Confessions Of A Recovering Hothead Trader

[Iron]

With respect, this is nonsense.

You cannot predict the market correctly all the time, but good traders can predict the market correctly most of the time.

Nonsense? Ouch!

Can they? What evidence do you have for that?

I know a very successful trader who gets reversals right about one time in four.

Similarly, while there is an absence of absolute certainty, you can use technical and fundamental analysis to make very informed trades. Over time, with correct money management, this leads to profit.

Your faith in fundamental analysis is greater than mine. Studies have shown that many, possibly most, investment professionals perform no better than a monkey throwing darts at a list of companies.

As for technical analysis, some of the best traders in the world get it right 30% of the time.

If you are looking to be right in a market full of bluff, counter-bluff and randomness, good luck. Some people are happy simply to make money; being right is about the ego.

There has been a breakthrough in my psychology towards trading. For some reason, I suddenly have zero desire to take trades in-play.

Well done. What did you do to get to that point?

Jeff

[Wolf]

What evidence do you have for that?

The first thing to realise is that horse racing markets are not created equal. Some racing markets are volatile, some are stable, and some are in between.

One of the key teachings in Peter's course is how to profile a race. Before a trade is made, it's important to identify whether a race is likely to be volatile or stable. From there, you adapt your trading approach accordingly.

Now, when trying to catch tops and bottoms in volatile markets, then yes my experience is similar to your friend's. I am right one time in three. (So I'm wrong more than I'm right.)

However, when trying to catch tops and bottoms in stable markets, then my experience is that, yes, it's very possible to be right a majority of the time.

(Of course, a strike rate in itself means very little until it's paired with an upside and downside. I'll gladly trade a system with a 10% strike rate, so long as the profit expectancy is decent.)

Perhaps an example would help. Coire Gabhail exhibited a solid looking trading range in the 1830 at Wolverhampton yesterday. By backing at the top (8.20/8.00) and laying at the bottom (7.0/7.40), a reasonable profit was achieved through recycling small stakes. The screenshot is attached.

I get the impression you're taking what you've read about financial markets and applying it directly to betting markets.

While there are similarities between the two, there are also very significant differences.

As you know, horse prices interact with each other. This fact alone makes trading reversals a different, I imagine easier, proposition on Betfair than it is on financial markets.

Your faith in fundamental analysis is greater than mine. Studies have shown that many, possibly most, investment professionals perform no better than a monkey throwing darts at a list of companies.

If a horse starts to play-up, the odds on that horse will drift.

It's one of the easiest, most lucrative trades a horse racing trader can make. Is that not fundamental analysis?

There has been a breakthrough in my psychology towards trading. For some reason, I suddenly have zero desire to take trades in-play.

Well done. What did you do to get to that point?

I wish I knew.

Like I said, I think accountability has something to do with it. Reading up on trading psychology has probably helped, too.

I also stuck several notes around my trading desk. They say things like, 'I am a professional trader. I close all trades before the off'.

When you're truly ready, change happens in an instant.

I'm looking into screen capture options. Hopefully, the videos will resume next week.[/color]

[Iron]

One of the key teachings in Peter's course is how to profile a race. Before a trade is made, it's important to identify whether a race is likely to be volatile or stable. From there, you adapt your trading approach accordingly.

In horse racing, markets have a tendency to start trending sooner or later. See, for example, the charts I post here - viewtopic.php?f=5&t=7685&p=61861&hilit=+jeff#p61857 - to which James1st replies:

Yes, Jeff, you managed to pick up a rare event.

I traded 16 races (all, except where times overlapped) between 2pm and 4pm today and in EVERY race the market moved between 5 and 10 ticks (a few 20's) which demonstrates that "static" races like your example is indeed a unique event.

I've no doubt that Peter and others can confidently scalp ranges in stable markets. However, whenever I do it, it seems like a matter of time before the market starts trending and wipes out my profits!

However, when trying to catch tops and bottoms in stable markets.

Define 'stable markets'. And if you can't define it mathematically, how do you know in any given market whether what you are looking at is in fact a 'stable market'?

This isn't a mere philosophical question. It's absolutely fundamental. How can you be sure that you're dealing with a stable market unless you have a non-subjective way of defining one?

I get the impression you're taking what you've read about financial markets and applying it directly to betting markets.

While there are similarities between the two, there are also very significant differences.

Only in the sense that there are differences between Microsoft shares and gold futures...

Yes, there's the fact that one thing can't go up without other thing(s) coming down on Betfair, but for all practical purposes we are talking about the interaction of supply and demand in both cases.

If a horse starts to play-up, the odds on that horse will drift.

It's one of the easiest, most lucrative trades a horse racing trader can make. Is that not fundamental analysis?

Yes, but by the time you see the TV pictures the market has usually already reacted.

How are you going to get value over the thousands of other people reacting to the news when you do if not seconds before?

Jeff

[Euler]

Only in the sense that there are differences between Microsoft shares and gold futures...

I disagree, there are very key fundamental differences between financial and sports markets. All prices are related on a sports market and that makes it much easier to spot turning points.

[Iron]

Could you elaborate on that please?

Let's say that we have a two horse race - Horse A and Horse B. Horse A is steaming and Horse B is drifting.

