Anatomy Of A Trade IMO

Average Guy had a comment that is worth discussing further:

Hello, respect your thoughts but referring the basketball trade that nearly went very wrong. Are you really trading if you only get out when it suits you with a profit but do not accept a substantial loss ? Not questioning your logic as you are obviously successful but what's the difference between a blind punt and what you did ? I need to rationalize this as I do it constantly and feel like crap as I watch the losses double or treble because of an inability to cut and run ?

Ignoring that in my experience, when someone says "With all due respect" or "I respect your thoughts" what they really mean is "I think you're an idiot", it's a good question.

First of all, I was in and out of that market several times before that lay at 1.69, all trades that were exited when the value was to do so (in my opinion). I have no doubt that I am a trader rather than a punter although on occasion I will let my trades run, or add to a position, if it is value (in my opinion) to do so. Looking at the details in My Account, prior to laying Dallas at 1.69, I had layed them at 1.74, 1.72, 1.67 and 1.96, with lays of Miami at prices ranging from 1.68 to 2.38.

Secondly, I do not "only get out when it suits [me] with a profit". At one point in the first-half I was green on both sides to the tune of around £400, (thinking "this is easy") but by half-time, I was down to around just £50 on each side. I took the losses because the value was gone, and it was the right decision to 'cut and run'.

Thirdly, and specifically with the lay of Dallas at 1.69, this was a position entered in the second half of a game, and I believe it is true that Dallas never led by more than 7 until late on in the game after Miami had closed the gap, gone odds-on and I had closed out my position. In my opinion, it was never value to close out, and in fact I added to my position by laying an additional £1,886 at 1.46 16 minutes later, and 13 minutes after that, a little more at 1.32. It was my opinion that, as is often the case in a close basketball game, the prices available were value lays, not backs.

I've used the term "in my opinion" several times in this post, and for a reason. Betting odds are not exact probabilities in the same way that the outcome of throwing a die or tossing a coin are. They are the result of opinions. If your opinion is right more than it is wrong, then you will come out ahead in the long run. My opinion will not always be correct, at least not when it comes to betting, but it would be wrong for me to have 'cut and run' for a big loss if it wasn't value to do so - in my opinion. It's a spin on the "should I green up at 1.01 or let the bet run" issue. Assuming you are not over-staked, then you lay at 1.01 if it is value to do so, not just because you can.

I don't like big losses, but the occasional big hit is unavoidable. Fortunately the more frequent wins mean that the trend is upwards, and it's only when the trend becomes downward that you need to re-consider your strategy. Some might argue that you should always have a stop-loss in mind when entering a position. I don't agree, at least not for sports where the prices can move fast. What price should my stop-loss be? A stop-loss for the sake of it doesn't make sense. The game-state is constantly changing, as are the prices. Backing back at say, 1.5 might be value if Dallas are up by 20 (excellent value in fact, and used for illustrative purposes only), but would be terrible value if they were down by 20 (bear with me, I'm trying to make my point). What if Dallas are up by 10? Would 1.5 be value then? Well, it might be, but it might not. How much time remains? What is the foul situation? Any key injuries?

The fact is, I never felt that backing Dallas at the prices available, given the state of the game, was value. Experience gives you the confidence to put your money where your mouth is, and means that even if you lose, you're OK with it because you made the right decisions.

A good comment though, and while it's not good to take a big loss, it's far worse to take a big loss when it is not value to do so, and then watch as your initial opinion is proved correct and the price comes roaring back. If you stake sensibly, you should be able to make the correct decision. It's when you are over-staked that panic sets in and you close out a position in desperation. Fear and greed drive the markets remember. To quote Warren Buffett "Be fearful when others are greedy and greedy when others are fearful".

Accounting For My Taste

Young Curly is back for another blogging effort over at Part-Time Gambling, and while his first few posts are a good read, (not quite as good a read as this blog of course), only time will tell if he can stay the course or fall by the wayside, a fate that seems to befall so many blogs about betting. I think a lot of enthusiastic wannabe professional gamblers stumble across the exchanges, think all they need to do is open an account and make a steady income, and want to brog / blag about their success. When it doesn't turn out to be quite that easy, the enthusiasm for both bloging and betting quickly dies. It's hard to be enthusiastic about losing money!

I've made a change to my accounting procedures, whereby I now deduct the Premium Charge from the previous week's most profitable day. That saves me from starting a new month with a hit on the PC which really belongs to the previous month, and it stops me from highlighting record highs only to have the spreadsheet take what appears to be a drop a few days later. I maintain moving averages too, and it messes these up if it is entered after the fact. Perhaps a little pointless, but it's one of the annoyances of the Premium Charge that it can be almost a week and a half after a win before you know how much you really won and I feel better applying it retro-actively to the best day. If I were really anal about it, I would pro-rate it across the charged week's profitable days, but even I am not that sad. Well, maybe I am, but I just don't have the time for it.

