Just thought I’d point out something that I came across when I was trading the West Ham vs Bournemouth game on Monday night (24th Oct). This was after my disappointing weekend results (22nd-23rd Oct). I’ll talk about dealing with losses in a later post, but I thought I’d post an interesting scenario that I came across whilst trading the West Ham vs Bournemouth game. I found myself in a situation which helped me (I think) understand the Risk vs Reward concept a lot better. Traders need to be conscious of the risks and rewards whenever they undertake any trades, and whereas I have been aware when I’ve been trading, I’ve probably not understood or focused on it as much as I should have. Anyway, below is the match state and my trading position when I came across an interesting risk vs reward scenario:

1). West Ham were 1-0 up, and the game was around the 65 minute mark.
2). I had bet outright on the scorelines 2-0 and 2-1.
3). I had hedged the 1-0 scoreline. I also hedged the 1-1 scoreline, but not in it’s entirety (I would have had a small loss against it had it come in).

When West Ham scored their first goal I decided to reduce some of my liability by taking some profit out of the 2-0 scoreline, which meant I had a profit of £3 showing for the 1-0 scoreline, £17 for the 2-0 scoreline, and a sizable profit of £65 for the 2-1 scoreline. All other scorelines were showing a £17 loss, apart from 1-1 which was showing a loss but not as much. My current cashout value was £6.30.

Rather than objectively look at each of the different scenarios in front of me and try to assess the best path to go down, I seen the nice green profit figure and immediately decided to trade out for £6.30. It was only when I looked back on my trade that I realised I probably took the wrong option, and here’s why:

1). If West Ham scored another goal (2-0) then my cash-out amount would have been a lot higher than the £6.30 currently being offered. Although by how much more, I’m not sure.
2). If Bournemouth scored (1-1) then I reckon my cash-out amount would have increased quite substantially (depending on when it was scored) due to the £65 profit being shown on the 2-1 scoreline which I could have traded out on.
3). If I stayed in the 1-0 scoreline, then I would have still had profit, just not as much as the £6.30 being offered.

So all-in-all, there seemed to be everything to gain and not much to lose really. In other words, the risk was minimal and the rewards were great-ish! I just didn’t assess the situation as well as I could have done. I will take this lesson learnt and try to apply it to my future trades. This is just a heads up for anyone else who’s starting out and may find themselves in a similar position to myself. If I come across any more of these little nuggets then I will post about them and let you know.