importance of looking backwards

 

Importance of loooking backwards

I don't know how other traders define their "trading year" or even if they do, but I use the English season, which means I am now coming to the end of my 10th season as a sports trader. As I have in the past, I will spend a fair while looking back at the past year as part of a wider re-evaluation of the way I trade.

For 7 of those years, trading has been my predominant or sole income. Funnily enough, the last 12 months have seen the biggest change. That is specifically due to joining livetradingfootball.com having been very much a sole trader previously. At first, my motivation was boredom. The upsides to trading are many - the freedom, the flexibility, the tax (or lack thereof) and the geographical independence it brings are huge. What it isn't (or hadn't been) is social.

That was my initial motivation. The desire to communicate with the outside world and with others of similar mind. Being located in Aussie and working the night shift made that a particular incentive. Of course I hoped to gain financially and I haven't been disappointed. This site has a great depth of knowledge to be mined, and I am convinced too many potential or part time traders only skim the surface in that respect.

But still, I mainly wanted a bit of banter, a bit of moral support and a bit of human communication during the long periods of mind numbing that is trading and the lead up to the trades. That may mean that on occasions I clutter up the chat room with inane drivel (as I do in my life in general !) but that is part and parcel of it. It keeps my mind alert, keeps me awake and reduces stress all at the same time. 

At times that may get on people's nerves. I think a visitor to the chat room was a tad irked by my flippant attitude only last night, but I make no apologies for that. I am committed to making a worthwhile contribution to the site but I enjoy the craic and if that gets misinterpreted there's not a lot I can do about that. There's always the filter button. Anyway, I digress, so I'll return to the point of my post.

I've seen a lot of hugely successful traders come and go over 7 years. I presume a lot of them were SO successful they made their millions and are now sat on a beach somewhere. They were the dogmatic ones. The ones for whom there were no shades, just black and white. No room for flexibility, no need to listen, just THE way to trade. Then they're gone. Never to resurface. To them I say well done.....maybe 

I've never made millions, but somehow my approach has generated a full time income over each of the last seven years after a three year apprenticeship building to that. Yep...three years. That may come as a shock to those of you who have been doing it for three months and are ready to take on the world, but that's what it took me. I might be a bit slower than you, but even allowing for that, it takes time.

Looking back a site like this, or rather a community like this, would have been a huge short cut and a huge benefit to me in making that transition and becoming successful. For those of you with ambitions to do the same thing, I would suggest you embrace that. Stick with it - think of it as college fees (which will more than likely be funded by what you learn along the way) but mine the depth of the resource and absorb, filter and utilise the combined brains of the owners and other members in whom you trust. Too many of you come, invest a couple of months membership and then depart - having either demonstrated the lack of patience that successful trading needs, or having decided you can sprint before you learn to walk and you already know it all.

I have bad news for both categories of blokes. You don't have it. Odds / probability suggests you will fail. Sorry.

So over the next week or two I will be reviewing every aspect of my trading, and posting my conclusions on this thread. As always, I hope some of you will find something of benefit to derive from it. Without question, successful trading is about finding and maintaining the "edge" it's a matter of small degrees and minor improvements. If one thing you read sparks that, it will of been beneficial reading it. 

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Looking backwards (cont...........)

As I've said before, the beauty is that this is not a competition. As a community, if we all work together and learn from each other, then we all benefit. It's fairly unique in that respect, and I see my part as an investment in that.

So, to part 1.

This is something that genuinely only became clear to me in the last couple of days. Th first thing I did in looking at my trading performance was to look at how I traded at the start and compare it to how I trade now. When you do that, you expect change obviously, but there has been a definite evolution that I hadn't realised and now I have, I will actually be looking to follow further.

It's about the way in which the markets in which we trade are formed. In some respects, this will not strike a chord with newer or developing traders, but I find there has been a definite shift in the way in which markets form and the variation that occurs.

When the exchange platforms first became popular, the markets were largely determined by the bookmakers and then mirrored by Betfair customers (some of them bookies themselves) Even the method and science that went in to the bookmakers market making were less precise and technically sound. As a result there was a definite and discernible shift in many prices as punters opinions balanced out the market.