The 100% record of teams winning the third game in a tied 2-3-2 series in the NBA Finals is on the line after the Dallas Mavericks won another thriller against the Miami Heat to take a 3-2 lead to Miami, just one win away from the title. I layed Dallas at what I thought was a value 1.69 early in the third quarter, but it all went pear shaped as the price dropped to the low 1.3s. I considered bailing out for a £1.5k loss, but finally Miami rallied, went odds-on, and with my nerves shot, I saw value in greening up at that price, and came away with a modest win as Dallas pulled away.

To end with Curly again, he had some words on the ROI and trading subject:

If only you could have won and then lost a little more.

Whilst I agree that ROI is in some ways irrelevant that is mainly because the 'investment' part is hard to put a value to. If you back £100 at 2.0, lay £100 at 1.9 and repeat 3 times and your selection goes onto win your profit minus commission is £30. So your ROI could be determined as 30% or 10%. The problem with saying its only 10% is you never actually risked £300.

However to completely ignore the £300 is perhaps just as wrong. An example for this, scenario A you back £100 at 2.0 lay £100 at 1.9 back £100 at 1.6 and lay again at 1.5 for a profit of £20. Scenario B you have 20 backs of £100 at an avg of 1.9 and 20 £100 lays at 1.89 for a profit of £20. If you calculate ROI as a % of risk then they are both 20% if you look at total investment you come up with 10% and 1%. I believe a long time ago you discussed something similar to this and possibly broached the topic of ROCE as a measure (I may be wrong).

He is actually wrong, ROCE (Return On Capital Employed) has never been the subject of a post by me. It probably won't be any time soon either. It seems to be the consensus that ROI / ROCE or whatever, are all rather meaningless for in-play trading, and nigh on impossible to work out after a busy trading game. I'd need a qualified accountant, and my son still has another year to go!

So this accountant dies, and he reaches the pearly gates and is amazed to see a happy crowd all waving banners and chanting his name.

After a few minutes, St. Peter comes running across and says, "I'm sorry I wasn't here to greet you personally. God is looking forward to meeting such a remarkable man as yourself."

The accountant is perplexed. "I've tried to lead a good life, but I am overwhelmed by your welcome," he tells St. Peter.

"It's the least we can do for someone as special as you are. Imagine, living to the age of 123 and still looking so young," says St. Peter.

The man looks even more dumbfounded and replies, "123 years old? I don't know what you mean. I'm only 40."

St. Peter replies, "But that can't be right - we've seen your time sheets!"

So Close

The screenshot shows how close I came to dodging the PC bullet this week. If only I could have lost a little more!

A couple more comments to comment on, the first being Scott Ferguson's take on the question of traders 'never actually committing to stating what return on investment they are targeting or achieving.'

Part of the reason for that is that ROI doesn't really work for trading. From a bank of £200, I might turn it over 2x or 10x or 100x, depending on what event it is. Turnover (investment) is irrelevant - there's the absolute limit of what you are prepared to risk, although for most that is only a figure they temporarily use in the market to work back from, or I'd look at it more from the angle of 'what value is my time worth'. And there's also the angle of not setting a limit on what you want to win because every opportunity is different

As Scott says, your risk is your limit, but the reward can be anything upwards of that amount. Lay at 1.01 and you either let the bet expire, (for a loss or for 100 times your stake), or you green up at some point in-between. It's impossible to say what ROI you are targeting.

Scott (not Ferguson this time) is having trouble commenting. Not sure if this is a widespread problem or not, but I haven't heard any complaints before. Re: my Kelly post, Scott said:

Sounds fascinating.

A further explanation of precisely who the prolific ROI-boosting Kelly is would make it even more interesting.

Is Kelly a male or a female?

How does he/she split himself into two?

On a separate note, I share your pain with the MLB daily picks of late.

Are you just laying the home favourites with the minus ratings or are you staking all the posted ratings that are showing value?

I continue to read your blog with great interest.

Lest Scott, or anyone, be unaware of the great John L Kelly, start here, with a post about a post on Scott (Ferguson's) blog. A lot of Scotts around today.

Regarding the MLB Daily Picks, I am blindly following the one pick of the day selection. After a promising start, a losing run of six took away any system profits, but my profits will come from a reduced PC rather than from this system itself. The losing run was halted at six last night, as the Tampa Bay Rays won 4-3 at the Los Angeles Angels of Anaheim in extra innings. Losing runs are to be expected though, when the average price is 2.15.

