Penny Pinching... And World Peace

Dave, aka Gundulf, at Betfair Football Trading extracts one question and answer from the Sultan's excellent recent series of interviews , (although he has lately resorted to desperately copying posts of mine from nearly two years ago!) which was this:

Q: When learning, what did you find the hardest aspect of trading to crack?

A: The hardest part of trading is identifying the entry and exit points. Anyone can back the unders in a football match, wait five minutes for the price to drop a few ticks, and lock in a profit, but was the entry point value? Was the exit point value? A lot of people consider this to be trading, but to me, without a valid reason to enter or exit a market, it’s gambling. The predictability of price movements is the big problem with trading football in my opinion. The scarcity of goals means that prices trend in a very predictable way, and if the opening price was correct, you are unlikely to find value during the game. If the opening price wasn’t correct, then my approach is to take the value bet and let it run.

Dave then analyses this advice, and writes:

Many readers probably do as I do and scalp the unders markets in a football match. Why do we do this? One reason, as Cassini states above, is because the price movements are so predictable. All the time there is no goal, unders will reduce in price. So if I back £100 at 2, lay at 1.98, back at 1.98, lay at 1.96... recycling that same £100 and adding to it every time there is no goal, does it really matter if my entry and exit points are 'value' according to the traditional definition. I've struggled with this one - and I don't think it does!

The reason I enter this market is usually to cover another trade in the same match where I am slightly more 'value conscious'. It might not be a classical approach but if I intend to stake say £50 on a correct score trade and I can scalp a £40 green on both sides of the overs / unders in the same match then in my mind a) that's a valid reason to enter and exit that market and b) it enables me to view the entire match under one overall 'umbrella'. The gamble involved, of course, is that a goal might be scored after a back has been matched and before the lay has been matched. But that is a calculated gamble in my opinion and, yes, of course I've been caught! Many times!

No names, but I have heard a rumour that the predictable trend is so seductive, that even the greatest of traders fall hopelessly in love with it on occasion. It's so easy to put a £1,000 on pre-game at, say 1.96, only to see the price drift to 2.0 by kick-off. No problem, you say to yourself, I'll lay off £800 at 1.95 and let the £200 I am comfortable with, run. Then Napoli, or whoever our imaginary team is, concede a goal in the 3', before the price gets close to 1.95, and our trader is in big trouble, cursing his stupidity.

The truth of it is that if you are backing at 2.0 to profit from a movement of one tick, you'll win more often than you'll lose, but when you lose, you'll lose more than you win. You are not considering value, because your hope for a profit relies on you finding a greater fool than you.

Does this make sense ever? No. It makes no difference whether or not you have a bet in another market on the same match. All you are doing is attempting to reduce your exposure, and if you feel you need to do that, it means that you over-staked on your initial bet. Instead of backing on the correct score market with £50, and then taking a big risk (believe me, I know how hard it is to lock in £40 without either staking big or waiting a long time for the price to move far enough), why would you not simply back the Correct Score market with £10? It makes absolutely no sense to try to randomly jump in and out of the Over/Under market, and it most definitely is not "a calculated gamble" whatever Dave's opinion of it is. It is a gamble, and as a trader, we need to be above gambling. And quite what the point of backing "£100 at 2, lay at 1.98, back at 1.98, lay at 1.96" is I'm not quite grasping. Why lay off at 1.98 in the first place if you intend to back it straight back? You often won't be able to do that anyway. Your lay at 1.98 will be taken when it is a value back for someone else, and the available price for you to back at again will now be down to 1.97 or even 1.96. So all you end up doing is giving away even more value. And the qualifier that you would only do this "every time there is no goal" means what?

Goals are not exactly two a penny, unless it's a game that Geoff has selected for a draw, of course! And speaking of pennies, someone once described the approach mentioned above as akin to picking up pennies in front of a steam-roller. It's a steam-roller that can, and will, hit you at any time, however clever you think you are.

This is exactly what I meant to highlight in my answer to the Sultan - that this style of betting is gambling, not trading, and it doesn't work. It looks easy, but you're wasting your time.

If you can identify value in the Over/Under markets, my advice is to bet a modest stake, and let it run, not necessarily to conclusion since any edge becomes reduced as the game goes on, and I'm of the opinion that laying off a bet at 1.01 even though the 'true price' might be 1.009 is quite acceptable.

By this I mean that at the start of a game, if you have Unders priced at 2.0, but 3.0 is available, (unlikely, but I'm simply making a point), that's a big edge, but if you have a winning bet with a couple of minutes remaining, the 'true' and available prices will have converged to all intents and purposes, your edge is minimal. Therefore if you still have your opening stake at risk, you are over-staked.

Essentially by using a Kelly style of betting - the bigger the edge, the bigger your stake - so as the edge reduces, you become over-staked, so the correct approach, in my opinion, is to reduce your stake as your edge diminishes. I have started to do this with the XX Draw selections, and with a run of five losses due to second-half winners, (51', 56', 83', 85' and 87') that seems a far better idea than backing Unders pre-game for silly money. Live and learn.

Meanwhile in Los Angeles, the Lakers have a new name on the roster:

He was formerly known as Ron Artest of course. The Lakers will need all the help they can get this year to be top dog in Los Angeles, never-mind the Pacific Division, the Western Conference or even contenders for the NBA Championship. They are not, in my opinion.