Thursday 9 June 2011

So Close

The screenshot shows how close I came to dodging the PC bullet this week. If only I could have lost a little more!

A couple more comments to comment on, the first being Scott Ferguson's take on the question of traders 'never actually committing to stating what return on investment they are targeting or achieving.'

Part of the reason for that is that ROI doesn't really work for trading. From a bank of £200, I might turn it over 2x or 10x or 100x, depending on what event it is. Turnover (investment) is irrelevant - there's the absolute limit of what you are prepared to risk, although for most that is only a figure they temporarily use in the market to work back from, or I'd look at it more from the angle of 'what value is my time worth'. And there's also the angle of not setting a limit on what you want to win because every opportunity is different
As Scott says, your risk is your limit, but the reward can be anything upwards of that amount. Lay at 1.01 and you either let the bet expire, (for a loss or for 100 times your stake), or you green up at some point in-between. It's impossible to say what ROI you are targeting.

Scott (not Ferguson this time) is having trouble commenting. Not sure if this is a widespread problem or not, but I haven't heard any complaints before. Re: my Kelly post, Scott said:
Sounds fascinating.

A further explanation of precisely who the prolific ROI-boosting Kelly is would make it even more interesting.

Is Kelly a male or a female?

How does he/she split himself into two?

On a separate note, I share your pain with the MLB daily picks of late.

Are you just laying the home favourites with the minus ratings or are you staking all the posted ratings that are showing value?

I continue to read your blog with great interest.
Lest Scott, or anyone, be unaware of the great John L Kelly, start here, with a post about a post on Scott (Ferguson's) blog. A lot of Scotts around today.

Regarding the MLB Daily Picks, I am blindly following the one pick of the day selection. After a promising start, a losing run of six took away any system profits, but my profits will come from a reduced PC rather than from this system itself. The losing run was halted at six last night, as the Tampa Bay Rays won 4-3 at the Los Angeles Angels of Anaheim in extra innings. Losing runs are to be expected though, when the average price is 2.15.

I'm also following the Free Under Over Soccer picks for the same reason. 1.94 is the average price for these, and they have a longest losing sequence of 5.

1 comment:

Curly said...

If only you could have won and then lost a little more.

Whilst I agree that ROI is in some ways irrelevant that is mainly because the 'investment' part is hard to put a value to. If you back £100 at 2.0, lay £100 at 1.9 and repeat 3 times and your selection goes onto win your profit minus commission is £30. So your ROI could be determined as 30% or 10%. The problem with saying its only 10% is you never actually risked £300.

However to completely ignore the £300 is perhaps just as wrong. An example for this, scenario A you back £100 at 2.0 lay £100 at 1.9 back £100 at 1.6 and lay again at 1.5 for a profit of £20. Scenario B you have 20 backs of £100 at an avg of 1.9 and 20 £100 lays at 1.89 for a profit of £20. If you calculate ROI as a % of risk then they are both 20% if you look at total investment you come up with 10% and 1%. I believe a long time ago you discussed something similar to this and possibly broached the topic of ROCE as a measure (I may be wrong).

Anyway, I'm making another stab at blogging again, I've added you to my blogroll - the only one there so far - and would appreciate it if you'd return the favour.