It's a LAY..
Point of resistance
Back lay or abstain?
For me it's an absolute no brainier to abstain in this situation. Sit on the hands time! How can you make a judgement without looking at other market influences? Has it come in from 1000 to 300? Is it 6 hours from start time? Is there pressure from other runners? Is this a 130% book with no liquidity? These are all examples of questions I need answers to before contemplating an entry.
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JollyGreen
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- Joined: Sat Mar 21, 2009 10:06 am
Did you actually read the original post?98lewisj wrote:For me it's an absolute no brainier to abstain in this situation. Sit on the hands time! How can you make a judgement without looking at other market influences? Has it come in from 1000 to 300? Is it 6 hours from start time? Is there pressure from other runners? Is this a 130% book with no liquidity? These are all examples of questions I need answers to before contemplating an entry.
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JollyGreen
- Posts: 2047
- Joined: Sat Mar 21, 2009 10:06 am
Fair enough; I thought your first reply suggested you had misread the OP98lewisj wrote:JG -my bad. Right, My view has not changed in as much as I still don't have enough information to make a call either way. Abstain!.
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JollyGreen
- Posts: 2047
- Joined: Sat Mar 21, 2009 10:06 am
Now now my friend I am not calling people mugsicarus121 wrote:The Giant ......... When do we get the bad news then? i.e there is all the info you need ,you mugs!This is killing me.
and I am actually just writing the answer. I really hope it will help people or at least make them consider their trading methods.-
JollyGreen
- Posts: 2047
- Joined: Sat Mar 21, 2009 10:06 am
Some very good answers and clearly this caused some grey matter to be used.
Here is my explanation based on many years in the markets. I am not saying this will occur every time but it will occur enough to make a profit. The chart I drew was close to a recent situation where I was sat with a novice trader who was trying to improve his market reading skills. I drew something similar and asked what he would do. He replied "lay because it has moved too far for me to back". I said we would explore it more and look for similar live markets. I then explained why a lay in my experience was wrong. I will try and explain to this to you.
If you said Abstain, then I can accept that. There is nothing wrong with that course of action. However, read on and hopefully you can turn some of those abstains into trades that bring a profit.
If you said Lay then I have to disagree. There is nothing in the market to suggest a reverse and it requires a leap of faith to step in front of what is a fast moving train in the hope it will stop and reverse before running you over. I will try to explain the reasoning behind this.
The information I gave was as follows. The money has been at peak flow for 30 seconds and it is 2 minutes to the start of the event. This was the favourite in a 10 runner handicap. I was going to include a price but I felt it would add in other factors and people would read too much into them. I took this from an example market when I was working with a novice trader. Admittedly I did not go into a great level of detail because, quite simply there is no need.
The first clue was the peak volume of 30 seconds. You may not be aware but this means the market is efficient at this point in 99% of markets. Okay so it could be an egg and spoon race at (Insert Irish track) with £39,000 traded but we should not be contemplating a trade in such a poor market. So we can safely expect the market to be efficient and behaving.
There are 2 minutes left, assuming they start on time and the horse is the favourite in a 10 runner handicap.
Some of you said you required more information but trust me, this is all the information you need. Before someone starts jumping up and down and calling me strange names, let me expand. A common theme was wanting to see other runners, or seeing what else was happening in the market. With a favourite being heavily supported like this one, you can be assured the rest are doing a combination of staying flat and drifting. For example, the 2nd favourite could be fairly flat moving 1-2 ticks around its price which means the rest are drifting to balance the book. It could be the 3rd fav staying flat...you get the idea. A quick warning; I am NOT saying you can just jump in and back this blindly and expect to make a profit every time. I am saying you can back this type of runner and with positive expectations, manage the position and expect a good return long term.
Another thing mentioned a few times was the amount of movement which had already occurred and this caused people to feel they had missed out on the move. There were references to getting in much higher (one was a funny tongue in cheek comment) and another suggesting it had moved too far so they were fearful of a reverse. This is a belief generally held by people who bet horses or have come from a gambling aspect into trading. You will often hear the word "value" bandied about by people, commonly the eejits who frequent our TV screens! It is not conducive to successful trading if you carry this concept from gambling to trading. It will muddy the waters and influence your decision making. In my first draft I included the price of 3.20 which is from the actual trade I performed with the novice trader. I left that out because I knew people would then make a judgement on where the price had moved to and how it was now approaching a cross-over point at 3.00. This is seen as a natural resistance point so people would be more likely to lay. Yes, the cross-over point can provide resistance but you should not let that affect your judgement.