I'm also following the Free Under Over Soccer picks for the same reason. 1.94 is the average price for these, and they have a longest losing sequence of 5.

Wayward Target Shooting

Wayward Lad commented on my last post that:

I always find it interesting when reading the posts of Traders that they never actually commit to stating what return on investment they are targeting or achieving. This isn't a criticism.

One trader I'm aware of has a max exposure of £1,250 for a target return of £75 per "play"; which he repeats 10 or 12 times a day, 6 days a week. If you max exposure is £5000, what return on that are you hoping to achieve (you don't have to answer if you don't want too)? I like your blog btw, but I'm not a trader.

The answer is that as an in-play trader, I am targeting as high a return on the investment as possible. For instance, when I lay at say 1.0x, I will let that bet ride until the point that it becomes value to lay the bet off, which may mean taking a loss at a lower 1.0x or greening up at a higher price, or indeed letting the bet run to expiry. I certainly do not enter the trade with a set goal of making one tick or two ticks or whatever. If my exposure is the full £5,000, it is in my conservative nature to at least reduce that amount a little sooner than I might if my exposure is £50, and while I would always hope to do that only if it is value to do so, I do accept that in my haste to trim my exposure, and bring my breathing back to normal, I may sometimes be giving away value. But it's good for my health!

I will also trade out of positions pre-game in the rare event that a price moves enough to take it from a value back to a value lay for example. To take an extreme example just to illustrate the point, I might have a team priced at 2.0 and find I can back it at 2.2. If closer to kick-off, the price drifts to 1.8, then I will lock in some green, but again, when I made the initial bet, I do not target a set return on the investment.

As a racing man, you likely view trading differently to myself. I am not trading to scalp one or two ticks of profit - I enter a position because I think that a price is wrong, and will correct itself. If circumstances mean that the price continues to represent value, I ride the wave.

I am not a big fan of setting targets, whether they be daily, weekly or a set number of ticks. I believe that they constrain you, and you end up losing money, either by forcing you to make poor value bets to achieve your target, or by encouraging you to trade out of a position simply because the target has been reached.

Daily targets are the most ridiculous. In the sports I mainly follow, some days there just aren't any value opportunities at all. Other days, there might be several. To force myself to bet when I shouldn't, or not bet when I should, is just nonsensical.

You enter a trade when it is value to do so, and you exit a trade when it is value to do so - not because your target (or stop-loss) has been reached.

When Bets Go Wild

Brian commented:

Good post there. Some big losses though. How did you recover form them and what % of your bank did they account for? What is the max % you would bet nowadays compared to in the past? Keep up the good work.

Alcohol? Lost £1,317.82 on 31st August 2006. -27%
Distracted? Lost £3,148.76 on 25th July, 2006. -54%
Tired? Lost £5,183.31 on 1st January, 2007. -29%
Chasing? Lost £2,841.59 on 4th January, 2007. -22%

The longest it took me to recover was 227 days after that New Year's Day debacle in 2007, a loss that was compounded by a losing February and April before I righted the ship, and steered a steady course to profit once more.

It didn't help that I had just started dating Mrs. Cassini, and my usual routine was somewhat disrupted. It wasn't really her fault, but if I have a shortcoming, it is that things are never my fault - it's always because of something out of my control.

What did help was that I knew what my mistake had been, and that there was nothing wrong with my strategy, only that I needed to stick to it. That discipline thing again.

My maximum exposure has always been £5,000. I've never asked for that to be raised, and as my style is more in laying at low odds, rather than backing at them, the limit isn't usually a problem. When a bot went wild at the end of a college basketball game earlier this year I did miss out, but that's the only time.

In the early days, the percentage of my bank at risk was higher than it is today. Right now I have a fair sized bank, so it's not possible for me to lose the percentages from a few years ago, and usually 2.5% is about as high as I'll go, which seems to be reasonable enough. I will occasionally commit the full £5,000 on an in-play trade but I would cut my losses if the market moved against me, and never expect to lose the whole amount.

While I don't consciously have an amount that I am comfortable betting, my body soon lets me know if I've over committed - and my wife can hear my breathing pattern change to heavy, so she knows as well and stays away! A side benefit of this is that I am able to watch hours of "When Girls Go Wild" videos without fear of interruption, although they are nowhere near as exciting as "When Bots Go Wild". So I'm told.

It also depends on how good the value on the bet was. Losing £1,000 on a good value bet is a lot easier to take than losing the same amount after making a stupid error.

