade with the confidence that you are right, each trade should instead be entered with the assumption that you are wrong with a willingness to react correctly if indeed you are wrong.
As much as you may have built up your reasoning for the trade you just did, you must remember that you don’t actually know anything about what is going on and it’s ok to be wrong.
Mistake 4: Wanting a profit of a predetermined size
Many people decide how much they want to make out of a trade before they enter it and then set their exit price according to that rather than what it looks like they can reasonably get now.
Wanting to make 2 ticks is great but putting your counter trade in 2 ticks higher than you just layed at and then sitting back waiting is gambling, not trading.
It might go up, but it might go down, if you can’t get out straight away with a profit you should ask for a smaller profit. If you can’t get the smaller profit straight away you should scratch, and if you miss the scratch trade you should take a loss.
If instead of all that you remain motionless with your counter trade still in at the same price waiting for your 2 tick profit then you are gambling and will have your share of profits but also your share of big losses.