This, together with the gaps in the exchange prices created obvious and exploitable pre KO opportunities to trade that movement with a good degree of certainty and consequent reward.

Moreover, the markets were more frequently out. Prices based on personal calculations and opinions often through up anomalies which could be exploited. In fact I (and I'm sure others) still look for opportunities where the market is "out" and value can be achieved as a result. But there is where I am gradually changing my mind. 

Fact is that the statistical analysis, the algorithms, the complex and evolving modelling and the ever increasing skill of the market makers means that we are probably wasting our time looking for overs and unders based on simple observation of the market. The market is usually pretty close to being right, and I, for one, am not arrogant enough to truly believe that I have the smarts to take that on and be right.

So rather than swimming against the tide, I am going to look to embrace it and follow trades that follow that market. The key thing in getting overs is to try to enhance your odds with a bit of swing trading pre match to raise those effective odds within the context of the trade. When you consider that you can amplify the benefit of swing trading pre match by increasing staking without the risk, you perhaps start to see the point I am making.

That doesn't mean that I won't look for risk v reward opportunities within a trade where the market may have overreacted to a material event, but it does mean that I will trust the market in setting up my original trade. I'm not sure how crystal clear this is, but I am finding that in recent seasons, the odds on the over/under x.5 markets are pretty accurate. That means that one of my standard trades (back u1.5 / over 2.5 and cover) and other similar strategies are becoming less profitable. Certainly, when one looks at the effective odds created by such trades, we need to compare them with straight backing of a particular outcome, even with some insurance to cover in the way of specific scores.

This may not be the most electrifying start to the discussion on this thread, but in time I think it could prove to be an important one. The short outcome of all this thinking is that there are times when we trade to cover a number of bases where (because of the accuracy of the market) we are actually trading to a point where the return is not commensurate with the potential. Trading is about making a profit, and sometimes trading is therefore about doing nothing other than taking a price knowing the point at which you will bail out if needed.

I have found that on a number of occasions recently where a straight back of over 1.5 (often left until 20 mins or so after KO where no goals have been scored) will produce a more consistent and higher percentage return than all the smart strategies in the world. I expect to be doing a lot more of that in future. Look at the logic. Watch a game for 20 mins. The odds on over/under 1.5 will move fairly consistently irrespective of the pattern of the game, but you will be able to take a view on the likelihood of goals. If a goal goes in within that time, suck it up. And move on. It's gone. If not, take the price, have your exit ready and off you go. Test it....it works.

One of the certain conclusions I have drawn is that we as a community and certainly I as an individual, have been over trading. I've got caught up in the actual business of trading - the mental challenge, the trying out of new ideas and strategies, and the perceived need to come up with a trade when you have a lot of people looking for something to pick up on. In short, that has increased my time commitment dramatically and had little or no actual financial benefit. This comes back to the way in which markets are created, because when we apply a strategy, we really should be looking for matches which meet ALL CRITERIA for that trade.

In that way, we make use of the vast investment bookies and the like have made in arriving at the prices and use that as the basis for our trades. The sooner we get into that mindset of acceptance, the sooner we can focus less time on the market itself and more on identifying the games where all markets combine to paint the same picture. That means looking for indicators in the CS market to confirm or undermine the Match Odds etc etc.

One of the things about over trading is that you start to look for matches to fit a strategy and then try to apply a strategy to a match which isn't perfectly suited to it. It's like going to a tailor and choosing a suit that is perfect in the chest, waist and shoulders but way too short in the arms. It may fit in most areas but not perfectly. You wouldn't wear that suit, so don't do that trade. You will kid yourself that you are coming out on top, but if you look back you will find that your success rate is much higher on those trades that fits the markets perfectly. Cut out the others, increase your stakes on what's left and you are already on the way to maximising your profit. 

1 comment

  • Comment Link Thursday, 05 January 2017 06:46 Graham Manson posted by Graham Manson

    Fantastic insights. Familiar with the looking for matches to fit a strategy.

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