Beating The Clock

For anyone using BETDAQ, be aware that it appears that API users can beat the clock there using the method that was used on Betfair a few years back. For those who don’t know, the method was essentially to submit a bet just prior to a potential price-changing event, and to cancel it four seconds later if the event did not occur.

For example a bet would be submitted just as a bowler made his delivery, and if a wicket fell, the bet would not be cancelled. Betfair closed this loophole, but it is being reported that, by using an API, this same method still works on the BETDAQ site.

Also, on Betfair, it appears that the 8 second delay on Spanish games is no longer enough. From the Betfair forum are a number of stories of bets being hovered and large sums of money appearing just prior to the Suspension in several games.

Million Dollar Traders : Traders

I didn't get a chance to write about the last episode of Million Dollar Traders before, but while I await a goal in the Liverpool v Chelsea game I do have a moment. It was quite a dramatic episode, with one firing, and three 'in-sympathy' walk-outs, leaving just three traders. The group ended up slightly down over the period, but ahead of the hedge fund index for the same period. One trader summed up the experience as like "playing chess against the rest of the world" - a sentiment I share and have commented on before myself. The boss man, Lex, showed an astonishing lack of mathematical understanding when he said that in one month he made 0.3%, the next he lost 1%, so overall he was down 0.7%. What? Admittedly with those numbers, he's close, but if I make 50% in one month and then lose 50%, believe me, I am not even.

Monthly Review - January

Time flies like an arrow (sorry, can’t resist it – ‘and fruit flies like bananas’) and it’s hard to believe that February is here already. Despite the Premium Charges which are proving to be a bit of a setback, January was my second best month ever, behind only January of 2008. Of course this means that with Betfair’s 60 week rolling time-frame for calculating how much to steal, I mean deduct, from our accounts, my two best months ever are both currently being included. Roll on March, or perhaps I should say ‘roll off January’.

I’m not sure why January has proven to be such a good month for the past two years, although in the interest of full disclosure I should add that January 2007 was my worst ever month. I don’t consciously do anything different (except in 2007, but I learned my lesson from that), but January certainly seems to be a month of extremes.

February is at the other end of the scale, ranking 9th with a daily average just 26% of January. Why so much lower? Only one NFL game, and the NBA All-Star break means less matches could be two reasons. Valentine’s Day means a forced break in investing (although how fortuitous that this year it falls on the same weekend as the All-Star break.) My February luck is changing already.

As for today’s Superbowl, it’s hard to see the Cardinals amazing run continuing. I fancy their luck to run out against a hard-hitting, experienced Steelers team who have a lot of players who won it all as recently as 2006. If you’re punting on the game, take the Steelers -6.5.

I Don't Like Wednesdays

The Betfair Premium Charge is going from bad to worse. 

Having been hit by a charge in the £400s for the past two weeks, today I was hit by one over £730, which amounts to a whopping 21.2% of my NET profits for the week, not gross - they are taking regular commission plus this bastard Premium Charge. I thought this charge was supposed to max out at 20%?

Anyone got any clever ideas of how to get around this? Other than trying to lose more!

And I really hate that you can have a big win on a Monday, and not know until 9 days later how much you really made. But still no viable alternative, so on we go. Mumbling and grumbling.

Tennis Is No Djok

An ill advised bet on the King of Serbia went awry this morning. A great first set, but then Djokovic was in trouble, finally calling a medical time-out during the third set. By the time I went to cut my losses, the price had moved so far against me that I felt it was value to hold on and hope for the best. Actually, my hope was that although he might drop the third set, the temperature would cool down and the expanding shade would give Djokovic a chance to recover. (130F is hot!) It wasn’t to be. I threw my chair around (as seems to be the way after Djokovic’s matches), and put the result behind me.

Tennis is one of those annoying sports. Sometimes everything goes to plan, and other times, nothing I do is right. This morning was one of those times. The problem is that tennis is not a sort I enjoy watching. My bets are modest (relative to other sports), and I don’t put in the time or effort to study the results and statistics or rate the players like I do on other sports. I think I wrote a few days ago how it is important to do your homework so that you have confidence in your bets, but with tennis I don’t.

Stick with what I'm good at, I know.

Sharp Minds

The subject of whether or not the gambling industry should do more to protect those individuals who are incapable of looking after themselves was a topic that was discussed here earlier this month.

I was reminded of it when I read a post on another blog (the author wishes to remain anonymous to protect the anonymous individuals he was posting about).

The post was titled: How To Open An Account With Betfair and read:

I’ve had a couple people ask me about opening an account with Betfair. Once you click the link below it will open the Betfair home page. I have shown the top part of this page below the link. There are two places to click, one being the top left of the page where it says “Open an Account” or there is also a spot on the right with a green arrow. This will go to a page to enter in your information.

Now seriously, should anyone be allowed to open, fund and operate any kind of account if they are incapable of opening it for themselves? I mean, it's not exactly rocket science. It's hard to imagine anyone but a complete half-wit (or former President) doing anything other than simply go to the web site, click on the link that says "Open An Account" and follow the instructions. I think that anyone who has to be guided through this tricky process would be well advised to forget about it. I would be astonished if one person asked me for help, never mind a couple!

The comment I posted, but which was later removed, was this:

"I'm confused as to why people wouldn't just go to the Betfair site, look up how to open an account and follow the instructions. People who need to ask someone else how to open an account are probably not the sharp minds that will find Betfair profitable."

The reply, exactly as received, was: "You are likely right about that, I cannot approve the comment as it would be an insult to the intelligance of some."

