Friday, 14 September 2012

Green Envy

I have to hold my hands up and admit that I still get envious at people's greens. That's why I banned myself a long time ago from looking at other's P&L screenshots. Occasionally though, one catches me off-guard and slips through the net and this happened recently on Twitter. You may know of a guy called Matt who used to write the brilliant Punt.com blog. He's a tennis specialist and been trading for far longer than me, with the blog retired long before I started Centre Court Trading. He slipped in a sneaky jpeg on a tweet and I was unexpectedly greeted with an all green scenario; £500 on player A, £26,000 on player B.

There are two ways you can look at this. Either it's something to aspire to, a sign of what is possible if you make it as a top trader, a motivational, inspirational screenshot. Or you can view it as I did; demoralising, bringing out the worst inadequacies and causing the questioning of everything involved with trading strategy. Which is weird because Matt's blog (along with Cassini and Mark Iverson's) has been one of my biggest influences and a huge factor in inspiring me to keep going. He never posted his P&L on there though and if I remember rightly, that was a policy of his blog. But I guess when you are going through a tough spell (as I am right now), these things tend to get to you more.

I'm not jealous but I am definitely envious. I also understand that he has far more experience than me and is at a level where he can make those enormous greens because he's worked hard to get there. But most importantly, I understand that it's all relative and anyone who makes those kind of greens, will also be making some rather hefty reds too. So I was very pleased when the following day, Matt offered up an all-red screenshot (-£12,000 on both players) to balance things out; a gesture which most traders wouldn't dream of doing. It puts a bit more realism into trading. There's enough bravado as it is in this game, so it was nice to see. It's very easy to worry about what others are doing and compare yourself to the next trader. It can make you question what you are doing wrong, even when you are doing the right things - especially when you are scratching around for £25 greens and you see someone making 1000 times that amount!

One thing you read a lot on the net, particularly I've noticed with tennis trading, is that matches are labelled a 'trader's dream' because they have a lot of swings and ups and downs. But as Matt himself said along with the all-red tweet, "one man's dream is another man's nightmare". These traders who brag about the profit they made from these matches, seem to assume that tennis trading is easy in a topsy-turvy match. If it was as simple as just laying every time the price goes one way and then repeating, we'd all be rich.

The fact is, you can't just blindly 'lay and leave' every time the price goes one way. Every strategy needs an exit point, a stop-loss. Unless you get very lucky, it's unlikely you'll get to ride every momentum swing to the exact point it stops and turns again. You may be on a roll but then have to exit at 0-40, then your player wins 5 points in a row, takes the game and continues the momentum - you didn't catch the whole swing. You might enter, see your trade go red, hang on for ages but hit your stop-loss just one point before the start of  a huge swing you were hoping for. Frustrating, but what would have happened if you'd stayed in and lost the next point? It's the little details between the huge momentum shifts that matter and how you react to the smaller spikes and dips.

There are so many different ways of executing strategy that no one can ever say a match was a 'trader's dream' and it riles me whenever I see comments like this - though admittedly, they are often by people with something to sell. They want it to seem like every match has low-risk lays which come off every time and run smoothly from one extreme on the graph to the other. That rarely happens. Don't be fooled into thinking that every trader is catching every swing. Just blindly 'laying and leaving' will mean you will inevitably get the odd match where do you catch every swing and when you do, it'll look so good and seem so easy that you can be fooled into thinking you've found the holy grail.

The truth is that variance will eventually catch up with you and you'll get a slew of reds where the match trained to 1.01. Even if it was low risk, they can mount up quite quickly. And even if they don't train all the way, you should often be looking to exit and protect your bank, rather than letting it ride. I guess that's the trade-off; do you let a trade run to conclusion and risk losing the whole liability but also leaving you a chance of making a profit, or do you red up and reduce your maximum loss but lose out on any potential swing into profit? It really depends on the individual. Do what works for you but never get drawn into thinking one way is right and yours is wrong. Be careful what you read - don't let that green envy get to you!

P.S. If Matt is reading this, did you get the full £26,000? And how much do you charge for lessons?!

Caroline Wozniacki:


9 comments:

  1. Thanks for the nice comment Sultan. It's nice to know that my blog has done/is doing some good.

    These days it's YOUR blog that keeps me going.

    All the best,

    Mark

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  2. Cheers Mark, that means a lot. Still waiting to hear about your new project though ;)

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    1. Hopefully won't be long now! Not sure it will be your cup of tea though :-)

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  3. Excellent post Sultan - sums up my thoughts completely - My tennis trading P/L is like a Yo-Yo so your comments make me feel better.
    As a fairly new tennis trader I have built my strategies around the use of 'Tradeshark Tennis' and swing trading. Are there any other resources you have used to help your trading which you could point me towards.
    Thanks
    Pete

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  4. Thanks Pete. To be honest, I don't even remember the names of half the resources I've used down the years! The 3 blogs I mentioned in this post are a great resource, I read through all of them, pretty much from start to finish. There's the usual financial trading books that people trot out, I'm sure you know them already - the Curtis Faith ones are the ones which helped me most. But pretty much everything I learnt to do with tennis trading (after Tradeshark) was learnt by myself, just watching matches and the markets.

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  5. +8k +24k +55k +130k +250k (so far this year) - 5 years since I went ft.

    99% tennis 95% inplay, and I'm a grinder. The figures the likes of matt trade with still leaves me in awe to be honest, I don't know if I could ever stomach or realistically aspire to it.

    Anyway, I'm just a grinder (a good one) evolving year on year, still generally work off a 10k bank as it suits (and for a few other reasons). It can be done.... not glamourous though.

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  6. From reading his blog, it would seem he made his large bank by taking advantage of massive arbs, back in the days when the markets weren't so efficient - stuff you wouldn't be able to find these days.

    I don't think anyone expects this to be gamourous, although I'm sure you can afford a few comforts with those kind of profits ;)

    Well done!

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  7. I just meant that maybe Matt picks and chooses where to focus, bigger tournaments, slams ....masters, stuff that can support the kind of figures he trades with. Whereas I'm grinding day in day out and trading every hour of atp possible and have been for the last 5 years near enough..... 60 hour weeks in front of a computer are the opposite of glamourous.

    Might change my style a bit in the future, or just try and work less hours, but realistically until I feel I've got enough profit to retire on I'll probably keep grinding!

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    1. No need to change a winning formula if you are happy. I know that in future, I will definitely be trying to get away from the grind and going with a more aggressive approach, which will hopefully mean less hours.

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