The market is never wrong! It moves according to the flow of money so the only incorrect element is the person(s) placing orders into the market. You will always have the people who follow the money and you will always have people trying to oppose a move. It is human nature and we generally fall into one of the camps; I push so you push me back, etc. The market on Betfair is no different and you will always see it.
A quick mention on another idea bandied about. “People force the price down deliberately to then let it move back up!” There are lots of them and I really must advise you to forget that in all but the very worst of markets. Think about it logically, would you force a price down so you could then allow it to move back up; what is the point of that? Would it not be easier to back it and then look to trade out lower down? Why would you risk money trying to drive a price down in the hope you could then let it drift back out again? The risk is crazy and the market is too powerful for you to play that game. If a price is shortening then it is being supported and the overall support will far outweigh what one person or perhaps persons can muster. That is simply one for the conspiracy theorists and something I never concern myself with. The market is what it is and when you start to consider “conspiracy theories” you are doomed to fail.
Yes, the price has moved in a lot but do not use the “value” belief to determine your next move. This takes us into the next area of belief which is common among new traders and some older ones. I call it the “what if?” club and trust me again, it is not a club you want to join. Once you start trying to second guess the market by asking “what if” then once again you are doomed to fail. If you are already a member of this non-exclusive club I urge you to cancel your membership as soon as possible!
Membership of the “what if” club generally leads to membership of the “Rabbit in the headlights” club. This is where a market like this will teach you nothing if you are a member of said clubs. Let me explain. A lot of people will say lay or they do not want to back because they are fearful of a reverse. The second part is understandable but let’s see if I can help you to avoid it. If you are fearful of the reverse you will be waiting for it to occur. It is part of the brain which wants to show you are correct and it takes over your thought process. Generally, you sit there looking for the reverse, it consumes you and everything else is discarded. I know this is true because I have done it. You watch and watch and then suddenly, bingo! The market reverses and you tell yourself something akin to “I knew it!” The problem is you have been stuck in the headlights and missed the ~10-15 tick move! Come on be honest, you have done it….I know I have! It gets worse though because now you have reinforced the behaviour and your brain has taken the signal to mean you were correct; this is a hard cycle to break! To justify the action when questioned you will pull out your “What if” membership card and say “Ahh, but what if it had reversed earlier, I would’ve made a loss!” The important point is it didn’t and you must forget these negative influences.
In the actual market I traded, the price moved from 3.20 when we came to it and finished down at ~2.60. So we missed the move from ~5.5 into 3.20 but surely a move from ~2.90 into ~2.70 is “value”? Does that make sense? We cannot deal with what has happened and we must not allow “what if” to affect our current judgement, we must deal with now and what the market is showing us. If it changes then we deal with it but we must never allow our thought process to be determined by “what if” or we will always be second guessing the market and we will get caught out too often.
I have a stock answer to the “what if” question. If my Auntie had testicles she’d be my Uncle; she hasn’t, she isn’t”
So try and be more positive in your trading, do not sit there worrying about what may happen and deal with what is happening. Stay in the now and you should find it much easier to learn rather than clouding your thoughts with what has happened and what might happen.
Here is my explanation based on many years in the markets. I am not saying this will occur every time but it will occur enough to make a profit. The chart I drew was close to a recent situation where I was sat with a novice trader who was trying to improve his market reading skills. I drew something similar and asked what he would do. He replied "lay because it has moved too far for me to back". I said we would explore it more and look for similar live markets. I then explained why a lay in my experience was wrong. I will try and explain to this to you.
If you said Abstain, then I can accept that. There is nothing wrong with that course of action. However, read on and hopefully you can turn some of those abstains into trades that bring a profit.
If you said Lay then I have to disagree. There is nothing in the market to suggest a reverse and it requires a leap of faith to step in front of what is a fast moving train in the hope it will stop and reverse before running you over. I will try to explain the reasoning behind this.
The information I gave was as follows. The money has been at peak flow for 30 seconds and it is 2 minutes to the start of the event. This was the favourite in a 10 runner handicap. I was going to include a price but I felt it would add in other factors and people would read too much into them. I took this from an example market when I was working with a novice trader. Admittedly I did not go into a great level of detail because, quite simply there is no need.