I'm not sure that someone needing help opening an account would have the intelligence to recognise any insult, but anyway, before anyone asks, if you need help opening your Betfair, BETDAQ, WBX or any other betting exchange account, forget it. You'd be better off playing Bingo.

Aging Handicap

I'm a little depressed, not because the gambling gods have been unkind or anything like that, but because I've been reading an excerpt from a cheerful book called "The Thing About Life Is That One Day You'll Be Dead", by David Shields.

I'm now starting to wonder how much longer I have at this trading game. According to the book, my IQ peaked at some time between the ages of 18 and 25, and since then my brain has "started shrinking, losing weight, and filling with fluid". (It doesn't say what fluid, but I suspect that beer is a distinct possibility in my case).

As I have aged, my "response to stimuli (of all kinds) becomes slower and more inaccurate, especially in more complex tasks". My creativity peaked when I was in my 30s, and whilst "everyone has talent at 25, the difficulty is to have it at 50".

And that's just the mental side of things. Apparently when I get older, there will be physical effects too. Wrinkles and hair loss. Imagine! And decreased aerobic power. Shorter notice that you need the loo. Muscles wasting away. It's not good news.

But every cloud has a silver lining. Apparently as one ages, one loses ones odour. Think of the money to be saved on deodorants! And our vocabulary increases as we age.

When the group was selected for the Million Dollar Trader show, I wondered how Simon (by far the oldest) would fare. The answer, as we found out this week, was 'not too well'.

Perhaps by keeping the brain busy with on-the-fly mental computations trading in-play nearly every day, I can postpone the day when my brain really does turn to mush and it's time to give up. I want that million first though.

Trying to work out the Premium Charge has got to have helped. For those on Betfair, they now provide a spreadsheet by the way: https://premiumcharge.betfair.com/PremiumPortal/portal

Half-Time Draw

I was reading a system today called the Half-Time Draw Football Trader.

To summarise the poorly written and fluffed out 13 pages into a couple of lines, the ‘system’ is to back the draw at half-time when an in-play match is tied. The author states that the approximate odds will be around 3.0 (range 2.76 to 3.25) and that the bet should be layed off 10 to 15 minutes later after the price has dropped by a full point.

It certainly sounds easy enough, but there is a noticeable lack of supporting data to back up his claim. He also fails to specify any other qualifying rules as to the kind of in-play games to try this.

Essentially, for this system to be profitable, it needs a goal in less than 50% of matches (or in the event of a goal, for a subsequent ‘get-out-of-jail-free’ equalizer.)

Do 50% of matches which are level at half-time fail to produce a goal before the price drops by a point – or become drawn games later?

Time to start yet another spreadsheet unless anyone has data already to prove that this 'system' is worthless, as I am quite sure it is.

Million Dollar Traders: Profit And Loss

Warning: Plot-Spoiler ahead.

Episode Two yesterday, and as an aside, why is the programme not called Million Pound Traders? An example of the world's second superpower's cultural domination I guess.

I digress. A couple of comments on the show. One was where one of the traders had a position moving fast against him, and the voiceover guy said something to the effect that the trader didn't make the novice mistake of panicing and selling. Where did this piece of wisdom come from? What happened to the idea of cutting losses short and letting winners run?

Anyway, we saw the end of Croydon's finest, Simon, who was hopelessly out of his depth, and ditherer Cleo survived by the skin of her teeth.

There wasn' too much to take from this episode about trading, although the comment was made that if you do your homework before taking a position, then you will have more confidence in it even if it moves against you.

There was also a moment where Simon had no clue how to react to a situation, and it was stated that traders should always have a plan. Very true. How well I remember those 'deer in the headlights' moments in my early days where the brain stops working!

And there was a reference to the psychology section of their training, something I would like to have seen much more of. Knowing how the market will react to different scenarios is arguably the single most important element to making money on the betting exchanges.

Arcade Charade

One of my fellow bloggers, Alastair, over at Bet Your Life Sports Trading has previously commented on the offer from Betfair of up to a free £10 bet if you bet that amount or more on the Arcade in the next few days.

However, read the fine print of the Terms and Conditions, and you read that the £10 credit (win or lose) is added to your Arcade account, and has to be used on one of those games. I'm not sure how many people will be tempted by such an offer, but I would rather put my energy into markets where I might actually have an edge. There is no free money here.

Alastair also commented that he would prefer the £10 credit to be used to offset his Premium Charge. Me too - another £400+ stolen from my account today.

Elo Ratings

Today there are just two English league games, and a chance to focus.

Liverpool v Everton: Liverpool (1.67) are rated at 1956, Everton (7.6) at 1427.

Yeovil Town v Leicester City: Yeovil Town (5.7) are rated at 394, Leicester City (1.76) at 761.

Clearly the favourites are Liverpool and Leicester City, but where do my ratings suggest the value is at? One of my big problems when pricing up matches, is calculating the odds of the draw. When I rate my NFL and NBA teams, I don't have this problem. There IS no draw.

My selection for today is Leicester City. I fancy the Liverpool v Everton game to be tight as derby games often are, so I shall leave that alone.

Update: Well, every dog has his day. Nice call, even if I do say so myself.
Woof!

Stupid Football

That last second winner from Chelsea yesterday may have delighted my son, but it cost me close to £700, and it was quite a relief that I managed to end the day in profit (albeit by just £20.19).

Why do I continue to bet on football? Well, my last losing day on this sport was back on October 11th. After a steady succession of small winning days (median profit a whopping £5.39), the confidence starts coming back, and the memory of the last lightning stike begins to fade.