Reality Check

I recently removed the link to John O'Dwyer's blog, as none of you most likely noticed. It was getting rather repetitive, with the set format of each post along the lines of "still no money due to a small bank size", never mind that I have told John (pictured above)that bank size isn't the issue, betting without an edge is the issue.

He clearly isn't interested in advice, as several helpful comments were never published, proof that while, as the saying goes, “you can lead a whore to culture, you can't make her think”. Or something like that.

While I'm not holding my breath that he is serious about finishing, (that would suggest he had seen the truth, which I doubt), he did write a post yesterday, later redacted, that went:

Finished is a headline I hoped I wouldn't use. Nearly anyway. If I wrote the extent of how bad things really are on here it would shock a few people, and it has nothing to do with losing. I've not been losing recently, I've just not had the means to do anything about it for the time I need. There is big money to be made here as well. I've already won £350 mythical quid from predicting a new winner of the woman's French Open and Rafa as the winner of the men's, but what good is that?! When I did make the money I made 2 weeks back, I withdraw most and paid off various credit cards. I've been using an ultra small bank and seeing as this is my only form of income, it's an impossible task.

I've had a bad few months overall on Betfair and not been able to do what I did last year. I know a 1001% why. I'm using too small a bank size. My Betfair bank at the moment is £2.66 and it's not been higher than a tenner for about a week now, hence the small amount. I owe about 5k in total which again is not betting related. That £2.66 is the lot for me. I'm all sold out.

Wish me luck, and thanks.

Contrast the two quotes “I’ve had a bad few months overall on Betfair” with “I’ve not been losing recently”. Eh?

While I have not had my account as low as £2.66, I was at one time down to £21.40 from an initial, and to date only, deposit of £98.50, so I do have some knowledge of working with a small bank. It can be done. The difference though is that while my account was a hobby, and I had the time to experiment and find what worked with no pressure, John thinks that he can generate an income from his balance just like that. Well, good luck with that idea.

A golden rule of gambling is never to bet with money that you can't afford to lose. Scared money (fear) leads to poor decisions. Your mind has to be clear, alcohol free, and well rested too, although the rest thing to me simply means a good night’s sleep. A two week holiday to recharge your batteries is overkill – from a trading perspective, it’s as useful as charging your mobile for two weeks.

If you're distracted by outside factors, you're not going to succeed in this game.

I’ve made plenty of errors, but that’s acceptable if you learn from them. As John F Kennedy said “An error does not become a mistake until you refuse to correct it”.

Alcohol? Lost £1,317.82 on 31st August 2006.

Distracted? Lost £3,148.76 on 25th July, 2006.

Tired? Lost £5,183.31 on 1st January, 2007.

Chasing? Lost £2,841.59 on 4th January, 2007.

Ouch, but lessons learned.

John does have it right when he says “There is big money to be made here as well” because there is. The problem is that everyone else is after it too, and you need to be patient and disciplined in the struggle for it.

And, of course, well hydrated!

Kelly And The Strong Draw

A final look at the Strong Draw results for 2011, specifically a look at how Kelly would have fared as a staking system.

While Kelly would have indeed have increased the ROI to 63.9% (versus 19.5% at level stakes), the volatility of Kelly makes this a rather meaningless comparison. Had the final selection of the season been a loss rather than a win, the ROI would have been just 6.6%, a reflection of the huge 3.85 that was available on this game.

Working with a starting bank of £1,000, the biggest draw-down would have been £110.82, and the average stake would have been £98.91, with a high of £175.11 and a minimum of £40.16.

Half-Kelly would have resulted in an ROI of 49.75%, with a draw-down of £39.80, an average stake of £48.37, with a high of £85.96 and a minimum of £19.82.

These numbers are for illustrative purposes only since, in practice, some games are played simultaneously and I have also made no adjustments for commission charges.

NOBs And Buttocks

It's not usually part of my investment strategy to bet on Argentinian football, but occasionally in a good week, I'll have a bet or two as part of the Premium Charge reduction strategy. 

My bet on Newell's Old Boys (classy fans above, fresh from filming TOWIE) last night was voided, apparently due to crowd trouble, including an incident when two Newell's fans on a motorcycle opened fire with guns (it is unclear what the ratio of shots to shots on target was) and wounded a Rosario police force commander. Without meaning to trivialise the fact that a person has been shot, it is frustrating that it will be costing me money. Do these people not think about how far-reaching their actions are?

Saturday was not a good day. Looking for some 50/50 shots, I seemed to pick the wrong one with remarkable consistency emphasising again that for me at least, value is a lot easier to find in-play than it is pre-game. I picked a bad time to start following the MLB Daily Picks as they are now negative with a current losing run of 4, and 6 losses in the last 7 selections.

