Following on from race descriptions and the latest information about handicaps I thought I would post this for you.
I hold a simple belief when reading a market. The market is never wrong! I am sure many of you will disbelieve me but let me explain and perhaps you may reconsider.
I have mentioned many times how I am a fan of Edward de Bono. He refers to an intelligence trap where people will use their intelligence to try and prove another person incorrect rather than accept they could be wrong. This is because most people do not truly think about something, they "ASSUME" too much. I am not pointing fingers, this is nothing more than human nature. As a young man I realised very quickly that it was better to listen to others first and try to learn if possible. I still hold the belief that one idea combined with another idea could well lead to a better idea!
So let's think about the market, in particular the pre-race horse racing in the UK. I mentioned handicaps are allegedly competitive and this is reflected in the prices. I looked at the Southwell 2:30 yesterday 02/10/14 and it was a 4 runner affair. The favourite Jim Job Jones had won last time out and was a short priced favourite. If you looked at the bare form it was okay and he seemed to be on a fair handicap mark. The others did not amount to much IMHO! Despite this the price drifted alarmingly as you can see from the attached image. I didn't listen to the experts on ATR but I am sure they were saying or thinking "the market got that wrong!" It is the usual guff they come out with and it is best ignored.
The market doesn't get it wrong, the market does what the money tells it to. If a horse is supported it will shorten, if a horse is opposed it will drift - that is it! Actually there is one other mechanism and I will cover that in another post. I know that if you studied the data closely enough you could find a statistic to show it is related to the result but I believe that falls back into the intelligence trap. You can use data and statistics to prove almost anything but what is the point if it gets you nowhere?
Why is this important? If you are swayed by media comments, alleged false market moves, etc. you are likely to be missing the important events. I think the easiest way to get away from this issue is a simple one. Accept the market as a friend and let it guide you. If you sit there thinking "you (the market) are trying to trick me!" You will be in serious trouble.
I will go back to Jim Job Jones' race yesterday. I had him at around 2.50 as his correct odds, that is my opinion based on my knowledge and he was a value bet at those odds. When the price started drifting I did not say "this is wrong I am going to oppose the drift" I simply thanked the market and went with the drift to grab a nice trade. In a strict comparison the market opposed my view but it was NOT wrong. It does not think or form opinions, it is a basic mechanism driven by money as mentioned above.
In your next trading session try to treat the market as a friend and trust what it shows you. If there is no discernible trend then simply watch until one appears. If it doesn't show a trend then do not trade. Try it and I think you will be pleasantly surprised.
Market moves - right or wrong?
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JollyGreen
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Interesting post JG.
You write:
'If there is no discernible trend then simply watch until one appears. If it doesn't show a trend then do not trade.'
To clarify, do you avoid scalping within narrow range-bound markets, such as those that you often get at grade 1 events or big field races?
Jeff
You write:
'If there is no discernible trend then simply watch until one appears. If it doesn't show a trend then do not trade.'
To clarify, do you avoid scalping within narrow range-bound markets, such as those that you often get at grade 1 events or big field races?
Jeff
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JollyGreen
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Rarely scalp Jeff, hate it with a passion!
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JollyGreen
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YesFerru123 wrote:PS Given that Jim Bob Jones was deep in back value territory according to your own calculations, did you have an outright back bet as well as trading?
Jeff
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spreadbetting
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Good stuff JG, I think new traders get bombarded with so many snippets, sometimes it's to see the wood from the trees. We continually get told the only way to win is to oppose the crowd etc which may well be true in some circumstances with gambling but for trading it'll rarely pay out. Betfair regularly pump out their steamers and drifters stats to encourage people in with easy strategies but yet again nothing really counts but the price you've taken. I'm sure getting on early enough those figures would look a hell of a lot different.
The real problem for new traders comes when they refuse to accept the red and admit they're wrong, they either wait til in running hoping a backed drifter will come in or a steamers odds go out, But there are usually very good reasons why a horse is well backed/laid and their running usually reflects this.
The real problem for new traders comes when they refuse to accept the red and admit they're wrong, they either wait til in running hoping a backed drifter will come in or a steamers odds go out, But there are usually very good reasons why a horse is well backed/laid and their running usually reflects this.
I've been trying to trade for nigh on 5 years now and I'm still down 10K. By far my biggest losses have all come trying to identify and follow trends. Whenever I've 'trusted the market' and followed trends, the end result for me more often than not has always been huge beatings (blood-bath reds).
On lower-grade markets with short-priced favourites, you routinely used to see prices steaming in for a long time....only to get sudden huge drifts close to the off...these drifts can be by an enormous number of ticks...24 ticks or more I've seen.
Many many people (including myself) have lost thousands of pounds following these 'false trends' - they more often than not turned out to be temporary price-spikes where after a 24-tick drift the price suddenly viciously reverses and steams all the way back in again, relieving those who 'trusted the market' and followed the trend of all their money.
As an example: I remember towards the end of 2012, a big player that Peter later called 'the late layer' started appearing in the markets and regularly dumping in huge lays on short-priced favourites - this used to regularly generate 'price-spikes' of 24-ticks. The late layer was active for many months and I was relieved of thousands of pounds following these 'false trends' before I realized what was happening.