I really am rather disappointed in myself. I like football, and it is very frustrating that I can't consistently make money at it as I can other sports. I keep ratings of all the teams, and get results like top-rated Wycombe Wanderers (rating 453) losing at home to bottom-rated Grimsby Town (185). Elgin City drawing with Cowdenbeath! I ask you. Where's the logic? It's actually quite interesting re-rating the teams after every game, but it doesn't seem to be paving the road to riches for me yet.

For anyone who's interested, top-rated teams in each division are currently Manchester United(2237), Wolves (1246), Leicester City(761), Wycombe Wanderers(421), Burton Albion(339), Droylsden(167), AFC Wimbledon(153), Celtic(1423), St Johnstone(626), Ayr(369) and Dumbarton(236). The biggest surprise is Droylsden who languish in 14th place, but who have several games in hand. Like I said, this is a work in progress. Still not quite sure how to turn this effort into money!

Make Me A Trader (2)

Back to the first episode of Million Dollar Traders, and just where exactly are these 'ordinary people' supposed to get their edge from? We saw a very limited amount of their training, so we may not have the whole picture, but the limited training revealed consisted of the group being told that there were no hard-and-fast rules, that trading was about generating ideas, that trading psychology tended to favour over-confidence, and a study of technical analysis ("charts are simply a mathematical representation of momentum in the market").

We've probably all been through similar learning curves on Betfair. First we try out different ideas to try and find what suits our style. We learn not to fall in love with positions, and to take a loss if the market moves against us. We use the (limited) charts that Betfair provides to help us see where the market has been, and where it is likely to go. We read books on trading, and we learn everything about the markets / sport that we end up specialising in.

For the most part, we see the group staring a a screen full of numbers and under pressure to make trades. Again, where are they supposed to have an edge over everyone else (far more experienced) in the market? Reading the newspaper (where the 'news' is at least several hours old) hardly seems likely to give anyone an edge, and because of their inexperience, any news on the TV is likely to be digested and understood by more savvy people a lot faster than this group.

At least with sports, we get to see pictures of what's going on. We get to see what team is playing well, who is struggling, which way the momentum is going, injuries, substitutions, weather etc. and as long as we know our stuff, we can turn this to our advantage.

My experience of technical analysis is that it is very useful looking back, but is of limited use in predicting the future, and because the information is out for for anyone to see, it is not going to give me any kind of edge.

It will be interesting to see if any of the group succeed. Right now, they all seem completely lost, and there doesn't appear to be any specialisation at all.

Letting Go

Yesterday, I was following the NBA game between the Cleveland Cavaliers and the Chicago Bulls. Cleveland were pre-game favourites at (I believe) around 1.3, and after a strong start were backed as low as 1.09 for fairly big money (and as anyone who follows the NBA regularly knows, to back a team at this low a price in the first quarter of a game is not far short of crazy). 

36 minutes later and I had a nice profit locked in as a result.

The screenshot above was taken at the end of regulation, with the game set to go into overtime. Now it seems to me that if two teams have played 48 minutes against each other, and there are no issues with players in foul trouble or injuries, then the odds should be pretty much 2.0 on each team, with them possibly favouring any team that has made a big run to tie the game up, or indeed the home team.

In the above game, Chicago was the home team, and neither team was in serious foul trouble. As for injuries, it was Cleveland who were faring worse with West, Ilgauskas and Wallace all missing.

So why the heck were the Cavaliers still rated as 1.5 favourites? It made no sense to me, and my end of regulation lay proved to be profitable, as the Bulls went on to win the game.

It seems that the market sometimes just can't accept that the favourite can lose, and wakes up to the possibility a little too late. I'm not complaining though. I think whatever the pre-game probabilities on two teams are, going into overtime (with the above factors being considered) backing a team at anywhere close to 3.0 has got to be a winner.

Make Me A Trader

Did anyone catch "Million Dollar Traders: Make Me a Trader" on BBC2 last night? Very much influenced by, if not directly copied from, "The Way Of The Turtle", (a book by Curtis Faith detailing the story of Richard Dennis who took 23 ordinary people and trained them to be traders in just two weeks), last night's show took 8 men and women and gives them two months to become successful traders with money provided by a Russian sounding guy straight out of a Bond movie.

The two qualities for a trader that he was looking for were the ability to handle stress, and to be good at maths. It was quite amazing how few people applying could multiply 32 by 32. Anyway, the series looks like it might be interesting, with the first episode already showing much of the emotions and stress that traders on the betting exchange go through as well as some of the mistakes we make.

I've always been good with numbers, something my Mum swears I inherited from my stockbroking grandfather, and losing a few quid on a bad bet is to my mind not something worth stressing over. If I was told I had cancer, or someone close to me was in trouble, then I might find that stressful, but if you can maintain perspective while trading, it makes it a lot easier to make good decisions.

The quote: "If you can keep your head when all about you are losing theirs..." (Rudyard Kipling) is very true.

It also helps to be playing with profits rather than with the mortgage money (scared money never wins).

I was thinking in the shower this morning, (yes, once a week, whether I need one or not), Betfair really is the ultimate video game. I've never been one for games, (friends at work spend hours playing Call of Duty - why? What's the point?), but in many ways the exchanges are one big on-line game. It's me versus an unknown opponent. My opinion versus yours, except in this game the points are real money.

Finally, my little vent yesterday did me the world of good. I bounced back from Monday's loss with my best day in over a year (since Jan 13, 2008 to be precise) and even the Premium Charge is (almost) forgotten.

