Fear of running out of budget in Trading

The fear of running out of budget is typical in the world of Sports Trading. I experienced it myself, especially in the early stage.

For many years, I’ve adopted a “High Stake” strategy: few monthly movements with high investment amounts.

I recommend this approach to anyone wanting to excel in this activity, as it ensures peace of mind for both psyche and wallet.

It’s a strategy that leaves me truly at ease in the long run, thanks to the data and experiences from previous seasons confirming its solidity.

However, in past years, a small but significant doubt haunted me: what if I didn’t have enough budget to last the entire season?

I believe this issue can be approached from two perspectives:

• The stake/budget ratio
• Managing a bad run

The Stake/Budget ratio

The primary cause of this fear is often an incorrect ratio between stake and available budget. This ratio is defined by personal money management strategies, or the rules adopted to manage the available budget.

As mentioned, it’s important to make precise choices to structure your action plan.

In my case, considering the quantity of daily movements (maximum of 1 per day during the week and 3 per day on weekends), the questions to ask are:

• How many total stake do I have available?
• Into how many parts do I divide my budget?
• How many consecutive mistakes can I economically withstand?
• How much “variance width” can my total budget handle?

The answers are subjective, as each of us has a threshold that makes us feel comfortable but not overly so.

“Not too” because there’s also the opposite problem. Having too many stakes available and being too light, superficial, and unfocused in your choices.

For example, in the past season, my longest negative series (commonly called a bad run) consisted of 4 consecutive movements. In the previous season, despite ending with a positive balance, in February 2021, I had to manage a series of 7 consecutive events. Events that become 11 events if we consider an interval of a single positive event (so, 10 negative events out of 11).

Analysing my historical database, I observed that such an event was quite unusual in my journey as a Sports Trader. Such a long series is usually fueled not only by variance and normal evaluation errors but also by an extended tilt phase that alters the ordinary decision-making process. This record negative series dates back to a very complicated month from a personal and entrepreneurial perspective, which directly affected my Trader balance.

However, that season ended positively, demonstrating the resilience of my strategic framework to withstand prolonged disruptions and extraordinary events.

But what if I didn’t have the budget to continue?

It would have been economically and psychologically disastrous.

That’s why it’s crucial to carefully choose the stake/budget ratio by making assumptions, analyzing historical data, and considering the maximum extent of a negative period. This way, we guarantee ourselves the possibility of continuing financially even after negative events, as well as measuring the season’s performance in the long run, as it should be.

To this end, always analyzing my historical database, I found 5 stakes as the maximum negative point under ordinary conditions and 10 stakes as an extraordinary event. Based on these parameters, I set the ratio to 1:15, meaning I valued my base stake as 1/15 of my overall budget.

Why 15 and not 20 or 30 to be more at ease?

Simple: always a choice dictated by data. I noticed that too many stakes available reduce ambition and focus on budget protection  Essentially, limiting the economic allocation to what is rationally necessary equals imposing a limitation that makes me more lucid and effective.

After all, this happens in all professional fields: resource constraints have always favored optimization, while excessive abundance often leads to waste.

That’s why it’s crucial for me to have a stake/budget ratio that doesn’t rationally have sizing and continuity problems but at the same time contains it just right to give me the opportunity to be more performant.

And that’s exactly how I organize my resource management.

I have a higher budget than the value of the stake I want to manage daily. How do I use it? I prefer to create an extraordinary budget reserve. This way, the extra resources don’t affect the average value of my investments, but they give me the peace of mind to manage extraordinary events or increase the stake during the season if necessary.

My favorite solution is to “immobilize” the extraordinary reserves in non-profit-making investments that compel me to disinvest to access the reserve. In practice, the extra money shouldn’t be immediately available and easily accessible, thus avoiding improper use.

As I’ve said many times, this work is a subtle game of psychological balance and strategies aimed at preserving it, and this is a concrete example.

Managing a bad run

To be able to overcome a Bad Run, it’s essential to analyze historical data of yourwork. From there, one can define the correct ratio between stake and available budget.

And consequently protect yourself from the fear of running out of budget.

However, beyond concrete historical data, the fear of running out of budget is closely linked to my way of reacting to a bad run.

Historical data, indeed, indicate how much, on average, my strategy exposes me in terms of variance and evaluation errors, which are an absolute part of the game. However, they don’t offer protection against the risk that, facing a bad run, I may not be able to maintain control and expose my bankroll unprepared to a larger than normal negative series.

At that moment, the strategy counts for nothing, and it’s all about clarity and psychological resilience. You must never lose focus because therein lies the real danger of nullifying an entire season. Or worse: undergoing a downgrade of yours professional growth that’s really difficult to manage.

Season after season, I’ve codified a personal method of managing this moment. The moment I realize I’m in a negative series. Already at the second consecutive negative outcome, I start to be on alert, while at the third, I already initiate my personal emergency plan.

A short break

When I enter a negative series, all that matters is getting out of it. The monthly balance doesn’t matter, the annual budget doesn’t matter, neither does how or why I’m in it and the motivations that led me to make 3 consecutive errors.

Whether it’s variance or evaluation errors, it counts for nothing. The only thing that matters is getting out of it, and the first step is a short break.

The break should be short, just one day. Useful only to interrupt the negative flow and recharge with positive energy with a nice outdoor concert, a nice dinner with friends, or a fun theater show.

I’ve seen that too long breaks detach me too much from the moment and the goal of getting out of the negative series, sometimes generating an effect opposite to the desired one.

From the break to focusing on the next move

The morning after the break day, I wake up with only one thought in mind: the next move, the next choice.

As mentioned, it’s crucial to interrupt the flow with the next move, which must be scholastic, elementary, proven, and codified from a strategic point of view. No “headshots”, no variations on ordinary moves, that’s not the time to be an artist.

It’s better to leave variations on the theme for the phases of a good run and subsequent positive flow. At that moment, I felt like Nadal, whom I admire for his extraordinary ability to reason moment by moment and reset at the end of each played point.

Likewise, nothing should distract me from the next move.

Injections of logic

I’ll talk about logic injections later in a dedicated article. At the moment, it’s important to emphasize how, especially in this moment, it’s crucial to adopt a positive language.  Both in communication towards the outside and in one’s inner dialogue, even more delicate and dangerous..

As Paolo Borzacchiello, one of my favorite authors and one of the leading experts in linguistic intelligence applied to business, says, “We think based on how we talk.”

It goes without saying that negative language at this moment can be particularly detrimental and can lead my thoughts towards a wrong choice as well as towards continuing the negative series.

When I reflect on this concept, I always think of a friend of mine. Some time ago, when we watched a game together and there was a penalty kick, started repeating “now he misses it, now he misses it, imagine if I have luck“. And invariably, the penalty hit the post. Well, this is precisely an example of how one’s communication can become a serious obstacle!

Within a bad run, if you don’t take control of the process, your thoughts, and your language, you can make mistakes that you would never have dreamed of making.

And much depends on how we speak to ourselves, the messages we send to our brains, and the external environment.