Game 3 of the NBA Finals starts in a little over an hour, and if either team has a double digit lead in the fourth quarter, lay them at 1.02. Twice in the last three play-off games, a team has come back to win from the dead, and Dallas, who achieved this last week in Miami at the American Airlines Arena, now have the momentum in the series and can win out in Dallas at the American Airlines Center with the 2-3-2 format now in use. A 2-3-2 final series has been tied at 1-1 eleven times, and the winner of game three has gone on to win all eleven series. Miami are still favourites at 1.72, hardly surprising with Le Bron James, Dwayne Wade and Chris Bosh, but Dallas are resilient and that 1.72 looks a value lay to me.

Lest anyone think my comment on the shot policeman be in poor taste, the victim was shot in the buttocks, in no serious danger and will survive. Similarly, my account will receive another kick in the arse next week, but will also survive.

Janus

The European football season is now in the books, and the screenshot above shows the final strike rates for the Strong Draw system across all leagues individually and in total. Ligue 1 (37%) finished slightly ahead of the Bundesliga (37%), with the EPL (36%) close behind in third. La Liga (33%) and Serie A (31%) were the 'worst' of the leagues. It is a very selective system, with just 157 picks over the season, and the 55 winners means a strike rate of 35%.

I monitored the selections that fell just short of the 'Strong' rating, and while their inclusion did slightly reduce the strike rate overall, it wasn't by a huge amount, and the extra bets (50) would have boosted the bottom line. The results with these included is shown below in yellow:
As I mentioned before, I only started keeping an accurate record of the prices in 2011, where the average price was 3.44, an implied probability of 0.291. Only La Liga fell below this number when the 'weaker' draws were included - disappointing, but with just 9 selections, hardly anything to worry about.

With the Spanish play-offs not concluding until June 19th, I have a few days to decide how to merge the promoted teams into the spreadsheet. It will probably be along the lines of assigning promoted teams the average for the bottom half of the league (excluding relegated teams) with a small adjustment based on finishing position, e.g. QPR will start the season with slightly more points than Norwich City and Swansea City. Assigning the league average is too generous - the gulf between the top league and the second tier appears as great in France, Germany, Italy and Spain as it is in England with at least one promoted team going straight back down in each country.

Always Learning

The always respectful Mr. Nordsted posted a comment on my last post which oddly didn't show on the blog, but, perhaps to compensate, appeared in my in-box twice. It's worth a read, with some advice on the importance of staking correctly.

Once again congratulations on your most informative blog. Just a quick word on a number of points. This years Drawmaster did not go as well as last year where I made 30 points profit and you are right this season I did these selections for goal.com and it was part of the preview I would do 3 matches so if one came in you were in profit and the readers seemed to enjoy this although I certainly believe being a little more selective would have produced a bigger profit. All I can say is the 3 selections I picked every week were the 3 best rated for that weekend and I never strayed from that course.

As regards the baseball my colleague is doing OK and hopefully he will be able to return a good profit by the end of the season. I am pleased with way the opposing the home favourite with a negative rating has gone and this is showing a profit of just over 18 points in 110 bets which equates to a 16.54 Return on Investment. I will ensure a ratings result table goes up on the site very soon.

As I've said before I do not know one end of a baseball bat from another so it will be interesting to see where this goes and it is interesting to note your comments on when the strong home favourites start turning it on. The only thing I would say to anybody considering following these ratings is please be aware as you will soon see by the table losing and winning runs can be streaky and a long losing run can play tricks on the mind and havoc with your bank if you are not used to betting like this. So please make sure you are always correctly capitalised keep the stakes low and understand you can have a substantial drawdown and also please be aware that at this moment in time we are just experimenting here although initially the results do look promising.

All the best and keep up the good work with the blog.

My comment on Pete handicapping himself wasn't intended as a criticism of the selection method, only that by his commitment to goal.com to produce three picks a week, he was making things harder for himself than they are for those of us who have a little more freedom. An ROI over a season of 13% is an excellent outcome to my mind.

Mark had a quick question on the Premium Charge

have you worked out how much you need to lose each week to avoid the PC based on your average weekly win and commission rate?

and the answer is yes, I need to lose 1p a week (or more) to avoid the charge.

Being a little more serious, if I have understood the question correctly, the proper answer is that in an average week, I would need to add about £6,000 in winnings and £6,000 in losses to generate enough commission to stay under the radar. My points discount right now is 22%, but that will fall away during the summer, as will my 'average' weekly profit. I need to grow some bigger balls and put more money on the line at borderline, or even slightly negative value, but it goes against my nature. I've written before how betting thousands in-play is not a problem but more than a couple of hundred on a punt makes me a little nervous. I'm working on it.