The first clue was the peak volume of 30 seconds. You may not be aware but this means the market is efficient at this point in 99% of markets. Okay so it could be an egg and spoon race at (Insert Irish track) with £39,000 traded but we should not be contemplating a trade in such a poor market. So we can safely expect the market to be efficient and behaving.
There are 2 minutes left, assuming they start on time and the horse is the favourite in a 10 runner handicap.
Some of you said you required more information but trust me, this is all the information you need. Before someone starts jumping up and down and calling me strange names, let me expand. A common theme was wanting to see other runners, or seeing what else was happening in the market. With a favourite being heavily supported like this one, you can be assured the rest are doing a combination of staying flat and drifting. For example, the 2nd favourite could be fairly flat moving 1-2 ticks around its price which means the rest are drifting to balance the book. It could be the 3rd fav staying flat...you get the idea. A quick warning; I am NOT saying you can just jump in and back this blindly and expect to make a profit every time. I am saying you can back this type of runner and with positive expectations, manage the position and expect a good return long term.
Another thing mentioned a few times was the amount of movement which had already occurred and this caused people to feel they had missed out on the move. There were references to getting in much higher (one was a funny tongue in cheek comment) and another suggesting it had moved too far so they were fearful of a reverse. This is a belief generally held by people who bet horses or have come from a gambling aspect into trading. You will often hear the word "value" bandied about by people, commonly the eejits who frequent our TV screens! It is not conducive to successful trading if you carry this concept from gambling to trading. It will muddy the waters and influence your decision making. In my first draft I included the price of 3.20 which is from the actual trade I performed with the novice trader. I left that out because I knew people would then make a judgement on where the price had moved to and how it was now approaching a cross-over point at 3.00. This is seen as a natural resistance point so people would be more likely to lay. Yes, the cross-over point can provide resistance but you should not let that affect your judgement.
The market is never wrong! It moves according to the flow of money so the only incorrect element is the person(s) placing orders into the market. You will always have the people who follow the money and you will always have people trying to oppose a move. It is human nature and we generally fall into one of the camps; I push so you push me back, etc. The market on Betfair is no different and you will always see it.
A quick mention on another idea bandied about. “People force the price down deliberately to then let it move back up!” There are lots of them and I really must advise you to forget that in all but the very worst of markets. Think about it logically, would you force a price down so you could then allow it to move back up; what is the point of that? Would it not be easier to back it and then look to trade out lower down? Why would you risk money trying to drive a price down in the hope you could then let it drift back out again? The risk is crazy and the market is too powerful for you to play that game. If a price is shortening then it is being supported and the overall support will far outweigh what one person or perhaps persons can muster. That is simply one for the conspiracy theorists and something I never concern myself with. The market is what it is and when you start to consider “conspiracy theories” you are doomed to fail.
Yes, the price has moved in a lot but do not use the “value” belief to determine your next move. This takes us into the next area of belief which is common among new traders and some older ones. I call it the “what if?” club and trust me again, it is not a club you want to join. Once you start trying to second guess the market by asking “what if” then once again you are doomed to fail. If you are already a member of this non-exclusive club I urge you to cancel your membership as soon as possible!
Membership of the “what if” club generally leads to membership of the “Rabbit in the headlights” club. This is where a market like this will teach you nothing if you are a member of said clubs. Let me explain. A lot of people will say lay or they do not want to back because they are fearful of a reverse. The second part is understandable but let’s see if I can help you to avoid it. If you are fearful of the reverse you will be waiting for it to occur. It is part of the brain which wants to show you are correct and it takes over your thought process. Generally, you sit there looking for the reverse, it consumes you and everything else is discarded. I know this is true because I have done it. You watch and watch and then suddenly, bingo! The market reverses and you tell yourself something akin to “I knew it!” The problem is you have been stuck in the headlights and missed the ~10-15 tick move! Come on be honest, you have done it….I know I have! It gets worse though because now you have reinforced the behaviour and your brain has taken the signal to mean you were correct; this is a hard cycle to break! To justify the action when questioned you will pull out your “What if” membership card and say “Ahh, but what if it had reversed earlier, I would’ve made a loss!” The important point is it didn’t and you must forget these negative influences.
