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Nobody could ever predict every momentum stopper, that would be ridiculous. Predicting patterns that happen over and over again for percentage plays is entirely different though. And while that's not my game in the slightest, I don't doubt that is's possible.
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KBEFROMDOWNTOWN Of course no one knows for sure when momentum will change, and by saying "know more than guess" I meant that you are right more than you would be by pure chance. If you watch enough games, it is relatively easy, well - at least not impossible - to spot when a momentum change may be coming, and I have mentioned several clues / pointers previously on the blog. It is certainly no fluke when the same thing happens night after night, and it is certainly not “total guesswork” as you say! You may want to look up Bob Voulgaris who specialises in basketball if you doubt that this is one sport that an expert can gain an edge on.
Turnovers happen in the NFL and, like any infrequent event, it is hard to predict them, but some teams are more vulnerable to them than others, some teams are better at forcing them, some teams hold leads better than others, and some game states are more likely to see a turnover. You just need your estimate of the probability of something happening to be correct more often than is implied by the odds at the time. When I am wrong, I should cut my losses, when I am right I should let them run. No one is always right. I'm certainly not always right, but I am right more often than I am wrong, which brings us back to the original topic of this thread which is my theory that the higher the average win size is to the average loss size, the better a trader you are. I have yet to read anything that suggests this is wrong. |
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"I have yet to read anything that suggests this is wrong."
Really? I'm yet to read anything which suggests it is right. Why isn't it the higher the better? (ignorant of win %) |
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Bob Voulgaris, not heard that name in a while. He was very successful but even he got to a stage where he had to look at new approach as he found his edge was no longer producing the goods.
Darlo Bantam, I don't predict patterns but use a percentage play in tennis where opinion is taken out of the equation and just let the numbers do the work built around an attainable strike rate. I use a similar method with basketball. "Turnovers happen in the NFL and, like any infrequent event, it is hard to predict them, but some teams are more vulnerable to them than others, some teams are better at forcing them, some teams hold leads better than others, and some game states are more likely to see a turnover. You just need your estimate of the probability of something happening to be correct more often than is implied by the odds at the time." Turnover statistics change from season to season, Quarterbacks gain healthier Offensive linemen during a season which bring turnover stats down, bad weather makes for more errors in a game. Chicago bears have been known for the amount of turnovers and punt returns over he years which are big game changers. What I am saying is stats change game to game, week to week and no matter how much you look at teams who have high turnover stats you won't be able to estimate the probability of this happening. Just my opinion but good luck. |
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The closer to 1:1 you are, the better a trader I suggest you are
This remark perhaps means more for two- or three-outcome sports. When I said that my average loss was about three x the size of my average win, I was speaking per runner. I may have seven winning trades and two losing trades in a race. With trading, I wd in principle want to take my expected win as a profit after the end of every event, since I'm using trading to smooth out my gambling. |
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Yes, I am talking primarily here about two outcome sports. Football isn't a trading event in the sense that tennis, basketball etc. are.
JLivermore: The nature of trading in the context of this discussion means that the average win size is unlikely to significantly exceed the average loss size. It may be a little over 1:1 but for most traders, a ratio close to 1:1 would be excellent. |
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ok, one more question:
Do you do more often speculate on (a) the outsider shortening? Or (b) the favourite shortening? |
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Jesse: If you read my blog, you will know that for me, typically the most profitable strategy is to lay the leader when the price has been driven too low. When you watch enough games, you develop a sense for when the price is wrong, and in sports like basketball or NFL, the greed that has driven the price too low soon turns to fear when the leaders falter, and that 1.0x bounces back up allowing you to lock in profits. When trading in-play, an early lead is seductive to many people, and I find the value is more often in opposing them. Watch a NFL game and see how the price almost always bounces back after the first touchdown. Trading the favourite to shorten can of course also be value, but psychologically I much prefer to have a small downside and large upside.
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I do read your blog, but only started following recently.
This is interesting: "I much prefer to have a small downside and large upside." This does imply to me that you should have an avg win (large) to avg loss (small) ratio above 1. I suspect that you will counter than in the price moves you are dealing in the returns will be symmetrical, but I suspect a subtle effect exists (as it does with share prices which cannot go below 0). |
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Jesse: I suspect I probably should have a larger average win size to loss size ratio too, which is one reason I started this thread. I wanted to see what the numbers were for other similar traders. I suspect that I cut my winners too short and let my losers run too long which is the single biggest error novice traders make, even though I no longer consider myself a novice.