Finally, a story to highlight the importance of reading the rules properly before venturing into new markets. It concerns baseball, and Betfair have this season introduced a "5 Innings Moneyline" market -

Which team will be ahead after 5 innings have been completed? For bets to stand there must be 5 full innings of play unless the home team is leading after 4½ innings.

There is no half-time in baseball, but this market seemed close enough, but unlike other half-time markets where "dead-heat rules" apply, this market, for some odd reason, states that ***THIS MARKET WILL BE VOID IF THE SCORES ARE TIED AFTER 5 INNINGS***. Never mind that the rule is posted as written - with loud asterisks and shouty uppercase. One idiot, who shall remain nameless, didn't notice or read it, and was all over a back at 1.1 in a game tied in the middle of the fifth. When more money appeared, almost begging to be taken, it dawned on our nameless friend that perhaps, not for the first time in his (or her) life, he (or she) was missing something. Dead-heat rules did NOT apply, so in this situation a back of 1.001 was value, never mind 1.1. Fortunately for our simpleton friend, the bottom half of the fifth innings saw no runs scored, (although a runner on base with no outs ensured that a change of underwear was required), and he (or she) a-'void'-ed a small disaster. I bet he (or she) felt pretty silly though. I know I would, - if it were me. Which it obviously wasn't.

All About Pete

With the Champions League and French League both reaching their conclusion this past weekend, the ratings and other numbers are now final for the season. 

With the Strong Draws finishing with one more winner from two selections, the total for this system for 2011 is 24 from 69 selections (34.8% - average price 3.44), and a profit of 13.45 points with an ROI of 19.49%. Only half-a-season of tracking these selections, but they compare well to Peter Nordsted's Drawmaster system which, for the full season, went 38 from 119 (31.9%), with an ROI (by my calculations) of 13%. 

Pete does handicap himself by sticking to the EPL (or lower English leagues when there are no EPL games) and by 'having' to find three draws a week. As I've written before, some weeks there may be none, other weeks possibly ten, so the chances are that either he is reaching to find selections, or he is leaving winners on the table. I prefer the more freestyle approach of picking selections based on their merit, and if there are no selections or twenty selections, so be it.

Teamprofit asked "Interesting. What do you look for when spotting these candidates?" and the answer is that I use an Elo based rating system to tell me the matches for which a draw would leave the ratings for both teams unchanged (or almost unchanged). Over the past two seasons, this has proven to be a strong indicator, and while long losing runs can be unsettling, at 3.4+ per winner, a strike rate north of 30% is a long-term winner.

Once again, the Premium Charge is a factor with my Total Charges dipping to below 18.3% following last weeks big (for me) win. Looking for a "win some / lose slightly less" system to mitigate the charge, I've been following Pete Nordsted's baseball selections, and they are performing rather well. I've only been following them since April 18th, and the 54 selections since then have gone 27-27 and are showing a profit of 3.27 points, (ROI 6%). Pete posted an update while I was away which is worth a read if you are interested in baseball betting. 

Betting on baseball is arguably trickier in April and May than later in the season than once form is a little more established, so it will be interesting to see if the success continues. Almost all the research shows that a system backing the underdogs will be more successful than one backing the favourites, but as in football, there is a point where it pays to back the short-priced favourite. I first identified this back in the 2001 season when I had too much time on my hands, and I believe it still holds true - probably for the same reason that I suspect it holds true in football.

Impressive Barcelona

At 2.36, the Over 2.5 goals price seemed generous for the Champion's League Final. Lacking confidence in the spreadsheet's pricing ability on neutral games and inter-league games, I didn't play this pre-game though. Reading in-play football matches is not something that I seem to be very good at, or at least there are many out there who are better than me, but occasionally I get something right. There looked like goals from the start, and the market agreed as the prices didn't drop too fast, even with no goals until the 27'. At 2-1 to Barcelona, it appeared to me that there were still more goals to come and I switched to the 3.5 goal market for a nice profit.

I have a few bets for the French finale tomorrow, and that will be it for the season. Two Strong Draws in the Monaco v Olympique Lyonnais and Paris St Germain v St Etienne games, and value for Valenciennes (2.02), Lorient (2.66) and Lille (1.88).

I'll be back on Thursday after a few days away, sans PC, and will post up the final Strong Draw 2011 results. I know you can't wait.