On lower-grade markets with short-priced favourites, you routinely used to see prices steaming in for a long time....only to get sudden huge drifts close to the off...these drifts can be by an enormous number of ticks...24 ticks or more I've seen.
Many many people (including myself) have lost thousands of pounds following these 'false trends' - they more often than not turned out to be temporary price-spikes where after a 24-tick drift the price suddenly viciously reverses and steams all the way back in again, relieving those who 'trusted the market' and followed the trend of all their money.
As an example: I remember towards the end of 2012, a big player that Peter later called 'the late layer' started appearing in the markets and regularly dumping in huge lays on short-priced favourites - this used to regularly generate 'price-spikes' of 24-ticks. The late layer was active for many months and I was relieved of thousands of pounds following these 'false trends' before I realized what was happening.
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JollyGreen
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I never use stop losses and prefer to manage it myselfburdo77 wrote:Out of curiosity jollyG, what would you done if the price went back in, stop loss? I read a stock traders blog and he reacon you shouldn't employ a stop loss more than 1.5 times the market range, what are your thoughts?
I guess to summarize what I was trying to say: I've always found it extremely hard to distinguish genuine long-term trends from short-term price-spikes. The example chart of Jim Job Jones above is a nice clear example of a consistent drift, but the majority of races are not like that 
Far more often you might see what *seems* like the beginning of a big drift (say some price acting like the beginning part of the Jim Job Jones graph - for example I might see something moving from 1.75 >>> 2.00) - so I might pile in with the big lay, only to get the big vicious price reversal where the price crashes all the way back to 1.75 again and I've copped the big red.
Far more often you might see what *seems* like the beginning of a big drift (say some price acting like the beginning part of the Jim Job Jones graph - for example I might see something moving from 1.75 >>> 2.00) - so I might pile in with the big lay, only to get the big vicious price reversal where the price crashes all the way back to 1.75 again and I've copped the big red.
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JollyGreen
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JeffFerru123 wrote:Zenyatta - I'd say you've fallen into what JG calls the intelligence trap.
Jeff
You beat me to it. I had a reply ready but I thought I would wait and see what developed. That is exactly what I was referring to!
JG
Explanation of the intelligence trap - http://think-quick.com.au/the-intelligence-trap
If anyone doubts this is a real phenomenon, visit Twitter. You'll often get people insulting people who disagree with them, but you'll rarely hear someone say, 'Thanks - You know, my original view may have been wrong. I hadn't thought about it like that.'
I'm reminded by a quote from John W Henry:
'Investors hope or believe that they can predict the future, or someone else can. ... We rely on the fact that other investors are convinced that they can predict the future, and I believe that’s where our profits come from. I believe it’s that simple.'
Jeff
If anyone doubts this is a real phenomenon, visit Twitter. You'll often get people insulting people who disagree with them, but you'll rarely hear someone say, 'Thanks - You know, my original view may have been wrong. I hadn't thought about it like that.'
I'm reminded by a quote from John W Henry:
'Investors hope or believe that they can predict the future, or someone else can. ... We rely on the fact that other investors are convinced that they can predict the future, and I believe that’s where our profits come from. I believe it’s that simple.'
Jeff
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JollyGreen
- Posts: 2047
- Joined: Sat Mar 21, 2009 10:06 am
Jeff
De Bono is worth reading! Do you remember when I talked about the tennis tournament and said x number of players so how many matches to find the winner? You fell into the intelligence trap by thinking about byes when the answer is always x-1! That is not a dig I am just showing how easy it is to get caught - I was no different!
I seriously recommend a read of his books.
Dave
De Bono is worth reading! Do you remember when I talked about the tennis tournament and said x number of players so how many matches to find the winner? You fell into the intelligence trap by thinking about byes when the answer is always x-1! That is not a dig I am just showing how easy it is to get caught - I was no different!
I seriously recommend a read of his books.
Dave
Thanks Dave
I have fallen into the intelligence trap countless times in my life (although with that exercise I didn't know the structure of a knock-out tournament, so was approaching the exercise from a different angle!).
As an aside, I once read that a high degree of what psychologists call openness - being creative and open to new ideas (see http://en.wikipedia.org/wiki/Big_Five_p ... experience) - is a bad trait for a trader to have. To a point, I agree. It can take you down all sorts of excursions which amount to gambling, and waste time and money. However, it can also allow you to consider your assumptions critically, and hopefully take you closer to the truth.
Jeff
I have fallen into the intelligence trap countless times in my life (although with that exercise I didn't know the structure of a knock-out tournament, so was approaching the exercise from a different angle!).
As an aside, I once read that a high degree of what psychologists call openness - being creative and open to new ideas (see http://en.wikipedia.org/wiki/Big_Five_p ... experience) - is a bad trait for a trader to have. To a point, I agree. It can take you down all sorts of excursions which amount to gambling, and waste time and money. However, it can also allow you to consider your assumptions critically, and hopefully take you closer to the truth.
Jeff