Tuesday, 30 March 2010

Similar, Not Identical


Anonymous needs a quick lesson in logical thinking.

Apparently, because "I accept that I will never have an edge in trading stocks or bonds or options or futures or anything financial", and because I have said in the past that certain aspects of financial investing and sports investing are “similar”, the logical conclusion is that I “do not have an edge in sports either”!

Similar does not mean identical. In fact, the dictionary definition of ‘similar’ makes this very clear:

“Related in appearance or nature; alike though not identical.”
A marathon runner and a sprinter could be described as similar in that there are clear similarities. Both are athletes, both are runners, both need to train, albeit in different ways, but they are by no means identical.

Financial markets are similar to sports markets, but by no means are they identical. The time-frame for one is a big difference. Take a position in BP and you can choose to hold it for years if you wish. Options markets are shorter-term, but still longer than most sports markets, but all markets are similar in that they have prices which fluctuate. BP finding a new oil field will affect their share price. A snap of cold weather in Florida will affect the price of Orange Juice futures. And a go-ahead goal in the 90th minute of a Premier League game will affect the price of that game’s outcomes, and the prices in other related markets.

When I say that I will never have an edge in trading stocks or bonds or options or futures or anything financial, what I mean is that I am never going to be the first to learn that BP has struck oil. By the time I hear that there is a frost likely in Florida, the price of Orange Juice futures has already reacted to the news. There are people whose lives are spent focused on these things. It’s not realistic for me to think that I can ever have an edge in these markets.

Even Usain Bolt is unlikely to delude himself with thoughts of having an edge in a marathon, but he certainly has an edge in his specialist events.

The sports markets on the exchanges offer a far more level playing field for investors. We all see events unfolding at (more or less) the same time. The markets are not dominated by huge corporations – my competition on the exchanges is not “mega-institutions that are trading in hundredths of a second” but other individuals like myself. Surely even Anonymous can see that even if this does not necessarily result in an advantage, it is at least not an insurmountable disadvantage. Price in any market is a matter of opinion, and my opinion is more likely to be correct if my competition is a few people sitting in their bedrooms than “mega-institutions”.

I have been trading sports for close to six years now. In some, I have an edge. In others, I clearly don’t. I have spoken before about horse racing, which is more ‘similar’ to the financial markets as far as I am concerned, given that my competition here is not other individuals like myself, and so I leave those markets alone. I have no edge. I probably never will have, and that’s fine – there are plenty of other markets for me to trade in, markets where the numbers show I do clearly have an edge. After six years, and thousands of events in the spreadsheet, the probability that my profits are down to chance becomes somewhat small.

To draw the conclusion that having no edge in one market means that you can’t have an edge in another, is plainly nonsense.

14 comments:

Anonymous said...

it is good to know
people with no brain
like you are in the market

Curly said...

I really don't understand all the Vitriol that's expressed in the comments on this blog.

Just about the only positive outcome is that Cassini posts more often. Criticism can be constructive but not when its simply abusive.

The Rev. All Green said...

Good post. But really the same anonymous cunt that goes from blog to blog to spout his crap doesn't deserve any attention.
I know it's the same guy because he always repeats himself.

Unprofessional Gambler said...

Taking time out from counting all your money again Mr Anonymous to read Cassini's blog?

I can tell you for free(and I mean this as no disrespect to Cassini's blog which is always a good read) that if I was as good as you, I'd be doing something productive with my spare time like travel, shopping and spending all my winnings, not nit picking here, especially the blog of someone that I obviously thought incompetent. It defies logic actually that you would read the blog of someone you thought was incompetent and keep coming back each day to punish yourself!

I don't see if you have an ounce of intelligence why this article does not make sense.

Logic tells me successful people are not bitter people who spend time their spare time bitching, they have much better things to do.

It's so clearly obvious you're not that successful. You'd have a name for starters!

Anonymous said...

Carrying on your comparisons between financials and exchange betting I see somebody has decided to launch the first regulated exchange betting fund.

Personally I don't think it will work, the overheads/taxes would be too much of a drag on profits against people who just don't have those problems. Scaleability would also quickly become a problem to justify returns.


Anyway liked this headline for it's subtleness.

http://www.businessinsider.com/centaur-launches-new-sports-betting-hedge-fund-designed-to-exploit-amatuers-who-gamble-based-on-emotion-2010-3?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29

Anonymous said...

You won't hear about the frost in Florida first, you won't hear first about BP striking oil.....

And you won't hear first about Wayne Rooney being rested, about Kobe Bryant spraining his hand etc. etc.

I rarely, if ever, hear you mention team news when you put forward your sports tips.

Information, my friend, is king. And the smaller the market the bigger edge those with the information have.

wibdib said...

Or even, the smaller the brain the bigger the mouth?????

Anonymous said...

Centaur used to run a tipping service. The 'regulated' fund bit is a smokescreen, they still run a tipping service but under a different moniker. They were pulled up by the ASA for overegging the returns of the tipping service which seems to now be an 'investment' fund.

Any decent trader knows having enough money to use is not the problem. It's putting it to use. Therefore I suggest everybody is super cautious about any 'investment' fund run on sports markets.

Anonymous said...

"I really don't understand all the Vitriol that's expressed in the comments on this blog."

Easy, Cassini positions himself as a gambling god but can't offer any evidence. He also slags off other bloggers. Bound to rankle others. Live by the sword, you die by it.

Anonymous said...

"information, my friend"

perhaps a little wide of the mark.

Anonymous said...

You seem to be writing quiet a few thought provoking articles on your blog these days. Reading some of the criticism's from various anonymous people, reminds me of the book - "The Fountain Head" by Ayn Rand, where criticism of a persons work was actually a compliment.
With regard to a trading edge I prefer to liken it to a persons style of trading. In the world of hedge funds,there is a very successful funds that basis all its decisions on statistics. That style of trading has allowed the fund to grow considerably. I have known some very successfull traders who can predict which way markets are going solely on prices and of course there are the chartists who think that history will predict the future.
One thing that you cannot get away from is that to make money at anything involves a lot of hard work. I would be interested to learn how much time you spend collating and analysing your data, compared with time spent dealing/trading.
As the debate continues about whether trading on Betfair can be likened to investment, do you think we will ever see the day when Betfair will introduce the facility that allows the trader/ investor to set a stop loss? as they now do in a lot of financial markets?

Regards

Dave

Anonymous said...

Alot of gushing on CNBC today with the guy from Centaur, they had a bookie PR on with him who assured us how shrewd he was. Claimed 40% a year growth for the last few years, even fking Madoff and Standford wouldn't push it that far!!!

Anonymous said...

"One thing that you cannot get away from is that to make money at anything involves a lot of hard work"

Lol, making money on betfair is like shelling peas once you've got an edge. If you understand the mechanics of how an exchange operates you can easily work out how to gain an edge. From there it really is easy and no I won't tell you how to and neither will anyone else who really has an edge

Anonymous said...

"Lol, making money on betfair is like shelling peas once you've got an edge. If you understand the mechanics of how an exchange operates you can easily work out how to gain an edge. From there it really is easy and no I won't tell you how to and neither will anyone else who really has an edge"

Muppet