Points Mean Prizes - Betfair Trading Important Reason Traders use Points!
One of the questions that I get asked as Professional Betfair Trader all the time is - What does the term 'points' mean when referring to people's trading results?
Betfair Exchange Traders will often say things like 'I made two points profit today' or 'I'm staking three points on this'.
So what does this mean and more importantly why do traders refer to points rather than financial figures?
Let's start with the definition as I use it personally, I will state this is my personal way of using them others may differ on this:
'Traders who refer to points when stating a betting amount are usually referring to a percentage of their bankroll that they placed or instead won on a trade.'
So if a Betfair exchange trader said they were trading two points on a selection that would usually mean they were risking two percent of their bankroll on it.
If a sports trader said that they made three points on their pick it would usually mean they made three percent of their bankroll.
Betfair traders will often split their bankroll into 100 units. This makes calculating stakes and record keeping very easy from a mathematical perspective, especially when using percentages to measure success.
Being a successful Betfair trader and creating great trading systems and strategies is one part of becoming a pro trader, being able to keep records and measure the results in the right way is another part of ultimately reaching the destination many of you reading this will want to achieve, using units as points or percentages makes this very easy to track.
So more importantly why do so many Betfair traders talk about 'points' and units rather than actual staking amounts in financial figures?
One thing I used to get sick of as a trader in my early days of learning how to trade on the Betfair exchange was people just coming out with random statements, 'I made £50' or 'I just won £1000'.
Why was this so annoying? Well there was no context to it. These statements alone do not tell me -
a. Was it a good trade in terms of liability to profit? This person could have bet £10,000 to make £50 for all I knew, of could have bet £10 to make £50. The result is the same amount of profit but one trade is clearly lightyears better than the other!
b. Was this a sensible trade to make given your bankroll amount. If you just risked your whole £1000 bankroll to make £50 for example you may feel good about the profit but you will probably end up losing your bankroll very quickly. It is nice to make £50 of course but in this example the trader is not really displaying any talent or demonstrating that they are on the right path to become a pro.
Perhaps, something that has always irked me even more than this is when people do not understand that your stake is not your profit. You may have heard this from friends who like a punt at Betfred or any other bookie shop on the weekend. I cannot tell you how many people who don't trade have said this to me.
Friend 'I just won £100!'
My reply: 'Nice one, what was the bet?'
Friend 'I bet £50 at evens on Norwich City to win their football match today.'
Me 'So you won £50. The other £50 was your money in the first place!'
Friend 'No I got £100 back so I won £100'.
Bookies are very clever, so clever that they have managed to convince thousands of people that money they get back from their original stake is winnings!
So back to the topic at hand...
Why do we use points instead of financial figures?
They are simply a more accurate way of measuring success. If I make 2% profit and another trader makes 5% profit that other trader has had more success than me, they have made more money in terms of their outlay to profit ratio based on the respective bankrolls.
However, if I am using a standard pro traders bankroll of £10,000 I would have made £200.
The other trader has made 5% profit but is only using a £100 bankroll, so they have made £5.
If in this example if I had simply stated: 'I made £200 today' the other trader would probably not even mention their £5 profit as it is such a smaller amount.
So in doing this the financial figure has actually hidden the fact that relative to bankroll the trader with the £100 bankroll actually did better than me!
You may be thinking, yeah, but you made £195 more, so actually Martin you did better.
This is not true and here is why:
When you trade using points and percentages you can scale up your trading and still have the same results.
(Assuming the markets have enough money in them, liquidity as it is commonly known).
This is the true test of how good you are as a Betfair trader. Forget the financial figure that is just a smokescreen, what really matters is how well your points and percentages are doing.
Here is the proof:
So when the other trader in the example above has reached my level and uses £10,000 as a bankroll and they make 5% they will make £500, which is now £300 more than I made. This trader has made a better trade than me and can expect to have a similar success level at the higher levels.
The only thing that can stop this is liquidity as mentioned above but if you are trading in markets with plenty of money matched in them, this is not a big concern.
Hopefully I have demonstrated why Betfair traders use 'points' systems to talk about their trades, it is a much more accurate way of measuring results than mere financial figures, which can often hide some of the truth behind the figures.
If you have any questions or ever need any help just speak to me on the forum or email me email@example.com I always respond to people! (If I take a while give me another nudge).