Lambretta of Thoughts of a Football Trader's latest post, rather strangely titled "the chicken or the edge" opens with:
What stops us from becoming the trader we aspire to be? Why, when we look at the market, do we see all this money available yet fail to extract any on a consistent basis? The answer is fear.The answer to why most traders lose is because they have no edge, or their edge is so small that it fails to cover commission costs. This is another of those posts that suggests if you can't make a profit, it's because of an emotional flaw, in this case that you can't handle the emotion of fear.
The statement implies that if all traders active in the markets are 'fearless', every trader would be a long term winner. It's nonsense of course. In a zero-sum game, with commission costs, that would be impossible.
What can we do to remove those fears, to build confidence, knowledge and therefore control? We find our edge.The problem here is that the statement implies we all have an edge to find, and if you can't find yours, it's your fault. For God's sake man. it's there - just find it! What the heck is the matter with you?
Later in the post, Lambretta acknowledges that the key to mastering fear is in having an edge, writing in a somewhat biblical style:
The kingdom is on offer to us, there for the taking, but without an edge it remains so close but so firmly out of reach. Ask yourself, right now "What is my edge?"
If your answer is quantifiable and based on positive probability, you're likely already profitable.
If you're not, maybe your execution needs work.What else is an edge, if not a positive expectation?
Speaking of which, someone very generously pointed me towards an idea which has led me to come up with what would have been a very profitable system over the last four and a half seasons using Pinnacle's closing prices available for free courtesy of Football Data.co.uk.
Using just two filters in one league, the system would have generated 417 bets for a profit of 174.25 points, an ROI of 41.8%. My P-value calculator gives a value of 0.000368, (or 1 in 2,716) for these results.
Too good to be true? With half the season left, I'm adding this to my portfolio and will provide updates here from time to time.
Although no Pinnacle prices are available prior to the 2012-13 season, I'll take a look back to earlier seasons and see if this bias goes back even further. The Bundeslayga System has shown that inefficiencies can persist for a long time, but an ROI of 41.8% from this sample size is quite ridiculous.