Friday 11 April 2014

Lucky Fools And Rats

I had a purge of some obsolete / inactive blogs from the blog roll yesterday, and couldn’t help but wonder why so many betting / trading blogs fall by the wayside. The fact that any blog is ever born, means that the creator was at one time full of enthusiasm, excitement and positivity. Perhaps that moment was very brief, resulting in some blogs being created on a whim, while others might be started after a little more consideration. Either way, a lot of them seem to fall by the wayside fairly quickly. It’s been a while now, but at times in the past emails requesting to “please add my new blog to your blogroll” would come in fairly frequently.

The betting / trading blog world is in the midst of a dry spell, unless there are a whole bunch of new ones out there I just don’t know about. Why there are few new ones coming along is a different topic, but why do existing blogs of different vintages die, often after a very short life?

Apart from the possibility that the writer dies, or is somehow no longer physically or mentally able to post entries, (or Mrs Cassini says - in prison) the reason is simply that the writer has lost enthusiasm. I suspect the main trigger here is that the writer starts to lose money. What might be a fun hobby when you are winning is not such a fun hobby when you are losing and nothing dampens enthusiasm like losing money. Even if the blog isn’t about profit and loss necessarily, it is still understandable how enthusiasm for posting would be diminished. Being the sad person that I am, I maintain a ‘net-worth’ spreadsheet, and on an ‘up’ day I can’t wait to update the numbers. On a ‘down’ day, the enthusiasm diminishes significantly.

There are other reasons why enthusiasm might be lost. Writing posts, at least the more in-depth, wordy quality type of post that you find on a blog like this one for example, takes time. If you like quantity rather than quality, then there are probably blogs out there, but the formulaic posts or poorly written ones soon become tedious, at least to me, and the blogger ends up talking to himself. For my style of blog, an average of four of five posts a week is probably enough for most people. Blogs, like Tweets, can get boring fast. Again, it is quality rather than quantity that should be important. Time is precious, and priorities change as life and circumstances change, and even for me, blogging has to fit into my schedule rather than vice-versa.

Another reason why the non-formulaic, tipping or P/L blogs cease is that ideas simply dry up, but when you have a quality readership making intelligent comments and offering ideas and suggestions, this is not a problem, which brings me to a few comments and ideas suggested by a few of you.

Matthew commented on my Flash Back post comparing High-Speed Trading (HST) with Court-Sider Trading (CST):
I wonder if you would be interested in composing a devil's advocate article to this one. Maybe list some of the articles that support HFT and make a case for it and for court siders at tennis matches. I am aware that you may feel that there is not a credible counter argument but I would like to see you challenge yourself by presenting the other side of the debate.
I do love a challenge, but this might be a big one even for Cassini. Stand by though for a considered post on the subject in the next few days, and thanks for the idea Matthew.

I read Graeme’s post early yesterday, and was half expecting to see my name in there somewhere given that the theme was very similar to my own benchmark posts of recent days, but he did comment (fortunately for Blogger and their storage needs, with a little more brevity than his actual post) on my Benchmark post:
It’s interesting to see some of us scurrying around trying to look at underlying results and benchmarks after a poor season of results! As I’ve admitted a few times now on my blog, I’ve never really paid close attention to underlying results over the first 3 seasons as I had no reason to. With hindsight, even when you are making money betting, it’s probably not a bad idea to check that you just haven’t been operating in very favourable conditions but I guess it’s human nature to ignore these sort of things when things are going well. :)
I’ve actually been working on a blog post which is now on the blog which is on a similar topic as this blog post you’ve written.