Good News, Bad News

It's been a while since I vented about Betfair's Premium Charge so bear with me. I'd almost forgotten how annoying this Premium Charge is. This week, while my back is turned, I am robbed of another £500.00, a sum which is especially painful since it follows close on the heels of a £1,400 loss on Monday. (The good news is that next week's charge will be reduced!) To be quite honest, the impact prior to this week has been less than I feared, but this week was quite a hit.

Sadly for an alternative, BETDAQ just doesn't cut it. The liquidity simply isn't there, so I don't have any realistic alternative but to continue, and accept a reduced profit. For all their denials, the fact is that Betfair is a monopoly. There is no other betting exchange that has the range of markets and the liquidity that Betfair offer and like many monopolies before them, they abuse their position in the market, and take advantage of customers that they know can not pick up and move elsewhere. There was much fuming on the forum when the charge was first announced, with many people saying they were leaving, but I suspect that the reality is most people are still there.

The original concept of a betting exchange was really quite brilliant, and like so many brilliant ideas, really quite simple. Model it on the Stock Exchange, match backers and layers and take a percentage commission. I just don't think that the Stock Exchange charges anything like 20% commission based on a formula that isn't verifiable or consistent and which penalises one group of customers over another.

Vent over.

Handicap Betting NBA

As my regular reader already knows, I'm not a big fan of handicap betting. The idea of an imaginary finishing line certainly makes for wild finishes in-play but these markets just seem too much like gambling. It's hard enough to find a winner as it is without complicating things further! Who can really say that backing a team -9.5 is value, but at -10.5 isn't? While I don't mind putting my money on a team to win, I do mind putting it on a team to win by some random number.

I've long suspected that there might be value in laying teams that start as big favourites, but have also suspected that the probability of that team resting top players once they gain a big lead (or just easing up, as is human nature) has been factored into the price. So I've pretty much stayed away from these bets.

However, since the start of the year, I've been tracking the NBA handicaps, and while the sample to date is small, so far my initial suspicion is being borne out.

Of 49 games where the spread was 6.5 or more, the favourite has failed to cover 33 times. Something to follow as the season goes on.

Staying The Course

A few weeks ago, a friend of mine was sat next to a guy on the train who was studying the football page in the Racing Post.

Striking up a conversation, the guy started spilling his heart out about how lately he couldn't buy a winner and had had several consecutive losing weeks.

"I can't do anything right," he complained. "I do all my analysis, Overs/Unders, Home teams, Away teams, Favourites, Underdogs, Cup games, League games - but I just can't buy a winner. Penalties get missed. Goals get disallowed. Last second equalisers go against me. It’s the worst losing streak I’ve ever had."

After listening to this tale of woe for what seemed like an eternity, my friend helpfully suggested "Maybe you should switch to cricket for a while?"

"Cricket?!" the guy said, in a tone of disgust, "What the hell do I know about cricket?!"

OK, so it's an apocryphal story - (and I don't really have a friend).

Nanny - It's Not My Fault!

Back to the subject of the morality of gambling. John the (former) Gambler has posted again, comparing gambling with alcohol and saying about gambling that: "I now think it is bad, and should be controlled, especially on the internet. When you see friends lives deteriorating, it is is very difficult not to draw this conclusion."

When you drink or take drugs to excess, you lose your health. When you gamble to excess, (or invest in a rogue hedge fund), you lose money. Which is worse?

Anyway, the conclusion that I draw is that your friend is the problem, not Betfair.

John goes on to say: "Then the betting exchanges came along. This is good. The average savvy punter can make a few quid on Betfair. Then the exchanges like betfair evolved. Bots, Poker, Casino. The average savvy punter can now lose lots. Not so good."

A savvy punter would never get involved with on-line poker or casino games. Only an idiot will play those games. And before someone says that they only play them for small sums for 'entertainment' I would suggest that they need to get out more as there are far more entertaining ways of spending your money and time.

As I said before, it's up to the individual to control themselves - no one else. It really is quite pathetic when people do not take responsibility for their own actions.

Betfair (for all its faults) provides a wonderful opportunity for the truly 'savvy' punter to make money if they are disciplined - i.e. have self-control. It seems that this lack of discipline in someone's life is what causes them so many problems, be it alcohol, narcotics, sex or gambling.

From a rather selfish point of view, I'm glad that such people do continue to lose their money on Betfair. As John says, for every loser there is a winner. 

It's up to the individual to decide which hat they want to wear.

A man sooner or later discovers that he is the master-gardener of his soul, the director of his life. ~James Allen

Two Swallows

Following up on my post yesterday where I again reiterated my reasons for avoiding the horse-racing markets, I remembered earlier today a story (early 80s I believe) from my youth that may have something to do with it.

I was dating a girl in Banstead, Surrey, who had a friend whose husband worked for a stables in Epsom. One evening, he told me that he'd had word that a horse called Two Swallows was to be backed next time out. I scanned the racing listings over the next few days, and one day there it was. A 20 runner race and the probable SP was 15/1 and I excitedly told everyone at work about it, collecting a vast sum of money from my colleagues (about £20! - remember, this was around 1980) to add to my own tenner. I handed the cash to Mr Ladbroke and sat back to await my big win.

It didn't happen. The stupid thing finished somewhere in the middle of the pack, and I returned to the office with empty pockets.

Two weeks later, and I saw it was running again. I said to myself "I'm not wasting any more money on that stupid creature" and left it alone. That night, I went to pick up my girlfriend from her friend's house, and her husband was there. He greeted me with "Did you back that horse I told you about?"

"Yes, bloody thing cost me £20"

"No, I mean - did you back it today?"

"No - what happened?"

It had won at 33/1. He related that the stable had run it that first time and deliberately held it back to get the price out for next time. After that, it won something like six times in a row, but of course never again at 33/1. I think 6/1 was the best winning price I had on it, but it really was a stellar tip. As I recall, it ran in the Scottish Grand National (it was a grey horse, so it was easy to follow) and I did make some money from it, but I never forgot missing out on the 33/1 that day.

Anyway, the lesson I took from that little story was that racing is very easily fixed, and that unless you have an inside source, you are going to find it very difficult to make money.

Level Playing Fields

When I wore a younger man’s clothes back in the 80s, I worked in the City of London for a merchant bank, and was exposed to the world of options trading. At first sight, it seemed an easy way to make some money, but of course it wasn’t. I soon discovered that theory and practice were two completely different things, and that however much I read and studied, there were always going to be plenty of people in these markets who knew far more than I did about the direction of a company’s stock price. And so I gave it up.

Winding the clock forward twenty years, and how very similar stock options are to bets on a sports event. Whereas a stock option will run for months, the time-frame is reduced for many sports events to a number of minutes. (As I have stated before, I don’t touch the horses or dogs because as in the financial markets, there are people who know far more than I do).

You can buy or sell a stock option the same as you can back or lay a sports selection. At the end of the term, your option and your bet both expire, either worthless or ‘in-the-money’, and during the timeframe you can re-sell your bet, or part of it, or you can add to your position. Information drives the prices of both, but whereas financial information leaks out to a privileged few before becoming public knowledge, an event occurring during a sporting contest is there for all to see at the same time. It is a level playing-field (pun intended).

It seems to me common sense that if one is serious about making money from betting, the very least you need is a fair contest. Why get involved in markets that can potentially be rigged, or where others know far more than you do? Markets such as Big Brother / Next Manager are deadly unless, of course, you are privy to inside information, in which case you have a very big edge and should use Kelly to maximize your advantage (and be prepared for jail if you are breaking the law).

I personally have nothing to do with any markets of this nature, and stick to sports, usually betting in-running. It never ceases to amaze me that people think they can take on the world at, say, trading currencies or betting horses, when they are obviously at such a big disadvantage. I guess it says something for the natural optimism of human beings.

Enjoy Life Responsibly

The subject of the morality of betting has recently been raised by John the Gambler with comments on his own and on Bert Black’s blog.

He wrote:

“Back to the “gambling” front, I am predicting a “paradigm shift” in attitudes to gambling, particularly gambling on the internet. At the moment it is possible to lose an absolute fortune on the internet 24/7/365. I have recent experience of this destroying one friend’s life, and having a very serious impact on another friend’s life, not to mention both families and a wide circle of friends. I feel slightly culpable as I introduced him to Betfair. I thought he was a social gambler who liked the odd fiver on the gee-gees. 18 months later I find out he had discovered Betfair Casino where he had been wagering vast sums, which he had allegedly stolen form my other friend’s company. Consequently both parties are now seriously in debt.”

“For every winner there is a loser. It has definitely changed my attitude to gambling, and sometimes I can be “ahead of the curve” on these things. I don’t believe the story above is a one-off, and as these stories emerge over the months to come, I predict a change in people’s attitudes, and some sort of government legislation.”

Bert Black’s measured response was quite correctly that “this is not a new problem or necessarily a growing one in the UK. It is a very important issue, but regulation already exists and I’d be surprised if much were to change in the short term.”

In my opinion, it is hardly the responsibility of the government to nanny us all and put rules in place to the detriment of the majority, just because a minority can’t control themselves. Let’s be honest, anyone who thinks they can win long-term by playing in an on-line casino has got some serious problems. 

Fair enough, we all make mistakes, but when the losses begin to mount, is it too much to expect that an individual should be responsible enough to stop their activity themselves? Learning from your mistakes seems to me to be an essential part of life. Touch a hot stove once, and you tend not to do it again.

The idea that the government should pass legislation that may benefit a few, but to the detriment of many, seems extreme. Prohibition didn’t work, and in this Internet age, if people want to bet, they will. What kind of legislation would help in this situation anyway? While it is sad that a minority of people can’t enjoy alcohol responsibly, or can’t enjoy an occasional flutter, the problem lies with those individuals. Such people typically have problems coping in other areas of life too. They are the ones that need help.

We should all be responsible for our own actions, whether it relates to diet, exercise, financial investments or whatever, and passing legislation to restrict the rights of the majority to enjoy life responsibly is not the answer.

The Long-Term View

January always seems to be a dramatic month for me. January of 2007 saw my worst ever month, with the reason being a lack of patience following a few days away, and a consequent recklessness to start the year off with a big win. 

It didn’t work. I couldn’t buy a win for love nor money, whereas in 2008, January was one of those months where everything seemed to go perfectly according to plan. I am hoping 2009 will be a repeat of last year.

A few days away from the Internet and betting does allow time for reflection. 

As I have written previously on this blog, I do not believe in setting goals per se, but paradoxically, I am aware that I have a tendency to do this.

One downside of keeping records on a daily basis is that my aversion to a loss is magnified. Over a three day period, I might have two wins of £100 and one loss of £140, and a net total of £60 profit, but it is far more pleasing to me if the three days all reflected profits of £20. It makes no sense I know, and I would probably be better served by totalling up my numbers on a more infrequent basis.

I have become aware that despite my reluctance to admit to it, my daily profit level does affect how I react to a situation. My investment goal for 2009 is to change this.

