With size comes advantage! Or does it?
There’s often vigorous debate around trading stakes, banks and how successful your Betfair trading is.
In this post I’m going to spill a few of my own thoughts and why I have them on a few common questions that have been on my radar lately…
- Do stakes matter?
- What stakes should I be using?
- How much can you stake on the UK racing?
Does Size Really Matter?
Whilst size does matter in some area’s of life, trading is not one of them. I want to call bullsh*t on it straight out of the gates.
There are some situations where having a larger bank could help you influence the market, yes. However, it’s a dangerously sharp double-edged sword.
Let’s look at a few advantages:
- You can take larger positions making a bigger profits from movement
- Large stakes can assist you in spooking other traders to close out
- You have more freedom to spread multiple stakes amongst the market
And now the disadvantages:
- Losses hurt a lot more and it’s harder to exit a large position
- If spoofing the weight of money, your problem becomes someone else’s edge
- Large stakes bring extra risk when there is limited liquidity
- You stand out in the marketplace to other traders far more
- With larger stakes you are more likely to react emotionally
Check out this little trade, on small stakes.
It was a good risk/reward trade-off, which is the main point here.
The best trading plan is to do the right thing, staking in line with the current opportunity, risk and your overall trading ability. Efficiency over ego!
So often people ask questions about when they should be staking £50 or £500. The answer is simple; when you’ve become extremely effective on £5, £10, £25 and above all else; when there is sufficient liquidity and opportunity in the market.
Efficiency. Improvement. Progress.
Of course it’s not staking that allows you to develop an edge over the market though.
Understanding trading indicators, time-frames and other market participants are the quickest way to define the situation, making it possible to assess opportunity and staking. This is why we created a training section here, check it out!
Focusing on improving your overall understanding should be the goal. Increasing effectiveness 2-3% at a time makes a massive difference to the end result. A few high-stakes trades in the short-term won’t even compare!