Wednesday 17 June 2015

Pork Belly Futures Past

Ixnay had this to say about yesterday’s post:
Great post!
A question: isn't this the same for live-football (soccer)? What's your opinion on the live markets for this sport?
My opinion on this topic has been expressed several times before, including here, and the short version is that most people are wasting their time (and with all the football that is in-play, that is a lot of wasted time). Admittedly, some people seem to have a lot of time to waste, but for anyone with a day job and other interests, there are more constructive, sociable or profitable ways to spend your time.

While the court-sider factor is (usually) missing from football matches, the sagacity of trading in-play again boils down to the simple question “What do I know about this match or market that everyone else is missing?”

Once a game goes in play, the price movements are typically pre-determined based on goal expectancies, and current game-state. Deviations, usually minor, will occur as the game unfolds, but there are businesses whose bottom line depends on being right, and as with tennis trading, it seems to me to be delusional to think that you know better than these professionals.

It’s certainly a more level playing field (pun intended) than the more mature financial markets, and like the casino, it may be fun for a while, but it’s not going to make you any money in the long run, and losing gets old very quickly.

If you dabble in currency trading, or Pork Belly Futures* or Stock Options, you’ll soon find out that you are out-gunned by the full-time professionals. One big disadvantage is that getting access to data in the first place isn't easy (or cheap), the other is that even if you had the same data as the professional traders, you wouldn't know how to make use of it.  Professionals have the resources to gain access to information faster than you do, they have the tools to analyse that data faster than you and they thus have a more accurate idea of the true price than you. 

To believe otherwise is surely irrational, but many of us are just that, convinced that the laws of probability don't apply to us, or that the god our parents told us is real is indeed the one true god despite the absence of any supporting evidence whatsoever.

When trading, every winner needs a loser (or losers).

To beat any in-play market long-term, (i.e. to be a winner), you need to be able to accurately calculate the ‘true’ probability of an outcome before others in the market.

If others in the market are accurately pricing outcomes ahead of you, then you are the loser (over the long-term).

As exchanges have matured, opportunities for the humble home-trader have evaporated. Edges have been eroded and for most of us amateurs, in-play opportunities are now few and far between.

On the subject of scalping which was discussed yesterday, I should have linked to this old post - except that I only came across it just now. 

* I also only just found out that Pork Belly Futures are no longer traded, and haven't been for nearly four years. How disappointing!  

1 comment:

ixnay said...

Ouch, that's disappointing :)

Thanks for your oppinion!