Trading Strike Rates and What To Do With Them
Strike rates are often talked about with anything to do with betting. They’re important because they highlight two major things.
First, is how many winners you’re likely to get from a betting/trading system.
Secondly, and probably most importantly, it helps you to work out how much of a bank you need to start out with.
It’s fairly straightforward when it comes to betting. You simply place a bet, win or lose, the strike rate can be calculated easily enough.
However, this can be a lot more complicated when trading. We’ve got the initial stake to consider plus the percentage of “trading out” to involve into the calculation, plus whether we’re hedging or trading for a no lose-win situation.
In this article, I’m going to try my best to explain what we need in various situations, dependent on what we’re trading.
Hedging is by far the most popular way to trade. This is where we back and lay a selection, and the result means we profit no matter what the outcome.
Of course, there are elements of this trade, that means we don’t have a successful trade and we end up losing the whole of our initial stake.
This is where we need to come up with two strike rates –
1 – The general strike rate of successfully hedged trades
2 – The strike rate of losing trades (where our back bet, doesn’t have the lay bet matched and we end up losing our whole stake.)
The thing to consider here is whether the strike rate of successfully hedged trades will outweigh any losses from the unmatched trades.
For example, we have a system that shows us an 80% strike rate for successful trades. This means that 8 out of 10 bets are being matched on the lay side.
The average profit on each bet is £11.
Here’s the math –
80 * £11 = £880
That’s to £100 trades.
However, the other 20% of trades are not getting matched. Or, 2 out of 10 bets are not getting the lay side matched.
That means, that over 100 trades we’re seeing the following –
100 trades at £100 each means a turnover of £10,000
80 of those trades are successful and we’re generating a no-lose situation and a profit of £880.
However, 20 of those trades are losing (the lay bet isn’t being matched) and to £100 trades, this means that we’re losing £2,000. That’s an overall loss of £1,120.
What do we do?
We need to set up a “Stop/Loss”
If we try to set up a stop/loss method, then we reduce the overall exposure to our initial stake.
In this case, it’s £100. This could be set at £11 as a loss target.
The math would be as follows –
80 * £11 = £880
20* -£11 = £220
That would mean an overall profit of £660.
However, it’s not that straightforward.
This is because of market fluctuations.
You might find that a “winning” trade could have been profitable but the stop/loss trigger was initiated before the price dropped. In other words, the price drifted before it dropped into our “laying off” range.
This would, again, completely alter our strike rate of “said” trading system.
There is a way around this and next week, I will be showing you how you can factor in such market fluctuations. It can be automated (Jon and I will be discussing this, this week) and I’ll run through the math with you then 🙂
In the meantime, have a great day and I’ll catch you next week…
Eddie and the Football Advisor Team
If you'd like you to get on the priority update list for the automated trading group, feel free to add your details below: