Recently, I read an article on a vendor website attempting to explain the concept of scaling but completely failed to do so. The tenet of the article was that if you have more money then you increase your bet size, but that is not scaling, it is just correct money management. 

If you follow Kelly criterion to the letter, a successful trader always chases winnings and never chases losses. As a bankroll increases so too must trade size in relation to edge. If there is a run of losses and the bankroll decreases then so too must trade size. That is all that the befuddled Webb is saying, which has nothing to do with scalability.

The true concept of scaling is not the linear one put forward by the manual trading Webb. Of course, if you are limited to manual trading then you are limited in what you can achieve. Progressive traders should now all be looking to get into algorithmic trading and that permits true scaling of income.

In my latest book, Betfair Trading Techniques, I put forward the analogy of a shopkeeper running a 9 to 5 business. The only way the shopkeeper can scale up income in his hands-on business is to work harder or work longer. This is analagous to the manual trader trading more markets per day or trying to turnover more money in each market thus risking market capacity problems.

If the shopkeeper opens another shop and employs someone to run it then he can scale up his income without working extra hours. The shopkeeper can share the increased income with his new employee but still only work 9 to 5. The more shops the shopkeeper opens, the more income the shopkeeper earns but still his workload does not increase. More earnings with no increase in workload that is the true concept of scaling.

The same is true of algorithmic trading, with bots trading multiple markets, collecting and analysing data, taking the workload off a trader's shoulders. In financial trading the electronic revolution pushed manual traders aside. Some manual traders tried to continue as they were and failed, others tried to become algo-traders and failed (see Floored). Time moves on but always forwards. As in finance, algorithmic trading will grow to dominate sports trading. If you want to scale up your trading income then the only way to do so is through algo-trading.

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