Hurrah For Greed

One of my finer moments this morning when a sizeable lay of the Chicago Bulls at 1.02 was snapped up by someone eager to buy some money. The price dropped even lower, before the Miami Heat staged a recovery to win from some 13 points down and for once I rode the wave all the way. Well, most of the way. I made sure that I wouldn't end up with nothing once the price started moving out. It seems that when I'm lopsided on my outcomes, the luck never goes my way. If I need a three-pointer for a big win, the shot rims out. If I need a three-pointer to stay out, the shot sails through "from downtown". Or it's a two "and one" that spoils the day, but not today. Unfortunately the PC now returns after a two month hiatus, which will get June off to a bad start seeing as the next Wednesday falls on the 1st.

Love 'em or hate 'em, we probably all have an opinion on 1.01 (or close) backers. When a 1.01 is turned over, or 'gubbed' to use the forum phrase, threads spring up pointing out how much was matched, and usually from people not involved in the carnage / ecstasy.

While my lay was at 1.02 rather than 1.01, Scott Ferguson's post titled "the money buyers get burned again hurrah, hurrah...." on the topic of laying / backing at low prices drew an interesting comment. A George commented that

I have been following the blog for about 1 year now and I have seen a few posts about 1.01-backers getting burned or having to go through a gut-wrenching reversal before getting their cent. I find all those examples interesting and have two questions. First, why are you so negative on these backers e.g. "hurrah, hurrah"? Second, by only showing the spectacular losses and never pointing out the frequent, boring wins you are not giving a fair (RoC) treatment of the strategy? I believe that it can be very profitable when paying attention to the right factors (like investment grade credit investing) and a good psychological fit for a certain type of people. Thanks.

As Scott points out in his reply, backing at 1.01 leaves little room for manouvre. The reward of laying is huge, while the risk is small, but as with any price, some 1.01s are value backs, and others are value lays. In some quieter markets, you can sometimes find 1.01 available on a completed event - now that is buying money, but in sports like NFL and basketball, the 1.01 seems to get matched too soon quite often. Scott's reply in full:

That's fair comment. The 'hurrah, hurrah' part actually related to a song I'd been listening to this morning, an old song by The Jam, so it follows the tune. But yes I do cheer when 1.01s get beaten.

Surely 'frequent, boring wins' can be achieved with far less risk by trading one tick briefly at a much higher price? Just one going wrong in 101 markets and all you can do is break square at best. Betting circles over the years have been littered with leviathan punters who took the short odds for huge sums with win after win after win.... then it all went pear-shaped and they ended up selling used cars or the Big Issue.

In the States, they call them Bridge Jumpers (where they'll end up if it loses). In Australia, we call them bank teller bets - when a horse called Ajax in the 1930s would run, it was so good it would start very long odds-on. Bank tellers would take all the cash out of their drawer on a Friday night, take it to the racetrack, take home the 'interest' and put the money back in the drawer on Monday morning. When Ajax got beaten one day at 1-40, the brown stuff hit the fan.

No doubt there is someone who can make it work but the cost of just one mistake is just far too high. At least if you were backing 1.02 shots on Betfair, there'd be an upside you could cash in on (lay 1.01) without sweating a result. Backing 1.01 leaves nothing to chance.

I'm an 'educate the masses' guy. There will always be an exception to my advice but I'm trying to stop people falling into traps (eg thinking 1.01 always equals sure thing) and using their brains to find a strategy which suits them.

When backing at 1.01 in a binary event, you do have the possibility of backing the other side at 120 or more, but in my experience, it's not easy to get matched at those prices unless you really are giving away value.

Markets are driven by two things - greed (lay low) and fear (back high).

Strong Draws - Bundesliga and Serie A

The Bundesliga ended with the teams ranked as shown. Bayern Munich topped the ratings, but not the league, and Borussia Moenchengladbach finished in the relegation play-off spot but a decent 11th place in the ratings.

In total, the Strong Draw system had 10 winners from 27 selections, 37.04% making the somewhat unpredictable Bundesliga at least the second best of the big five leagues in terms of strike rate. France could drop below them this weekend if I have any losing picks.


The Serie A season ended with the teams ranked as shown. In total, the Strong Draw system had 10 winners from 32 selections, 31.25% - the fourth best (if you're an optimist) or the second worst if you're a realist, of the top leagues. I'm an optimist. With an average price on the selections just shy of 3.45, 31.25% is more than enough.

The best and worst Strong Draw performing leagues will be finalised and revealed when the seasons end for the English, French and Spanish teams.

I-O, Compare, Win

Imagine a game played with two coins. One head / one tail is a home win. Two heads is a draw, and two tails is an away win. To price up a match precisely would be rather easy, but when it comes to football, it’s a little trickier.

As I mentioned a couple of posts ago, mano said in a comment:

You mentioned in an earlier post that you have configured your Elo spreadsheet so that it can give you a goal expectation for each team in a forthcoming game. I maintain Elo ratings myself for a few leagues, and was wondering how you managed this. I don't expect you necessarily to reveal your workings and endanger your edge, but would you be able at all to point me at least in the right direction?