Deer 2009

The holidays are almost upon us, and this will be my final post of the year. I am preparing to close out 2008 with a couple of weeks away from the Internet visiting with family and friends in Surrey, North Devon and Dorset, eating and drinking too much, though not to the excesses of my youth, (with the possible exception of the Weymouth stop).

2008 has certainly been an eventful year. My ‘traditional’ investments (house and shares for example) are all worth less than they were a year ago, but with just two losing months on the betting exchanges (and one of those being a mere £70 doesn’t really count!), 2008 is my best year to date, exceeding 2006 and 2007 combined.

I still make mistakes however, although less often, and when I do, my ‘Bambi-in-the-headlights’ act is usually a lot shorter than it used to be when disaster strikes. I am getting better at not falling in love with a position, and with letting winning trades run. I do still have a tendency to go ‘on tilt’ after a big loss though, as evidenced by the increased probability of following a bad day with another bad day and I need to work on that.

There was also the introduction of the Premium Charge which affected my numbers, although I have to admit, not as significantly as I first feared, but one wonders what other tricks Betfair have up their sleeves.

BETDAQ is still a work in progress. As much as I would like to use them more, I still find the liquidity there sadly lacking. Faced with the choice of making £20 on BETDAQ or £50 on Betfair less the Premium Charge, well, it’s not much of a choice really. And sadly, with the introductory 2% commission offer scheduled to end in a few days, liquidity is unlikely to improve significantly.

Goals for 2009: Continue learning. Trading is an art, not a science. There are no ‘systems’. It’s all about the approach.

And finally there’s this blog. I started it back in March, with an opening post which included the following sentence “So, as arrogant as ever, I am hoping to fill this gap with a blog that goes a little deeper into the reasons why I made or lost money, my thoughts and emotions as the win / loss was happening, and perhaps filled with other observations from the world of betting”.

It’s not easy finding something worth saying about the world of betting on a daily basis, and I don’t try. I do try and find something to say every two or three days though, and hopefully some posts achieve the goal of being interesting and thought provoking.

Happy Holidays, and Good Luck.

Kelly Criterion

There is currently some debate on the Betfair as to the merits of the Kelly Criterion, and I thought I would post an excerpt from a piece I wrote some time ago on the subject.

In Kelly's analysis, the smart gambler should be interested in "compound return" on capital. He showed that the same math a colleague (Claude Shannon) had used in his theory of noisy communications channels applies to the gambler. The gambler's optimal policy is to maximize the expected logarithm of wealth.

Though an aggressive policy, this offers important downside protection. Since log(0) is negative infinity, the ideal Kelly gambler never accepts even a small risk of losing everything.

Fortunately for non-mathematical people, you don't even have to know what a logarithm is to use the so-called Kelly Criterion. You should wager this fraction of your bankroll on a favourable bet:

Edge / Odds
Edge is how much you expect to win, on the average, assuming you could make this wager over and over with the same probabilities. It is a fraction because the profit is always in proportion to how much you wager. The edge is usually diminished by tax or commission. When your edge is zero or negative, the Kelly Criterion says not to bet.

Odds is a measure of the profit if you win.

In the Kelly Criterion, odds is not necessarily a good measure of probability. Odds are determined by market forces, by everyone else's opinions about the chance of winning. These opinions may be wrong, and in fact MUST be wrong for the Kelly gambler to have an edge.

For example: The odds on Red Rum are 4 to 1 (i.e. the market estimates that Red Rum has a 1 in 5 chance of winning, or a 20% probability), but by your calculations, Red Rum has a 1 in 4 chance of winning (i.e. odds of 3 to 1, or a 25% probability).

Assuming your estimation is correct, then by betting £100 on Red Rum you stand a 1/3 chance of ending up with £500. On the average, that is worth £166.67, a net profit of £66.67. The edge is the £66.67 profit divided by the £100 wager, in this case 0.67.

The Kelly formula of edge/odds, is therefore 0.67 / 4, or .1675. This means that you should bet 16.75% of your bankroll on Red Rum.

A quick search of the Internet will provide you with links to a number of easy to use Kelly calculators.

Unlike some mathematical formulas, the Kelly formula does have the virtue of being easy to remember.

By always making the Kelly bet, your bankroll will increase faster than with any system.

However, gamblers need to understand that their progress and bank balance will not be a smooth upward slope, but will be interrupted by frequent drawbacks. For this reason, a common practice among investors and gamblers is to use the Half-Kelly bet. This greatly reduces the volatility of the Kelly bet, but returns 3/4 the compound return. For many gamblers, that is a price worth paying.

It can be shown that a Kelly bettor has a 1/2 chance of halving a bankroll before doubling it, and that you have a 1/n chance or reducing your bankroll to 1/n at some point in the future. For comparison, a “Half Kelly” bettor only has a 1/9 chance of halving their bankroll before doubling it.

For sports betting, there is the added complication that the true odds on an outcome are not known. When calculating your Kelly bet, your estimate may well differ significantly from the true odds.

Both under-betting and over-betting will give you a reduced rate of return. Under-betting, which the Half Kelly is, will provide steadier growth, but with reduced returns, whereas over-betting can be fatal, as betting twice the optimal Kelly bet results in almost no long-term growth at all.

Most gamblers are probably best served by using a flat 2% of their bank per bet, since figuring edges in sports is, as mentioned earlier, very difficult. For a season-long win rate of 55% (on a bet paying at evens), a good target for most bettors, this represents a little more than 1/3 Kelly, which is a conservative compromise between risk and return.