I think the key learning for me and everyone else following my systems this season is that a season isn’t as long as any of us thought. Before this season, I would never have contemplated a losing season happening to my systems as it would have taken such a massive drop in profitability to go from the returns over the last 3 seasons to actually making a loss over a season. I struggled to imagine having a losing system at football, never mind a losing season for all system results combined but I’m now starting to face up to this reality this season unfortunately.
I think my blog post on the underlying results shows how fickle this game can be and ultimately, if you experience quite small % differences in the long-term averages of Homes/Aways/Draws in any league or any sample of bets (like backing all teams priced 2.50+), then it has a huge impact on the results you can achieve. You can escape in a month or a few months but if you are against the bias the whole season, it is difficult. You are finding this yourself as is Matt at FE I think.
Of course, there are ways around this and spreading the risk to ensure you aren’t too exposed to a particular group of bets is very obvious with hindsight but ultimately, I didn’t think about this during the first 3 seasons! Having 70%+ bets on longer priced aways seemed like a great idea based on the first 3 seasons and although it’s a rollercoaster due to the average odds you are backing at, over a course of a season, I thought things would always level out and a sample of 1,000+ bets was big enough to cover any variance. As my results show this season, that isn’t the case!
I don’t really believe my edge has vanished overnight and ultimately, I think there are a number of reasons my ratings have struggled this season but I’m sure I’ll learn more from this season than I learnt over the last 3 seasons. My only issue is that I need to decide whether I can start again basically and build something new based on what I’ve learnt over the last 4 seasons as what I have now isn’t fit for purpose in my opinion. That’s not to say there is anything wrong with all my systems but quite simply, the Barcelona of football systems should not be fighting relegation in your tipster league! End of. :)
In terms of your comment about tracking my results, I’ve said this before I think but my results are the easiest to monitor! Every system I have is proofed to 1pt level stakes and therefore, if anyone wants to see how the systems are doing, they only have to read my blog. What I can’t cater for is people cherry picking systems and creating their own portfolio of systems and creating profits/losses that look nothing like what others have experienced but that’s the beauty of TFA. Until this season, the returns varied for everyone but everyone had to make a profit as every system was profitable. This season, with a mix of profitable and (more predominantly) losing systems, the range of returns is as wide as it has always been for subscribers but unfortunately, some will be winning and some will be losing. That’s life I’m afraid.
I thought I’d be smart ass this season and create a unique system to go into the tipster league as I honestly thought it was impossible for me to build a losing system at football betting over the season but I no longer believe this is the case. My ego is back in check! With hindsight, I should have plucked one of my high turnover systems and just sent you the bets along with the rest of the subscribers each time but I wanted to possibly proof a new system. Instead, I’ve proofed and proven I can build a losing system and a really bad one at that!

If I give this another go next season, I will try to cater for the people who may only want to follow a traditional tipster service and just place bets on teams my ratings think offer value! A little bit different to how I’ve worked until now but it was easy when people were winning all the time, much trickier when some are losing I’m finding! It was impossible to lose for 3 seasons following my systems….too easy this season though!

As always, an interesting post.
Graeme has this to say about tracking just how good his results really are:
In terms of your comment about tracking my results, I’ve said this before I think but my results are the easiest to monitor! Every system I have is proofed to 1pt level stakes and therefore, if anyone wants to see how the systems are doing, they only have to read my blog.
The problem for many of us is that we are not interested so much in System 36B-1 or System Alpha-Centauri-X-Plus or System Since 1905 Hull City Have Never Beaten A Team Whose Name Starts With A Vowel On A Tuesday Night, because, as I understand it, the same selection can be in one or more systems. What people want to know is what is the return to a level (one point unit stake) of all selections (no duplicates), and that is what the FTL does. It removes fancy staking and multiples and duplicates, and just takes each selection a tipster offers one time, one unit bet at Pinnacle Prices. Skeeve comes out looking rather good, Peter Nordsted comes out looking rather bad, and everyone else is in between, although it has to be said, tending towards the bad.

Graeme also mentions that “I’ve never really paid close attention to underlying results over the first 3 seasons as I had no reason to. With hindsight, even when you are making money betting, it’s probably not a bad idea to check that you just haven’t been operating in very favourable conditions but I guess it’s human nature to ignore these sort of things when things are going well."

I couldn’t agree more, and it is reminiscent of the day-trading boom at the start of this century when everyone was a stock picking expert. Acquaintances with real qualifications were quitting their jobs to day-trade full-time. Special day-trading centres were springing up every week; it was like picking up money from the street. The problem was of course that my chemist friend had no edge. He, and thousands like him, tricked themselves into thinking they had uncovered some hidden talent when it was all down to favourable conditions. Stocks in general were in a boom, a great ride while it lasts, but booms don’t last. They bust, and when the inevitable bust came, day-traders all but disappeared, and acquaintances (I don't have many friends) went back to their chemist careers or whatever.
In hindsight, all very obvious, and as Graeme says, “it’s human nature”. In his book “Fooled by Randomness”, Nassim N. Taleb calls these people ‘lucky fools’ and psychologists call it “the self-attribution bias” – i.e. when things are going well, we take credit for it, when things go wrong, it’s outside forces to blame. As Mrs Cassini would be all to happy to confirm for you, it's one of my faults. Not so much now, but in the early days, a bad trade would be down to her making too much noise with the dishes, the dogs barking, Winston (now fully recovered by the way) chirping too loudly, or she (Mrs C - Winston is a boy) was slow to bring me my water (Winston doesn't bring me water - at least not in drinkable form) before it was ever down to me making a poor decision. The good trades were all down to my brilliance as an expert analyst. Mr. Taleb wrote:
Lucky fools do not bear the slightest suspicion that they may be lucky fools — by definition, they do not know that they belong to such category. They will act as if they deserved the money. Their strings of successes will inject them with so much serotonin (or some similar substance) that they will even fool themselves about their ability to outperform markets (our hormonal system does not know whether our successes depend on randomness).”
Outperform markets” is the key here. To use draws in football as an example, (an example close to my heart), if you choose a league which has a long-term average draw percentage of 30%, and pick a sub-set of matches to end as draws one season, at random you will almost certainly make money if the draws make up 50% of the results that season, and you will almost certainly lose money if the draws drop to 20%.

