Second Guessing

I have done Football Elite a disservice, and omitted their winner at 2.52 in the Hannover ’96 v Stuttgart match on Sunday afternoon. The updated table is below (commission not included):

Some of you may have read the wonderfully honest comment posted by Swearbox on the recent Mind Games post. The comment was triggered by Peter Webb’s remark that “it’s curious how you can show two people a very clear strategy, and yet while one person executes flawlessly, the other just can’t do it” and here is Swearbox’s comment in full.

Read the FT article with interest and it got me thinking whether or not such a thing as 'performance anxiety' exists within the field of professional sports betting.

Seriously though, bear with me...consider this taken from Peter's blog...

"It’s curious how you can show two people a very clear strategy and yet while one person executes flawlessly, the other just can’t do it"

Several years ago I found myself in the some would say enviable position whereby I didn't have to go out to work. My betting related situation had evolved to the point where it became my sole income provider. My info was emailed every day and there was a set strategy to follow. It paid for nice things. Life was good.

I felt confident enough with the way things were going to make a life change and move to Canada. Naturally there were expenses associated with this move but not lifestyle threatening ones. Shortly after arriving in Canada I made a few financial decisions that with hindsight were foolish. They resulted in my leaving myself with a much lower capital base from which to carry out my usual betting related activities.

Then, all of us, as a betting syndicate, suffered a really bad week. Shit happens. I lost more that I would have liked resulting in an even lower available bank. That's when things started to go very wrong.

Instead of blindly following the rules of the strategy I made my own rules up. I questioned prices. I stepped back when I should have stepped forward. I didn't lay when the price was in my mind too high regardless of what the info in the email said about the horse's chances of winning. In the case of shorties I layed when the price was slightly higher than the price advised in the mail. I was losing when I shouldn't and not winning when I should have been. A complete mess.

The more I tried to tweak an already proven system the worse it got...and the driver behind all of this was not so much my ever dwindling bank but my mindset. The result was I ended up with no bank left. I had completely screwed up what was a simple monkey see monkey do system that worked.

I don't mind telling you that I've never recovered those days of old before the meltdown and every day I regret not having the mental smarts at the time to be able to calm down and take a deep breath and stick to the plan.

As always, your blog is a great source of interesting articles...keep on keeping on.

I don’t think anyone with any trading experience can doubt that the psychological aspect of trading is hugely important. If you read through this blog from the beginning, I have mentioned several times the importance of being in the right frame of mind when trading. You need to be free from outside distractions, able to totally focus on the market in hand, and the ability to clear the mind after a setback is vital. It's all too easy to let a reverse get to you, and for your ability to think logically seemingly vanish without trace.

Clearly, there is no one type of trader – we all have our unique styles, our favourite sports and our favoured strategies. Some like to invest hoping the status quo will be maintained. Others invest hoping for the opposite. Some like to back at low odds and have mostly winners with the occasional big loss, while others prefer lots of smaller losses, but the occasional home run. One trader may just not be comfortable with a strategy, even if it is proven to be a profitable one long term.

And you can have an edge, but unless you execute correctly, your edge is worthless. This is probably best illustrated by the ‘on-tilt’ phenomenon, which is typically the result of an ‘unlucky’ loss which the trader doesn’t handle correctly. This ‘unlucky’ loss – which isn’t bad luck at all, just a ‘random fluctuation of probability’ – gets to the trader, who in a frustrated state of mind, (some might say unbalanced), then makes an ill-disciplined bet (either over-staking or taking poor value, or both) in an attempt to win back the loss right away. Perhaps the trader sees an odds-on shot that looks like an easy way to buy money, and without too much thought, he puts a big bet on thinking the chances of losing two bets in a row are small. Wrong. The second bet is independent of the first bet, except in the trader’s mind, and on its own was poor value, and thus goes on to lose more often than the price taken would suggest it should. Essentially, discipline goes out of the window, and chasing like this is a recipe for disaster. Perhaps the worst thing that can happen is that the chaser gets away with it once or twice, and starts to feel that this is a valid strategy. It’s not. Taking poor value will catch up with you.

Reading through Swearbox’s cautionary tale, I am puzzled why it is not possible for him to build up from a small bank once again. The original bank was blown due to a lack of discipline, i.e. not following the system correctly, but if there is an edge, then a fresh bank and correctly proportioned stakes would see the bank build up once more. This knowledge is what you need to enable you to keep a clear head and stay focused on the big picture after a large loss, or a long losing run. I wrote a week ago about a £2,000 loss on the NBA, which was mildly annoying, but when you are confident in your long-term edge, it’s really no big deal in the whole scheme of things because it is simply a matter of time before that money comes back. As I have quoted before, to get upset about an individual loss makes as much sense as a casino owner crying over a large payout from one of his slot machines.

Without knowing the details of Swearbox’s horse-racing edge, I have doubts that even if there was a genuine edge there for a time, that in this sport such an edge could be expected to last for too long. If the edge was mathematical, it would be found out sooner or later, or too many members in the syndicate would drive the edge down to zero or negative, and if the edge was knowledge based, then this is clearly a weakness. Swearbox states that “my info was emailed every day and there was a set strategy to follow” but it is this total reliance on others which makes the decision to go full-time even more risky than having a self-developed edge, or preferably edges. It’s easy with hindsight to say that Swearbox should have waited until he had built up more funds, or given the system longer, but there are other factors that go into making a decision of this kind that only Swearbox knows in full.

Ultimately the pressure of trying to generate an income from a bank that was of an inadequate size for this purpose was the downfall. When you have to generate an income like this, you effectively have set yourself a target, and the problem with targets is that they lead to forcing bets and taking borderline value as opposed to having the luxury of waiting until value comes along. Your betting bank has to be money that you will never need. Otherwise it is not a betting bank.

It makes no difference to me or my life if the £2,000 loss last Sunday is recouped the next day or over the next month. It will be recouped, (right now I am about £343.75 short), but regardless, life goes on and the loss shows on my spreadsheet but nowhere else. Bills are paid on time, and there is food on the table, but most importantly there is no stress. When stressed, it’s hard to make smart decisions. I am also fortunate in that Mrs. Cassini simply doesn't care whether I win or lose. She knows I come out ahead in the long run, and leaves me alone to get on with it. She doesn't ask if I have won, nor does she ask if I have lost, which suits me fine, because after a loss, the last thing you want is to talk about it!

Many thanks to Swearbox for his openness and honesty, and for making this post possible. It's rare to find someone willing to open up like this when things go wrong, and he deserves a lot of credit in my opinion.

The above was all written before I read Rob the Builder’s post which offers an opinion on many of the points I have raised, as well as on the well-worn ‘should I go full-time’ debate. Well worth a read.