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My theory is that a 'perfect' trader will, over a long period of time, have a win size to loss size ratio of close to 1:1
I dont think it's good aproach. Why not win 90% of markets and make average profit as 60 - 70% of average loss? I try to explain why in my opinion average win size to loss size ratio 1:1 is quite imposible in most of cases. You are right, that cutting winners and letting losers to run is main reason of this win/loss ratio below 1, but I see one more very important reason (based on my experience). This reason is tendency to close market with profit (even very tiny). This approach causes that we have more won markets, but average win/loss ratio decreases. We can easily increase this ratio by leaving markets close to 0 as markets with small loss not small profit. |
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Mardock - I'm not suggesting traders can "aim" for a ratio close to 1:1, only that over a long period of time, the better traders will have a number closer to this than less experienced or talented traders. I have yet to see any evidence that contradicts this theory, although admittedly not too many traders seem willing or able to share their numbers.
Your example of closing a market with a tiny profit is indeed exactly what new traders tend to do. They take a position, the market moves in their favour, and they can't wait to lock in a profit. The result is lots of small wins, but the same trader will let a bad move go on for longer. Hence the larger average size of losses to wins. |
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Your example of closing a market with a tiny profit is indeed exactly what new traders tend to do. They take a position, the market moves in their favour, and they can't wait to lock in a profit. The result is lots of small wins, but the same trader will let a bad move go on for longer.
Not really. I meant something completely different but I already think 20 minutes how to explain it in english and I have no idea so i give up -_- |
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By the way, this might also be relevant to the discussion:
I take on more risk when I'm winning than when I'm losing. In 2013 my avg winning week is 4.24x my average losing week, and I win in 63% of weeks. 2012 winning week 1.71x losing week winning 74% of weeks Over time I'm getting more extremely skewed winning weeks and my % winning weeks moves toward 50%. 2009 for example I completed 52 weeks without a loss (including 1 inactive week from dec 2008 to dec 2009). For the year I had 98% winning weeks (1 loss in December), but that one loss was 3x higher than my average winning week. |
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Hello there cpfc4me. You state that "When you watch enough games, you develop a sense for when the price is wrong". You also state that "I suspect that I cut my winners too short and let my losers run too long".
Why do you think that you can sense a price that is wrong when you place your original bet but not when you place your counterbet. Especially if you conducting a large number of trades on a game. Or do you feel that even though the price is wrong you just can't help but place the counterbet. I find this concept particularly interesting in light of the fact that you don't trade football and that you are referring to markets where there isn't a sudden massive price change. I.e. there shouldn't be the fear of something like a goal which would mean a big price change and consequently a big loss. |
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Why do you think that you can sense a price that is wrong when you place your original bet but not when you place your counterbet.
Because I am not totally detached when it comes to trading. When I am out of a market, with no exposure, it's relatively easy to identify a price that is wrong and enter the market, and if I enter with a small stake, it is easy to override the emotion of fear and exit at the right time. What often happens is that in the heat of battle, there's no time to calculate Kelly, so I end up with a higher risk than I am comfortable with. As I mentioned in my rather amusing When Bets Go Wild post of June 2011, I know I'm in too deep when my breathing changes. It's a combination of risk and value, so a larger amount my not trigger the feeling of panic if the value is that much greater. In these circumstances, the overriding emotion is fear, so the tendency is to at least look to reduce the exposure somewhat, even if this is as the cost of giving up some value. As I wrote in December 2011, [Prospect Theory], quoting from a study by Tversky and Khaneman, who "found that contrary to expected utility theory, people placed different weights on gains and losses and on different ranges of probability. They found that individuals are much more distressed by prospective losses than they are happy by equivalent gains. Some economists have concluded that investors typically consider the loss of $1 dollar twice as painful as the pleasure received from a $1 gain. They also found that individuals will respond differently to equivalent situations depending on whether it is presented in the context of losses or gains." The last piece is interesting. Depending on where your money is, you see games very differently. If you want a team to score a basket with five seconds left, your thoughts during the time-out tend towards the improbability of it. "They're never going to score", but when you are on the other side of the same game, your mind keeps telling you that there is no way they can fail to score. That time-out gives too much time for thinking, and the cost of giving up a little value but guaranteeing a profit either way can often seem worth it. In a way, this trading out at a less than optimal price is adjusting the risk to a more Kelly like level, but there's a 'peace of mind' factor in play too. Even though this is a hobby, I don't like to lose, and while I would like to think that I am a cool detached trader, I know that I am not, and giving up a little profit to ensure a less stressful life and smooth out the ups and downs of trading seems to be worth it. In my opinion, to be able to trade optimally, you need to remove emotions from the picture, but that's easier said than done. And incidentally, price swings can be quite extreme in sports other than football, especially later in a game. The fear of giving up a late, game-changing score, is very much alive and well in many sports. |
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Hello there cpfc4me.
