It is clear to many that it is always important to have a stop loss point when entering any trade on Betfair. However, there is much debate about whether this should be a manual stop loss or an automated stop loss.
Most trading software can now implement automated stop losses so that once your specified stop-loss price is hit the trade will be closed automatically for you. This is good in that it can take the thought out of the situation which can be handy for those who often act like rabbits in headlights when a trade moves against them.
However, my thoughts on an automated stop loss are not all positive ones.
The Problem With An Automated Stop Loss
The problem with having an automated stop loss is that sometimes it can be activated when there is not actually a need to do so. Those who trade the racing markets will know how fast these can move. Sometimes the price spikes in a certain direction, hits the stop loss point and the software closes the trade. However, a human can spot that was only a momentary spike and the actual trade was not really in danger. It really can depend how far away you place your stop loss point also. Placing it just a few ticks away from entry is most likely to cause this problem in a fast moving market.
My other thoughts are that having an automated stop loss can actually make you more lazy as a trader and more likely to let the price go all the way to the stop loss before locking in a loss. This is probably because you feel a sense of “comfort” knowing the software will save you. If you are manually watching a market you can often see when a price is going towards a stop loss and, in certain situations, you know the price will not rebound back so you can actually close it earlier then you would and save money. Those with automated stop losses might be tempted to let it run to the stop loss point.
So while I think an automated stop loss can be handy when trading slow moving markets such as football pre-match, it is not suited to all forms of Betfair trading. Certainly, it should be avoided in-play when the situations are changing by the second and prices can crash through a stop loss point. Some software gets into trouble when a stop loss price is not taken and you might not get out of the market at all. Therefore, you should not rely on an automated stop loss when trading on Betfair and manual trading is always the best way. Would you really want to trust a robot with your money?
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