TFA - Two Furry Animals
Whether the selections are fantastic or useless cannot be measured by profit or loss, but as Graeme and I have both realised, it is how those selections measure up against a benchmark. For a rigid system, e.g. looking for a subset of draws, home teams in the 2.0 to 2.5 range, or teams who drew 1:1 on this day five years ago, it is a pretty simple process to establish such a benchmark and it can easily show the merits or otherwise, of a selection process.

If the selection process isn’t a rigid one, but flexible (i.e. the nature of the bet is not pre-determined, could be home, away, draw, under, over etc. based on value), a benchmark won’t work. For whatever reason, your model isn’t working. This could be a short-term hiccup or it could be that something has changed.

The other line of Graeme’s that jumped out at me was the reference to us “scurrying around” which rather brings to mind the image of black rats (in coal cellars?), which I’m not sure is quite the image we are hoping to project here! The truth is that as Graeme says, neither of us had any reason to look behind the numbers before. For me, it was only in the last few weeks that I realised this was an unusual season for draws. One reason for using five leagues is that it typically generates a reasonable number of selections each week – my idea of reasonable might be different to Graeme’s though, who’s idea of reasonable is 794 bets a week! – but a side benefit is that the overall average across all five leagues is more likely to reflect the long-term average. A slight increase in Italy may be balanced out by a slight drop in Spain, but as I keep mentioning, this season all five leagues are down on their 10-year averages.

Looking back, admittedly belatedly, the 10 year draw average (2001-11) in the top five leagues was 26.66%.

In season 2011-12, the draws hit at 26.56%. Down on the long term average, but only slightly and not by enough to erode the edge the XX Draws had that season. The league averages were down in England, France and Spain, up in Italy and Germany.

At the start of the 2012-13 season, the 10 year draw average was 26.78%, with the draws that season hitting at 25.96%. Down again, but again, not by enough to push the XX Draws into the red. League averages were up in England and Germany (again), down in France, Italy and Spain.

The 10 year average at the start of this season was 26.70%, and at the time of writing, draws are hitting at 23.79%, significantly lower, and down in all five leagues although Ligue 1 is very close.

With only 4 of the 15 league averages up in three seasons, it’s clear that it has not been a good time to start looking for draws, but if the benchmark is being beaten, i.e. the underlying selection criteria is performing better than the averages suggest, then the optimist in me looks forward to a stellar 2014-15 as the averages bounce back. More on this at the end of the season, if not sooner. That you can bet on.  

1 comment:

Graeme Dand said...

Sorry, I should have said this on the other post Cassini but the P&L from backing all my bets from an algorithm are also easily tracked. 4 based UK algorithms are systems 6,21,31,41, 2 draw algorithms are D1 and D6 and 2 Euro algorithms are E1 and E6. These are basically the algorithms whereby the filtering for the systems then originate from.

Given each algorithm is 100% independent and they each have their own characteristics, I agree that’s the way to look at things to get an underlying view of performance of my ratings. My issue was that historically, people weren’t interested in following a rating algorithm, they wanted to follow systems of bets built from the algorithms. Hence, that’s where the cross referring of algorithms and the filtering of the ratings come in. Ultimately, this is where the main issues have arisen this season although when the UK ratings are losing, trying to build a system to win is very difficult!

At the end of March, both Draw algorithms are in profit this season, both Euro algorithms are in profit this season and only 1 of the 4 UK algorithms are in profit. Needless to say, I chose a system for the FTL from the UK algorithms this season that are heavily loss making!

If you want to see the results since the algorithms went live, they are on the underlying results post at the bottom.

I don’t put too much weight on the performance of the underlying ratings as I know it’s not what most subscribers follow. If Skeeve started telling everyone they should have been following his bets to 1pt level stakes, I’m sure he’d get some interesting feedback. Same comment applies to TFA!