If Horse A stops steaming and starts to drift at a particular point, how will we know before the new trend forms that that's a turning point, and not a pullback? And how will the fact that prices are related help us to do so?

I'm not saying you're wrong - just curious.

Jeff

All prices are related on a sports market and that makes it much easier to spot turning points.

[Euler]

How many favourites have you seen go off at 1.01?

[Iron]

None, and I appreciate that the fact that the odds represent the percentage chances of the horse winning mean that that's not likely to happen pre-off. However, I don't see how that fact helps us to spot turning points.

Whilst horses don't usually go down to 1.01 pre-off, would you agree that there's no way of knowing in advance when or if there will be a market reversal? For example, a horse could steam in continuously till the off (with a few minor pullbacks along the way).

Jeff

How many favourites have you seen go of at 1.01?

[Euler]

So on the basis that a horse can't reach 1.01 before the off, what does that mean for trading it and the likely behaviour of everything else in the market?

[Iron]

I genuinely don't see a practical application of that knowledge.

The fact that a horse won't go to 1.01 before the off tells me nothing about that horse's likely behaviour in the market or that of other horses.

What am I missing?

Jeff

So on the basis that a horse can't reach 1.01 before the off, what does that mean for trading it and the likely behaviour of everything else in the market?

[JollyGreen]

Jeff

It's quite simple and applies to anything that is bought and sold. There is a price that someone wants to buy at and there is a price at which someone wants to sell.

If you therefore watch the money it will soon inform you where the price for buyers and sellers meets. If it goes too high the agreement breaks down and vice versa for the low.

If you watch the market this way it will soon become apparent where the reversal points are likely to be. Now before you reply with the usual "what if" a large order drives it further, ask yourself if that order is correct based on prior money that has slowly decayed as the market has moved away from the meeting point for backers and layers.

Also, if you don't think this is possible then look at the posts where I gave prices for Next Sensation at Newcastle and High Net Worth at Dundalk. They were pretty close in real life to the prices I quoted many hours before the market with the former being quoted before £20 had been matched on Betfair. So if I am wrong then I reassess and start again, the market will soon let me know what the correct price is. If the market is up and down like a fiddler's elbow then I will simply leave it alone.

[PeterLe]

I dont disagree with what Jolly has said, but an alternative viewpoint supporting the argument is that the odds are HIGHLY correlated governed by the book percentage amongst other things.
Jeff, choose a race that has a steamer in and what what happens to the book price at the same time as a market correction..Prices can only drift/steam so far before they are corrected. (the book price does increase slightly by a fraction of percent depending upon how many runners there are)
In the example Peter mentioned, if you have a fav going off at 1.01 everything else would have to be >100

[Iron]

If you watch the market this way it will soon become apparent where the reversal points are likely to be.

I appreciate that it may be possible to pinpoint possible points of support and resistance. However, if the market has been trending in a particular direction, is it not more likely to continue in the direction of the trend rather than bounce off support/resistance and reverse?

Jeff

[JollyGreen]

If you watch the market this way it will soon become apparent where the reversal points are likely to be.

I appreciate that it may be possible to pinpoint possible points of support and resistance. However, if the market has been trending in a particular direction, is it not more likely to continue in the direction of the trend rather than bounce off support/resistance and reverse?

Jeff

Jeff

You are just making assumptions based on the usual "what if" situation. Hence, "However, if the market has been trending in a particular direction, is it not more likely to continue in the direction of the trend rather than bounce off support/resistance and reverse"

So my message clearly stated there IS a point where backers/layers concur and the further you move away from that point the less they will concur. Now if something is steaming there will come a point where genuine money will stop as the backer will not want the price being offered by the layer. The market will always let you know where the likely point is and this is reinforced by Peter's statement about a favourite reaching 1.01 pre-race! It isn't happening so there has to be a low beyond which it will not go.

As Peter Le said, the overall book status will have an impact. If something priced <2.0 starts to drift badly it will not be long before the book hits 100%. The drift has to stop OR something else has to move in. If nothing moves in then the drift WILL stop.

[to75ne]

slight interjection (i dont really like this kind of fred, as they seem to go around in circles)

jeff

have a look at some of mugsgames videos, i think you will see what jolly g and peter are explaining.

[Iron]

There IS a point where backers/layers concur and the further you move away from that point the less they will concur.

Not sure I understand. Whenever money is matched, there is agreement between backers and sellers.

You might have a range where the vast majority of money has been matched. If the market moves away from that range, would you anticipate that it would generally want to return there, as that is the area with most 'concurrence'?

Now if something is steaming there will come a point where genuine money will stop as the backer will not want the price being offered by the layer. The market will always let you know where the likely point is

How will it do so?

You wrote a while back about doing a video. If you could do one that showed an example of the market telling you that it was about to reverse, I think a lot of people would find that useful.

and this is reinforced by Peter's statement about a favourite reaching 1.01 pre-race! It isn't happening so there has to be a low beyond which it will not go.

I agree - but surely nobody knows where that point will be till the race goes in-play.

I may come across like I'm being obtuse or deliberately contrary. That's not my intention. I'm just keen to understand where you guys are coming from.

Jeff