Increasing this to 3%, or occasionally 4% on an especially good play, is reasonable. More experienced gamblers, with a good understanding of the downsides of Kelly and an above average ability in estimating betting advantages, may wish to adopt the more aggressive Kelly approach to maximize their returns.

The Apprentice

In the book, "High Probability Trading" the author, Marcel Link, writes "From everything I've ever heard, read and seen, a trader needs about 3 to 5 years to get through the learning period. During this time in which he is learning and honing his skills, a trader will be paying his 'tuition of trading' the same way lawyers, chefs and doctors pay to learn their craft".

I joined Betfair in April 2004, so I should be about done with my apprenticeship.

When I read that piece, I rather thought the author was exaggerating – something along the same ultra-cautious lines that McDonalds informs us that the contents of our coffee cups may be hot, or a fitness magazine tells you to seek medical advice before embarking on a 10 minute a day walking program.

However, after my 4½ years, I think he may have been under-estimating. Either that or I am a slow learner, because I am still learning. The numbers suggest that I am getting better, but every once in a while I do something that makes me question my sanity.

Another piece of advice that I am often reminded of was to concentrate on PPC, an acronym for "Preserving Precious Capital". He says "forget about making money, just try as hard as possible not to lose any" and "the key to being a winning trader is to not lose a lot when you lose. If you cut losses, the winning trades will take care of themselves".

Richard Wildman

Some of you may well have been followers of Richard Wildman and his very interesting Bet Trading: £100 to £100,000 blog.

You will be saddened to hear that he has passed away after an almost year long battle against cancer. My condolences to his wife Sam and young children children Rebecca and Harry.

It's news like this that makes one realise how unimportant winning and losing is in the whole scheme of things.

Live, laugh, love.

Greater Fools

I read an article recently about an American company called Webvan who delivered grocery orders placed via the Internet. To cut a short story short, the company’s valuation increased from $375million to $8.5billion on the day the stock went public, but within two years, the company was bankrupt.

But the part that caught my attention was this:

“But it wasn’t just faith in the Internet that led speculators to bid up Webvan’s price. They also had faith that other people believed even more fervently in the Internet’s potential. In short, people who paid a foolish price for Webvan and hundreds of other Internet firms figured they could always find a greater fool to pay an even higher price. And many did…”

Now this is one time when, as a trader, “value” really doesn’t matter. All that matters is that your valuation differs enough from someone else’s valuation, and that you are able to trade out of your position with a profit.

Of course, the problem with this kind of trading is that at some point you will run out of greater fools, or more specifically, greater fools willing to risk enough money.

This is certainly a situation I have found with the betting exchanges. I have a tendency to go in big or not at all, and while the bet may prove to be value, at least for a time (as evidenced by a certain percentage being taken), the in-play markets can move so fast that in illiquid markets, they turn against me and I am sometimes left with a position that I have to take a loss on.

Doubling-Up On Betfair

What is this? A double overtime game so they double the markets?

I could live with the doubling up, but there are different prices on each line!

Very confusing. And the over-rounds were playing havoc with my brain.

Blink

Every once in a while, an opportunity presents itself that looks too good to be true. Tonight was one such occasion (again).

Basketball, and with 32 seconds to go, the Miami Heat v Charlotte Bobcats game stands at 95-91, and both teams are in the penalty.

One point is needed for the game to go Over. Now in a close finish such as this, the losing team will foul intentionally, putting the other team on the line for free-throws hoping that one or both will be missed, affording them the opportunity of a quick score at the other end, thus closing the gap.

The Overs was available for a larger sum than I have available for backing (I have never requested Betfair to raise my default £5,000 exposure limit since that is usually more than enough for my needs) at 1.1 but before I could react, it vanished.

Cursing my old age and consequent slow reactions, I was about to check the handicap market when the same huge sum popped up again at 1.12. This time there was no holding me back. The bet was matched, and at that same instant the Heat fouled. Two free throws coming up.

My cup of tea went flying, the cat moved with lightning speed to avoid the steaming contents, and my adrenaline kicked in to rev my heart rate up a few notches.

How ever good the value is, I still get a little excited when I am exposed... no, let me re-phrase that.

Even if I know the bet is tremendous value, I still get a little nervous wondering what key factor have I missed, but I'm getting better at trusting my Blink* instinct.

What WAS the true value at that moment? I would say that 1.01 would be close, for even if BOTH free throws were missed, the Bobcats would still foul the Heat and put them on the line and so on...

Anyway, the first free-throw went in, and that was that, though I wish I'd had more available to bet with. For the record the game actually ended 100-96.

* Blink by Malcolm Gladwell is about the first two seconds of looking--the decisive glance that knows in an instant. Add it to your Xmas list.

JAGIS and the Under / Over Markets

Regular commenter JPG (the provocative devil) got me thinking again about the Under / Over Goals markets.

As my regular reader will know, I have written in the past about the futility of these markets, but in the light of JPG’s prompting, I decided to re-evaluate it this week. My thinking is that if JPG can make money in these markets, then darn it, so can I!

Although I have watched football for over 40 years, (and even played for Holland* in my youth), I can’t claim to be able to predict or read a game well enough to make money from it, but trading the Under / Over markets following certain rules doesn’t require an in-depth knowledge of the game.

So as with all trading, we need to determine entry and exit points. Unfortunately the market does not signal the ideal entry / exit point of ‘just before a goal is scored’ but there are others.

It appears to me that the entry points can be narrowed down to two types:

1) Pre-determined (i.e. enter the market prior to kick-off, at half-time, after x number of minutes or after a certain change in price).

