Market Mispricing & Value bets

[PeterLe]

Why 2.2 and not 2.1 or 2.3?

And how will you be able to have an earthy clue what the true price is, to that degree of accuracy?

Jeff

For example if i think a team has a 50% chance of winning i would be looking for odds of over 2.2 and i would class that as value.

Jeff,
This is where I think a lot of traders go wrong. You dont need to know the 'exact' odds. Let me try and explain
imagine you you have three traders all trading a particular market over the course of a year:-

Trader A: Although this has a gut feeling that he may have an edge, he isn't quite sure. As a result replaces no bets over the 12 month period. he doesn't lose a penny, but he doesn't win either
Profit/loss :£0

Trader B: He has a gut feeling too and decides that the best odds to place a bet at are circa 2.1.
Over the course of 12 months he makes £20K and after spending a day going through the numbers decides his odds are slight low.
He tweaks his strategy and decides that next year he will use odds of 2.2. Next year he anticipates that on averaged his profits will rise to £25K. He carefully plots and records his data
He has also noticed from over 8000 events that year that Wolv; Southall and Newbury, have a much lower expectancy, so he decides not to place bets on those courses either.
More importantly, he notices a particular characteristic at Aintree. He decides to invest some of his £20K over the next year exploring this too using minimum stakes of £2. he knows that betting at random will not realise a big loss.

Trader C: A professor of Statistical Analysis and Sports Science at Loughborough University. He already had his data before he started.
He placed bets at 2.4 as he knew this was the optimum odds (after that, it resulted in diminishing returns).
He has been doing this for some time and this is his third year.
He also knew not to place bets at Wolv; Southall; Newbury and Leicester, as over the long term these were net negative courses.
He also notices a something very strange at York that on average will increase his P&L by £6K/Annum. There is also something very unique about a particular horse - HorseX in terms of the pre race trading pattern. He provides the data to one of his Phd students to analyse.
Profit for the year - £45K. He is he only professor at Loughborough who drives to work in a Range Rover Vogue. His wife enjoys her cruises and fancies the Asia Pac cruise next year

What Im trying to say (and I think we covered it in the post - Building a strategy or starting a strategy?), is; it is better to start somewhere then hone and refine as you move forward. If you never leave the front door you will be safe, but who knows what avenues and cul de sacs you will encounter if you do.

There a thread on here somewhere about growth mindsets. Time permitting, I think its perfectly reasonable to find lots of strategies by scratching at the surface and probing.

Dont forget - Good enough, is good enough! Aim for perfection, but if you never reach it at least you've had some cracking hols in Asia Pac!

Regards
Peter

[Iron]

Peter -

I'm not against making bets based on careful analysis. I'm sure there are very clever people who have rigorously tested models that have shown a historical positive expectancy. If the evidence suggests that the edge is likely to last, then fair play to them (although I think it's generally presumptuous to assume that the market won't mean revert).

However, your average Joe Punter who thinks 'you have to be in it to win it', and thinks he can outsmart an ultra-efficient market by backing drifters and using a bit of crude home-grown analysis is deluding himself IMHO.

One human bias is to think of oneself as being above average, and I think that's what many people are doing, ie thinking 'silly market, bunch of lemmings', rather than considering that the people on the other side of the bet might actually know what they are doing.

Jeff

[PeterLe]

HI Jeff,
Ive just added some comments to your text:

Jeff: I'm not against making bets based on careful analysis.
Reply: You can't always start analysis until you have data. Yes there is data in the public domain, but its much better to create your own.

Jeff: I'm sure there are very clever people who have rigorously tested models that have shown a historical positive expectancy. If the evidence suggests that the edge is likely to last, then fair play to them (although I think it's generally presumptuous to assume that the market won't mean revert).
Reply: No edge last for ever. I have some edges that have produced six figures. Sure some of them come and go, but by monitoring whats working and whats not, you either adapt them (sometimes for the better) or kill them. You dont plant a crop and expect it to produce each year; it has to be tended and nurtured

Jeff: One human bias is to think of oneself as being above average, and I think that's what many people are doing, ie thinking 'silly market, bunch of lemmings', rather than considering that the people on the other side of the bet might actually know what they are doing.
Reply: Jeff you dont have to be ultra smart. Thats a key message, it can be developed, You just need a logic and sensible approach and above all an open mindset as to what is achievable imo.

regards
Peter

[buyshirts]

PeterLe i have read your replies to Jeff's points.
You obviously understand my question, and from your post i can see you have/are running these sort of system based/value finding approach.
I understand that the larger the sample behind a system the stronger it is but as you said these "edges" dont normally last for to long, so i go back to my original post and ask you if your Fair Value at what prices to do look to back or lay?

[marko236]

You have to decide yourself what a good price is.

[Zenyatta]

at what prices to do look to back or lay?

I would be very wary of backing something below $1.85 - below this threshold, back value is getting hard to find. Best value for back bets is found at prices of $9.00 or more in my view.

I would be very wary of laying something above $7.00 - above this threshold, lay value is getting hard to find. Best value for lay bets is found at prices of $2.00 or less in my view.

To summarize, back very high (>$9), lay very low (<$2) for best value.

[Euler]

I agree

[buyshirts]

Zenyatta thanks for your insight.
The market im looking at primarily is over/unders 2.50 goals. So obviously im not going to get the back prices you highlight. I understand i could go higher up the goals chain to find this prices and the "Value".

What im trying to do is model and come up with a Fair Value for a certain set of circumstances and then see how far out away from that price i would need to bet to find some profit. I do except that the market im looking at is very efficient but it is as much a learn exercise as money making.
I don't have any experience of pricing a market from scratch but felt this is one of the easy ones to start with.