Betting Exchange Race Trading Strategy: Part 2:


Liquidity, Cash, News, Volatility And

The Herd Mentality.

 

Brokers and the Herd Mentality

This is indeed a classic example of the herd mentality moving market prices.

The REAL point of my analogy is that the herd mentality is magnified 100 times on the Betting Exchanges.

Think about it this way.

If Stock Brokers, Pension Fund managers, Full time professional Day traders can get it so wrong with so much information, experience, qualified up to their eyeballs, what do you think is happening dozens of times a day on the betting exchanges where the majority of people are just having a “fun punt”?

Inexperienced traders sat and watched like rabbits frozen in the headlights. This is a classic example that shows how only professional expertise and experience can assist in knowing when to sell a stock.

Here are a few key internal mental debates that always prevent an inexperienced trader buying or selling:  

 
  1. The stock is going up! Surely I would be foolish to sell because it might go up some more?

  2. The index won’t correct or crash will it? Surely it will just keep going up. I’ll wait till it starts falling before I sell!

  3. This stock has just plummeted; Surely it is not a company worth buying into. 

  4. The stock is soaring; If I don’t buy in now I’m going to have lost out?  

 

All 4 statements may seem logical on first glance, but to an experienced trader all 4 statements are fundamentally incorrect for 3 reasons which are just as simple as the statements are incorrect.

 
  1. When supply of a stock outweighs demand at any given price, the price will fall and vice versa. It can be and still remains very difficult to pinpoint exactly when this will happen. Hundreds of theories abound, millions has been spent on research, and there are libraries full of literature. Nobody has found an effective solution to effectively predict market moves.

  1. News and events related or completely unrelated to your particular stock can happen at any time and can directly affect the stock, or the index that pertains to your particular stock. This can have a huge effect on your stock price at any time. In the global economy, news can come in at any time, day or night, and can affect your stock price within minutes. Can you keep up with it all the time?

  1. When a stock crashes, the effect of the “herd mentality” can leave it massively undervalued at which point although the stock may look like it is in the doldrums it has actually become a “Value” buy. This very much depends on the nature of the cause of the crash. If the firm is going bust then it is never going to represent “Value”. Similarly when it soars, it can end up massively overvalued and in reality represents very poor value.  

 

With all this conflicting information stacked against you, it becomes obvious why so many day traders fail and become disillusioned with the Stock Market, and why the Betting Exchanges are taking off the way they are.

A good knowledge of Technical Analysis (TA) and Fundamentals combined with personal experience of both winning and losing trades are the only ways to profit long term from liquidity and volatility.  

For people interested in short term hedging,  scalping, swing and momentum trading who do not want the prolonged agony and uncertainty of having medium or long term trades open in the Stock Market, Horse Race trading with the Betting Exchanges is becoming THE medium of choice.

You can pick your race and your horse.

You know the exact time of the race.  

You can open your trade in the morning and close it in the afternoon.

You can open it 15 minutes before the race and close out when the horses are in the stalls.

You can even wait till the race has started and take advantage of price swings that would make a stock trader hide behind the sofa.

At the end of each day you can log into your online Profit and Loss account and sleep tight, or cry into your whisky, depending on the outcome.

There is no global economy. There are no hurricanes, earthquakes, interest rates or profit warnings. There is no setting the alarm clock for opening time and there is no watching a static stock for months waiting for the quarterly accounts.

All the Fundamentals are free online at 

www.RacingPost.co.uk 

www.OddsChecker.com 

And there are free tools that I will show you how to use in order that you can do some basic Betting Exchange Technical Analysis.

There are paid for tools for those who really want to take TA to another level.

The prices move so quickly that the absolute essentials are a real time charting facility, and the ability to fire trades into the market within microseconds, and I will show you a free tool that has these features.

Most importantly you will need some cash you can afford to lose (unless you don't mind getting divorced :-), an open mind, and a dash of determination.

The Moral: If you do not make liquidity and volatility your best friends as a trader, they will become truly feared enemies.

You have to identify a trend early, disseminate all the information and fundamentals, identify the risks, use Technical Analysis to get your trade timing correct, get in early before the herd stampedes and get out early before it peaks and they all run over the edge of the cliff.

If you think the Stock market is volatile wait till you start trading horses on the Betting Exchanges.  

 

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