I recall hearing Peter talk about how he prepares for the afternoons racing (think it may have been on a racing profits video) by looking through the various markets in the morning. Is this an important aspect of trading and should we be aware beforehand of the type of market that will face us?
I'm currently a pure novice in terms of identifying how a market may move prior to the race so is it just a matter of practice and patience to be able to pick out ideal conditions for trading?
Market identification for trading
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JollyGreen
- Posts: 2047
- Joined: Sat Mar 21, 2009 10:06 am
Hi, welcome to the forum.
Volatility (movement) in a market is generally dictated by volume of money. The easy way to start gauging movement is to look at the grade of the race, the higher the grade the lower the volatility and vice versa. Yes, there will be idiosyncrasies but overall that will hold true.
I would say take a look at Today's Racecards and make a note of the race grade. This will allow you to then watch the markets and record how they move. After a few days you will have a better understanding of what is happening and why.
Hope that helps
Volatility (movement) in a market is generally dictated by volume of money. The easy way to start gauging movement is to look at the grade of the race, the higher the grade the lower the volatility and vice versa. Yes, there will be idiosyncrasies but overall that will hold true.
I would say take a look at Today's Racecards and make a note of the race grade. This will allow you to then watch the markets and record how they move. After a few days you will have a better understanding of what is happening and why.
Hope that helps
Hi DaveJollyGreen wrote: Volatility (movement) in a market is generally dictated by volume of money.
It seems to me that there are two ways of looking at volatility. It could refer to either:
A. Markets with large gross moves, ie trending markets.
Or
B. Markets that don't necessarily go anywhere on aggregate, but jump around alot.
Do you agree, and which of the two definitions are you referring to?
Jeff
I'm kind of confused, so we're expecting less movement with a class 1 race as opposed to a class 5 race? Is this because the market volume tends to be spread more evenly over say the first 3 runners in a lower class race as opposed to a class 1 race?
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JollyGreen
- Posts: 2047
- Joined: Sat Mar 21, 2009 10:06 am
Basically market movement is dictated by money. If a horse is supported then it will shorten in price. If it is opposed then it will drift in price. You could also have the same thing happening if another horse is shortening or drifting at the front of the market - as the price of one moves in the price of the other is likely to move out to accommodate this move. That is because the market is a closed loop and for it to balance there has to be counter movement. You cannot have a favourite just drifting infinitely without another horse or horses moving in to balance the book.
Volatility is the inverse of market volume; I think I have mentioned this in other posts. So if you have a 12 runner Grade 1 race at Newmarket you should expect a more stable market. Yes, there will be price movement but it will be slower and more predictable. You will also find it harder to get your orders filled as money will be queued in larger quantities.
If you then take a 12 runner Grade 6 seller at Wolverhampton you have to expect a volatile market. There will be less money queued so a large order could cause mayhem. The lower grade race is not always a bad thing if you can catch the move but that would only come regularly if you have been practising in the markets for some time. It is more likely you will get caught out by the moves if you are a novice trader.
Visualise it like this. The market at a Grade 1 is like a large lake in a park. The money is represented by stones. If you throw stones in the water they create a ripple and that ripple represents movement in the market. If you throw in a breeze block there is a large splash and a ripple but it doesn't really cause too many problems. You could be stood at the edge of the water (queued close to the price) and not get wet.
Now think of your average 2m x 2m garden pond. This is representative of a Grade 6 market. If you throw small stones (money) into the pond it will be okay. If you throw in a house brick it will cause a large ripple and the water will probably lap over the edges. If you are stood in the wrong place you may get wet. So now you throw in a Breeze Block and there is an almighty splash that causes large waves and if you're stood at the edge you are going to get soaked.
I know it is a simplistic analogy but it helps people to visualise the effect.
Grade 1 = High Volume of money and therefore lower volatility
Grade 6 = Low volume and therefore higher volatility.
You should always try and use amounts that are less likely to cause a ripple as this will give you a greater chance of nipping in and out of the market with the least risk to your capital. So in a Grade 1 you can use larger amounts and in a Grade 6 you should use smaller amounts.
HTH
Volatility is the inverse of market volume; I think I have mentioned this in other posts. So if you have a 12 runner Grade 1 race at Newmarket you should expect a more stable market. Yes, there will be price movement but it will be slower and more predictable. You will also find it harder to get your orders filled as money will be queued in larger quantities.
If you then take a 12 runner Grade 6 seller at Wolverhampton you have to expect a volatile market. There will be less money queued so a large order could cause mayhem. The lower grade race is not always a bad thing if you can catch the move but that would only come regularly if you have been practising in the markets for some time. It is more likely you will get caught out by the moves if you are a novice trader.
No, it is simply because of the greater volume of money in the Grade 1. Because the amounts are higher it means a large order of £10,000 is less likely to move the market violently in a Grade 1 than in a Grade 6. As I wrote above, if you hit a grade 1 with £10K it may have a small momentary effect but the money will be absorbed into the much larger pot of money. If you hit a Grade 6 race with £10K the market will probably go into meltdown as it cannot absorb that amount.Is this because the market volume tends to be spread more evenly over say the first 3 runners in a lower class race as opposed to a class 1 race?
Visualise it like this. The market at a Grade 1 is like a large lake in a park. The money is represented by stones. If you throw stones in the water they create a ripple and that ripple represents movement in the market. If you throw in a breeze block there is a large splash and a ripple but it doesn't really cause too many problems. You could be stood at the edge of the water (queued close to the price) and not get wet.
Now think of your average 2m x 2m garden pond. This is representative of a Grade 6 market. If you throw small stones (money) into the pond it will be okay. If you throw in a house brick it will cause a large ripple and the water will probably lap over the edges. If you are stood in the wrong place you may get wet. So now you throw in a Breeze Block and there is an almighty splash that causes large waves and if you're stood at the edge you are going to get soaked.
I know it is a simplistic analogy but it helps people to visualise the effect.
Grade 1 = High Volume of money and therefore lower volatility
Grade 6 = Low volume and therefore higher volatility.
You should always try and use amounts that are less likely to cause a ripple as this will give you a greater chance of nipping in and out of the market with the least risk to your capital. So in a Grade 1 you can use larger amounts and in a Grade 6 you should use smaller amounts.
HTH