It sounds to me like it is more than a hobby, especially if you are talking overstaking and with emotions of fear. Just out of curiousity, if there are other people trading and going through similar emotions and processes then how do you know that your price is wrong when you trade out. Aren't there lots of people doing a similar thing but in reverse, i.e. people looking to trade out on opposite back/lay price to you. Wouldn't this naturally draw the price back to the correct price. Finally if you are staking more than you would be if you were trading in a different way then is it not possible that if you were to trade the way which you perceive to be ideal you wouldn't be making any more money because the improvement in profits is offset by the reduction in funds. Which one makes you a better trader. Neither if the profits are the same. |
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Hi U.A. - Yes, this is definitely very much a hobby for me. The nature of the activity and the risk of potential regulatory changes, (a ban of in-play betting for example) mean that it would be highly irresponsible and short-sighted to give up a career and all the benefits associated with one to trade full-time. Evenings and weekends provide more than enough opportunities, especially as I don't touch horse racing.
I don't know for sure that the price is wrong when I trade out, but I suspect that this is what the average loss size to average win size ratio tells me. I don't believe that how good a trader you are can be measured by profit size alone. Someone making £200 is not necessarily a better trader than someone making £100. There are other factors, bank size, strike rate, profit per hour etc. |
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CPFC. Is it just the U.S sports you play?
'I don't believe that how good a trader you are can be measured by profit size alone. Someone making £200 is not necessarily a better trader than someone making £100. There are other factors, bank size, strike rate, profit per hour etc. If a punter is making £200 and the other is making £100 I would want to know how he has made that profit so don't think bank size is a reason one punter is better than another. It's all measured against the risk involved in my opinion. |
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Hello there cpfc4me. Still sounds more of a part-time job than a hobby to me, but as I am an honest man (honest), I shall take your word for it when you call it a hobby.
Yes of course things like bank size and effort and risk taken (although I think risk taken diminishes the longer the period you take when looking at your profits) are important in determining how good a trader you are. It is not based on profit alone. The point I was trying to get across in my last email is what would happen if you took your existing fund and traded in amounts that you were comfortable with and traded out when you felt the prices were right rather than out of fear how would your profit stack up. Looking at it in this instance, the funds you are playing with are the same, the amount of effort would be the same, as you would still just do the same games, and the risk would be similar as you are betting within your comfort zone as you were before. If you really really want to know if you are throwing away value out of fear and whether you cut this out you could be a better trader, and if this is just a hobby, then just try trading this way for a while and see how the 2 techniques stack up. See how your profits compare. For what it's worth I know exactly what you mean about not wanting to lose. I know that everyone who bets doesn't want to lose but i suspect in your case and probably mine there is more of a pathological fear of losing. It's a double edge sword on the one hand you feel that it inhibits you and your profits but on the other, you feel comforted by knowing that this fear in a way keeps you in profit and stops you going down that slippery gambling slope. Whatever you do it has to be within your comfort zone, the art is to find the technique that maximises your profit whilst being able to work in your comfort zone. You can't look and say if i did this I would be a better trader if it means working in a way that you are just not comfortable with. |
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U.A. It's a hobby that brings in a little extra cash. I certainly don't view it as a job. Some people play video games and X-Box in their non-working time - I play with numbers and probabilities. It keeps me out of trouble.
One issue I have with trading is that when I see a price that is clearly wrong, money looking to back at say 1.1 when I feel the correct price is 1.2, it's very hard to just take come and leave money on the table. At low prices you often see thousands trying to back - I suspect because people feel they need to make it 'worth it' and short odds. So rather than take 10% of the say £10,000 (a risk of £100) I tend to take the whole £10,000 - excellent value, but the risk of £1,000 still makes me a little uncomfortable. I do the same with putting in lays at low prices too, but here my risk is more controlled of course. Anyway, when the price moves up to 1.12 / 1.15 I suspect that I am too anxious to offload much of that risk, and do so at less than than value, rather than wait for the 1.2. It does give peace of mind, regular breathing, and a lowered heart rate, but it's not what an expert trader should be doing. Yes I could always just risk that £100, but even with laying off at bargain prices, I am still better off risking the bigger amount. Just not as better off as I could be, and I still think the ratio of median win size to loss size is a good way to measure this efficiency. KOBEFROMDOWTOWN: I bet on lots of sports, but trading is mostly the US Sports and basketball these days. In my opinion, it's easier to find value in these markets in-play than any others. Cricket bores me unfortunately, as does horse racing, which along with single player sports, (e.g. snooker / tennis), has the additional disadvantage that it can be fixed too easily. |