In the actual market I traded, the price moved from 3.20 when we came to it and finished down at ~2.60. So we missed the move from ~5.5 into 3.20 but surely a move from ~2.90 into ~2.70 is “value”? Does that make sense? We cannot deal with what has happened and we must not allow “what if” to affect our current judgement, we must deal with now and what the market is showing us. If it changes then we deal with it but we must never allow our thought process to be determined by “what if” or we will always be second guessing the market and we will get caught out too often.
I have a stock answer to the “what if” question. If my Auntie had testicles she’d be my Uncle; she hasn’t, she isn’t”
So try and be more positive in your trading, do not sit there worrying about what may happen and deal with what is happening. Stay in the now and you should find it much easier to learn rather than clouding your thoughts with what has happened and what might happen.
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JollyGreen
- Posts: 2047
- Joined: Sat Mar 21, 2009 10:06 am
Sorry for the slow reply today has been a bad day health wise!
I measure the peak flow using £/s. If you open up Settings it's on the first part you see, ensure there is a tick in MA (moving average). You will then see how much is being traded per second.
Each race is different but you'll soon get used to it. When it's at peak flow you should expect moves to start shaping the market.
I measure the peak flow using £/s. If you open up Settings it's on the first part you see, ensure there is a tick in MA (moving average). You will then see how much is being traded per second.
Each race is different but you'll soon get used to it. When it's at peak flow you should expect moves to start shaping the market.
A comprehensive, authoritative answer Jolly. Despite my hesitation to back, I made the correct call in this case and I did vote to 'back' 
However...
I've never been any good at trend following myself. Sure, I made some money on the rare, clear-cut cases like this example, but then I always lost it back trying to 'follow the money' in weaker situations, when I got hit by the inevitable reversals.
However... A fair argument Jolly, but knowledge of what's happened in the past is still hard to ignore. I know for a fact its comparatively rare to get a nice steady move of this magnitude. Starting from 5.50 and moving into 2.60 is a huge move, that's 45 ticks! Statistically, I know that starting from 5.50, the average 'steamer' move will likely be less than 12 ticks, and it will not often exceed 25 ticks at the most. So this big clear move is a bit of an outlier.JollyGreen wrote: In the actual market I traded, the price moved from 3.20 when we came to it and finished down at ~2.60. So we missed the move from ~5.5 into 3.20 but surely a move from ~2.90 into ~2.70 is “value”? Does that make sense? We cannot deal with what has happened and we must not allow “what if” to affect our current judgement, we must deal with now and what the market is showing us. If it changes then we deal with it but we must never allow our thought process to be determined by “what if” or we will always be second guessing the market and we will get caught out too often.
I've never been any good at trend following myself. Sure, I made some money on the rare, clear-cut cases like this example, but then I always lost it back trying to 'follow the money' in weaker situations, when I got hit by the inevitable reversals.
Excellent post
As always Jolly you have taken posting to the next level with no ulterior motive.
Food for thought for me(for sure) and many others i guess.Steamroller/picking up pennies ,peak flow,stop loss sweet spots etc.(alluding to older posts)
Its all there for the taking isn't it really! The grey matter is in overdrive once again !
Thanks
As always Jolly you have taken posting to the next level with no ulterior motive.
Food for thought for me(for sure) and many others i guess.Steamroller/picking up pennies ,peak flow,stop loss sweet spots etc.(alluding to older posts)
Its all there for the taking isn't it really! The grey matter is in overdrive once again !
Thanks
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JollyGreen
- Posts: 2047
- Joined: Sat Mar 21, 2009 10:06 am
I appreciate that, very kind of you. As I said, I want people to think more about how they react to a market and why. Very often we are carrying a burden from a past issue or have been given some incorrect advice both of which are very difficult to shake off. I cannot teach someone how to trade because they cannot understand what is going on inside my head. Mind you I don't often know what is going on inside my head so I wouldn't wish it on others! What I can do is help people to understand the market a bit better so they can develop their own skills.icarus121 wrote:Excellent post
As always Jolly you have taken posting to the next level with no ulterior motive.
Food for thought for me(for sure) and many others i guess.Steamroller/picking up pennies ,peak flow,stop loss sweet spots etc.(alluding to older posts)
Its all there for the taking isn't it really! The grey matter is in overdrive once again !
Thanks
Give a man a fish, teach a man to fish and all that!