Trading at random

[Iron]

he knows that betting at random will not realise a big loss.

I've tested that theory by looking at a far bigger sample of bets than has been used in previous studies into this matter - my entire betting history!

Betfair has sent me my overall p and l figures since I opened my account in 2005. I've lost 0.42% ROI on horses and 0.8% ROI on greyhounds.

To put that horse figure into context, if a newbie experiences my rate of return, for every £50 trade they complete, they will lose 42p on average, which will soon add up.

I'm seriously thinking of taking a break from trading for a while and reviewing things in a few months. Betting/trading is a huge consumer of time - even if I were making a profit, I'm not sure it would be the best use of my most valuable resource...

Jeff

[Zenyatta]

Jeff,

You've done better than I have I have done even worse than that trying to trade manually. My own Betfair history since 2010, has me losing around 2% trying to trade manually. In the sample period I was manually trading on horse racing markets(2010-2012), I put 500K through (500,000), and lost 10K (10 000), for a ROI of -2%.

So trading manually, I have only ever done WORSE than chance!

And I agree, manual trading is also a huge time suck. That's why I gave up manual trading, and would only consider automation from now on. You should stick to automated systems - VPS/Excel/Guardian. Yes, you would still have to put some time in coding and testing, but this is much less than manually.

[Iron]

Hi Zenyatta

I'm not sure you did do worse than chance, if it's any consolation!

Let's say I were to back 1,000 2.0 horses for a tenner each, and get 500 wins and 500 losses.

Amount risked = £10,000
Winning bets return = £5000 - 5% commission = £4750
Losing bets return = - £5000

Therefore, I have a net loss of £250, or -2.5% ROI.

The only difference between the above and trading, as far as I can tell, is that, when trading, if you back and lay at the same price, i.e. 'zero up', you don't pay commission.

I'm wondering whether the 'trade at random and you will hardly lose anything' is a well intentioned but dangerous misconception. Even if you're just losing (say) 0.4% on turnover, do 10,000 trades like that and chances are that you'll be in a serious drawdown, if you're still in the game at all.

For once, you and I are on a similar page! Right, I'd better try to get some sleep! Been up since about 3.30, so I thought I'd go online rather than just counting sheep!

Jeff

[Iron]

PS Zenyatta - Something you might want to do is calculate what your ROI would have been at level stakes.

It could be that the reason you lost so much was because you increased your stakes to chase losses.

Jeff

[Euler]

If you bet at random in a consistent and disciplined manner and you assume the market is efficient (which it more or less is, but there are areas of persistent inefficiency) then your maximum loss is the commission you pay to Betfair.

If you trade at random then and assume similar then the maximum loss is the same but because you are trading in a range or similar, the amount of commission you loss will always be a fraction of the same when betting.

When I discovered this many moons ago I realised all I needed to do was be every so slightly better than random to make a profit. When that happened I started focusing on how to put more money through the market. That simple.

There are dozens of 'tricks' you can use to do this.

[Iron]

If you trade at random then and assume similar then the maximum loss is the same but because you are trading in a range or similar, the amount of commission you loss will always be a fraction of the same when betting.

I don't follow.

Let's say I were to back a horse at 1.9 and lay it for the same amount at 2.0. Over millions of iterations, surely I'd expect to pay roughly the same commission and have roughly the same ROI as I would if I were to back a horse for 1.9 in one race and then lay a different horse for 2.0 in another race.

The only exception to the above, as far as I can see, is if you 'zero up' on trades that go against you and take the profit when the market goes in your favour. However, I find that, when I try to scratch trades by offering to the queue, the market has a nasty habit of running away from my position, so I always take from the queue to close my trade (meaning I only occasionally break even).

Jeff

[PeterLe]

I did a post somewhere on here (2010 ?) whereby I ran three tests (using real money , we didn't have practice mode in them days!). I put £4-5K through the market with one tick offsets and it was very close to break even (in percentage terms).
You do need to apply some logic, i.e. if you were to back every 1.02 and trade out at 1.01 or lay at 990 and back at 1000, they probably wouldn't work..
Im convinced it would give the same result if it were run today.
After I did that, I ran many many tests before drawing any conclusions and defining my base strategy.
Its much better to try these things yourself Jeff as you learn so much along the way
Regards
Peter

[Iron]

Its much better to try these things yourself Jeff as you learn so much along the way

I would say that the data sample I used - every single bet I've placed since I opened my account in 2005 - is large enough, and no further testing is required.

Jeff

[Euler]

But that's your trading results Jeff, not trading at random, so you are worse than random looking at that data.

[Iron]

That's possible Peter, but I doubt it, particularly as I've used so many different methods since 2005.

I would say I've actually found value, but not enough to profit overall. The attached spreadsheet, which shows the long-term ROI from betting at efficient odds with 5% commission at various prices, supports this view. My ROI is negative, but it's not nearly as negative as the ROIs in the spreadsheet.

Jeff

But that's your trading results Jeff, not trading at random, so you are worse than random looking at that data.

[Euler]

If your results contain betting to value then you can't really derive much about the trading side of things without splitting it out.

[Iron]

You may be right, but I wouldn't have thought whether I was trading or betting outright would significantly affect my ROI (particularly as I don't often do scratch trades).

I just opened this thread to show people that trading at random isn't as safe as people might think. I've lost something like 8 grand over the years, and I hope this thread will help others avoid repeating some of my mistakes.

People might think that a ROI of -0.4% is nothing to worry about. However, if you're staking fairly conservatively, using 10% of your initial bank as your stake, and your ROI is -0.4%, then your bank will decrease in size by 0.04% per trade, or 4% after just 100 trades (perhaps in an afternoon's trading).

Without an edge, I think people will lose their banks fairly quickly, and either quit outright or throw good money after bad. It's something newbies should consider when going above £2 stakes.

Jeff

[Iron]

On reflection, I think I see where you might be coming from.

If I back and lay the same selection, both bets can't possibly win, so I will potentially pay less commission long-term than if I'd backed one horse and laid another in a different race.

However, even if we assume that my ROI would have been half of what it was, it could still erode significantly into my bank over relatively few trades.

Jeff

If your results contain betting to value then you can't really derive much about the trading side of things without splitting it out.

[PeterLe]

I just opened this thread to show people that trading at random isn't as safe as people might think. I've lost something like 8 grand over the years, and I hope this thread will help others avoid repeating some of my mistakes.

I think thats a fair comment really. If newbies approach the market thinking that they will not lose (or very little), then thats a recipe for disaster.
I was watching RudeTube the other night and a guy thought he was being funny tapping a crocodile on the inside of its lower jaw, and then quickly pulling his hand out..the crowd loved it. Well you dont need me to tell you what happened next. The market is the same

if however, you approach it with the respect it deserves and avoid as much risk as possible, you can make inroads - slowly.

jeff, I dont mean this to come across wrong, but we're all here to make money at this game. After having spent so much effort in the last seven years or so, if you dont change what you've always done, you will get the same results over the next seven years? have you thought about generating that money outside of Betfair? We all put a lot of hours into this game, so why not divert that energy elsewhere?
I was watching a program about Amazon, about people who self publish their own novels. One guy made around £400K for his first book. Albeit the average is a lot less than that.
I would have though something like that would be right up your street having been a copywriter etc?
Im probably thinking out aloud as this is something I would love to do one day too,

Sorry forgoing off topic

[Euler]

So the conclusion after all that is that paying commission reduces your chance of a profit

Not exactly a shock really.