2) Event-determined (i.e. enter the market just after a goal is scored (JAGIS), a substitution, a yellow or red card, a change in tactics or conditions etc.)

Exit points can be similarly Pre-determined or Event-determined.

Historically, my entry points have always been somewhat arbitrary, as have my exit points, but after much pondering I have settled on a new strategy. Enter the market JAGIS. My exit strategy remains to be decided upon, but for today’s experiment in the Everton v Aston Villa game it was to exit after a target price had been reached.

It worked rather well. The early goal for Aston Villa meant I could lay the Over 2.5 at 1.56, and go Green-All-Over when the price climbed to 1.68. Then when Everton equalized I layed the Overs at 1.24, greening-up again at 1.34. (I wasn’t totally comfortable with this strategy after two goals because another goal kills the bet – perhaps after two goals, I should switch to the 3.5 goals market?).

Anyway, a nice little profit today but further analysis is required. Not to mention that I still need to address the issue of what games to try this method in, although if one isn’t too greedy, then it may be a profitable strategy in any televised (i.e. liquid) game.

On a side-note, there was some serious damage at the end of this game with an equalizer and then a winner both scored in time added on. £62,313 traded on the draw at 1.01. Ouch.

I’m a firm believer that 1.01 bets can be, and often are, value, but I seriously question whether 1.01 in a one goal game is EVER value in football. Which gives me another idea…

* Holland Sports FC, in Hurst Green, Surrey – not the ‘other’ Holland you may have heard of.

Sunday Footy Lays

There are three 'big' games today, two Premier League matches and the East Anglia derby.

I have run the numbers and my selections are lays of home teams Norwich City (2.73 v Ipswich Town) and West Bromwich Albion (2.8 v Portsmouth).

Interestingly enough my numbers for Everton v Aston Villa are almost exactly the same as the market's - I have Everton at 2.86 and the exchanges have them at 2.82, and I have Aston Villa at 2.825 with the exchanges at 2.8. So, no bet there.

Update: One winner, but a net loss on those predictions. New rule: no betting in derby games!

College Ball

College Football in the United States is a big deal, unlike England where 'college' sports consists of the Boat Race. That's it.

OK, so we could possibly include the Varsity Match, (incidentally, my school always gave us this particular afternoon off with encouragement to head off to Twickenham while the teachers presumably took the opportunity to go Xmas shopping), but I have never been to either event, and no doubt there are other college sporting events, but none capture the public's imagination.

The US is quite different though, with college sports being a huge part of the sporting landscape. College Football crowds are enormous, (with some people taking up more than one seat!), but seriously Michigan attracted over 112,000 for a game in 2003, and the average over 791 games of top-level games in 2007 was 46,962. Several Premier League clubs would envy those numbers, although of course most teams only play half a dozen or so games at home each season.

Anyway, the reason I started writing this post is to point out how ludicrous their system of deciding the national champion is each year. Basically teams are rated by various people voting in different polls) and a computer working out who the top two teams are who then get to play in the National Title game.

As of this morning Alabama was top-ranked, with Florida ranked at number 4. Alabama was unbeaten in 11 games, whereas Florida had lost once (by one point) back in September.

These two were playing each other today in their Conference Championship (don't ask), and one might expect Alabama to be favourites, but no, Florida were 9.5 points favourites and won by 11.

One can't help but wonder why the computer used to calculate the spread isn't the same one used to calculate the rankings. It's just stupid to have a team ranked at number one when the market (i.e. everybody) knows they are NOT number one.

Roulette System - Win Or Your Money Back

I have a Roulette system, one that comes with a money-back guarantee. Look at the table layout from http://www.roulette.sh/ above - notice anything strange?

I think the 19 reds and 17 blacks means that the evens on Red is a fair deal (and if it wasn't an American wheel with the double zero, we could all give up our day jobs and turn pro).

Sadly, I suspect that were we to travel to St Helena, we would be disappointed and find that the layout in use actually has a black 28 and not a red one. Darn it, so close.

Now why was someone so keen on value looking at a roulette site I hear you ask?

I shall explain. Years ago, when I was a young man, (ok, so it was many years ago), I read an article, the gist of which was that because the numbers on the roulette table were not spread evenly (e.g. the middle column has 8 blacks to 4 reds, the 3rd column vice-versa), then it MUST be possible to combine bets to produce a winning system.

I am still waiting to hear of such a system.

The truth is that NO bet at roulette is at true odds, and no combination of two or more bets at unfavourable odds will produce a winning system.

I was reminded of this when reading a post on the Betfair "General Betting" forum where someone named Slicer is claiming to have 'discovered' the Holy Grail of football betting - a guaranteed 100% system on football by placing two bets, with the occasional third bet. Except that sometimes the third bet is actually more than one bet!

Bet 1 allegedly is to lay the Half-Time 0-0 score. Bet 2 is allegedly to back the Full-Time 0-0 score. Bets 1 and 2 to return equal profits, but Bet 3 is the subject of much debate and apparently many hours of wasted time.

With 553 posts to date , it seems there are a lot of gullible people around. Quite simply, for this to be true, then one market MUST be out of line with the true odds, and if this were the case, the market would soon pick up on it. Once again, no combination of unfavourable bets can possibly produce a winning system, but nevertheless, the 'hunt' goes on with conferences being held to discuss various ideas.

Good luck to them. I can personally think of better things to do with my spare time, (not that I have any), but the 'discoverer' must be having a quiet chuckle at how naïve some people are.