Sweden’s dropping odds in tonight’s international friendly football game against England is a great example to explain what stop loss is in Betfair trading! Sweden’s football odds are shortening according to the betting exchange’s line graph. This means that punters are betting on Sweden and demand for lay bets is much higher than supply. Thus, the football odds continue dropping by backers, who are willing to match their bets at shorter odds. If I decide to trade Sweden’s odds, how much money should I risk? And what happens if the trend reverses? I’d better have stop loss insurance!
What is stop loss?
I have already discussed about stop loss orders in online trading. A stop loss order is a standing-by order which is triggered if my prediction is wrong. However, you cannot set a real stop loss order in sports trading. You need to set a mental stop loss and check the football odds graph quite often during the day. Sports trading software can be useful at this point, as it can automatically execute a stop loss order while we are away from the computer.
In this example, I’m predicting that Sweden’s odds will continue their fall and I am setting my mental stop loss order at 2.76. Since I’m backing Sweden’s win at 2.50, my stop loss at 2.76 will help me cut my losses in football trading. Therefore my total risk is 0.26 or 13 ticks. Proper money management implies that I should risk no more than 2% of my trading capital. Taking a 13 ticks’ loss should decrease my trading capital of €1,000 by no more than €20. This means a tick must be worth €1.5, so I should place a back bet of €200. In case my prediction is wrong, I will lay €181 at 2.76 and will take a €19 loss.
The reason for setting the stop loss at that price is due to the resistance the odds met there, when they tried to pull back. Technical analysis can further help your football trading strategies, apart from predicting the odds’ trends. We can’t always predict correctly, that is why we must always have the stop loss insurance. After all, the stop loss orders are essential in risk and bankroll management!