Tuesday, 15 December 2015

Delusions And Laws

Among much sensible advice from Ben Carlson, author of the book "A Wealth of Common Sense: Why Simplicity Trumps Complexity in Any Investment Plan" is this:
But there are also a large number of investors who are delusional, because they’re making the assumption that they’ll be the ones who can pull it off, when in fact only a very small number of people can. There’s a seemingly endless supply of investors out there who try again and again to outsmart the markets, but only end up outsmarting themselves.
The Urban Dictionary definition of "delusional" -"Someone who is not thinking clearly, or thinks something will happen that, in all likelihood, will not" - is perhaps a little kinder than some other definitions of the word, but the point is that investors expectations are often not realistic.

James left this comment on my last post:
It is interesting that many people who enter into sports trading do so to cut their teeth before entering financial trading. Some openly make it seem that financial trading is a man's game and their playing at being a sports trader is just child's play afore the main event. Can it all be ego?
You would think the daily reported financial scandals would make them wary of this "Man's World" that is financial trading but no, their one-man operation is the equal of any corporate/mafia concern.

You would also think their meagre bankrolls would be better suited to the capacity of sports trading where they are up against similarly sized bankrolls but they prefer to be kicked around in the multi-trillion "Man's Game". One chip against many deep stacks.
By my definition you are a "manual fundamental trader".
Yesterday's post referenced Joe Peta moving from Wall Street to sports trading, and Sammy moving in the opposite direction, but I really have no idea where most people start their speculating or where they end up. Sports trading is still a relatively new creation, but while there are similarities, the nature of sports markets is so different from the financial markets that I'm not sure it really offers much as an introduction.

As James alludes to with his reference to 'financial scandals', outsiders are never going to have an edge over those on the inside. Same with sports trading in events where someone is several seconds ahead of you. This is where the delusion comes in - how can your 'one-man operation' have any edge? Anyway, I've banged on enough about this in the past so I'll save my energy, but it really is nonsensical if you think logically about it. The problem is that people WANT to believe they can somehow be long-term winners, but wanting something very much doesn't make it true.

Another example of wishful thinking is this awful advice, posted by a Golden Fleece on the Betfair Forum:
An edge is helpful but not a necessity as hard work and discipline can overcome this.
Fortunately others are more clued in, with racingguru noting that:
You not only need an edge, you need to work to maintain it
and dlarssonf writing:
If you have no edge ( getting value ) you will not win long term, no matter how good your discipline is or how hard you work
The laws of probability don't suspend themselves because you want them to, which is probably why they are called 'laws'. 

1 comment:

Megarain said...

I have no real wish to be a contrarian, aside from the joy it brings, to merely argue with others, but, I can sorta understand the advice Golden Fleece is giving.

Clearly, right-minded souls, will understand u need positive EV, on multiple outcomes, to base an (even, short-term strategy), which, given variance, even then, might not be profitable.

But, if u know there is no edge, u can work-around.

(and this is where the hard-work comes in).

I havent looked at the offending post on the Betfair forum, not having been there in years, but .. providing the poster is genuine, which, is sometimes a stretch, then ..

By knowing u have no edge, u have done the 'homework', and maybe offer odds, which have positive EV, even if they reside, maybe in the 3rd Back or lay column, away from the market.

It maybe a long wait, and its time-consuming/hard work, to continually monitor/update positions .. but, it would be +EV.

As long as u have the knowledge, what an edge is .. and have the hard-work ethic, I think u can clearly still make (good) money in exchange betting. Logically, it has to be .. or, we would not be paying PC.