When I first started rating teams, I thought I would be able to plug in the two numbers and have a magic formula spit out some prices for me, but that didn't work.

What did prove to be more successful was taking the next step towards calculating the result needed to maintain a team's rating, and this is the strategy used to generate the Strong Draw picks that have proved so successful, but when it comes to generating prices, it finally dawned on me that the starting point has to be the number of goals each team is expected to score.

Once you have these two numbers, it is relatively easy to use Excel and the POISSON function to generate the probability that each team will score exactly 0, 1, 2, 3… goals. And from there it’s simple enough to calculate the probability of any correct score, match odds or over / under outcome. If both teams have a probability of 0.25 of scoring zero goals, then we can price up the 0-0 score at 16.0. Repeat this exercise for all the Under 2.5 results, add them together, and you have a price for that market. Add up all the home results and you have the Match Odds home price and so on.

It’s easier said than done of course, because you first have to come up with the number of goals a team might be expected to score. I use a team's previous games, both home and away, with any 'extreme' results smoothed out.

As might be expected, recent results carry the most weight, but it's more than just the result goes into generating this number. I look at the shots, shots-on-goal, and corners numbers too, as well as the relative strength of the opponents in each game. This is where the Elo ratings come in. Since each team has a rating, a ‘performance’ worth 1.5 versus a highly rated team might be worth 2.0 versus a bottom of the table team. A goal at Manchester United is given more value than a goal at home to Blackpool, and a 4-0 win is significantly devalued if the team ‘lost’ on shots, shots-on-goal and corners.

The end result of all these inputs is one number per team per game – the estimated number of goals that team will score against their opposition. Again, this number will vary depending on the strength of the opposition for obvious reasons.

The numbers are also time-sensitive because ratings are constantly changing,

In the same way that the ‘average’ UK family used to have an impossible 2.4 kids (now down to an equally impossible 1.9 I believe), the probable number of goals a team will score is unlikely to be an integer, but we can still use this fractional number as input to the POISSON function.

From Wikipedia

The first model predicting outcomes of football matches between teams with different skills was proposed by Maher in 1982. According to his model, the goals, which the opponents score during the game, are drawn from the Poisson distribution.

While the Poisson distribution arguably doesn’t work well for ‘binary’ scores (0-0, 0-1, 1-0 and 1-1), by factoring in more than just goals scored, the model seems to work reasonably enough. Besides, I remember Poisson from my Pure Mathematics With Statistics 'A' Level, whereas my recollection, knowledge and understanding of Binomial distribution are pretty much non-existent. No, that's a lie. They are non-existent.

Early observations are that my draw prices do tend to come in on the high side, possibly the result of my model underestimating these ‘binary’ scores, which contain two of the most common draw results, but a couple of statisticians, Mark J. Dixon and Stuart Coles, (authors of the 1997 paper Association Football Scores and Inefficiencies in the Football Betting Market), invented a correlation factor to compensate for these low scores, and I may have to reinvent something similar.

The maths can get complicated, but if I am finding value in the 0-0, either backing or laying, in every game, then clearly an adjustment is needed, and I have no qualms about tweaking.

I’ve been saying that this spreadsheet is a work in progress for a while now, but I do feel that there is finally light at the end of the tunnel. Of course, it could be a train, and while 31 games at the end of a season is a very small sample, a profit on the Match Odds markets of 14.43 points from 26 markets where value was identified, is a good start.

The Under / Over 2.5 selections were a little more, well, selective, generating 5.75 points from 14 qualifying matches.

Roll on 2011-12.

Recency Effect

It is certainly true that the final round of the EPL today makes for a dramatic finish in the relegation battle, but the claim that today "undoubtedly is the most intriguing end of season relegation battle in the history of the English Premier League" shows how selective and short our memories can be.

The reality is that undoubtedly it is NOT the most intriguing end of season relegation battle in the history of the English Premier League at all.

Cast your minds back a mere six years, when the final day of the 2004-05 season arrived with not one team definitely relegated from the EPL. It was the first time since 1992-93 that this had happened since three-up, three-down was introduced as West Bromwich Albion, Norwich City, Crystal Palace and Southampton all tried to avoid the drop.

I'll let Wikipedia explain it all:

Going into the final round of matches, no team was assured of relegation. In each of the last three weekends of the season, the team that was bottom of the table at the start of the weekend finished it outside the drop zone. The final round of the season on 15 May started with West Bromwich Albion on the bottom, Southampton and Crystal Palace one point clear, and Norwich City in the last safe spot and two points from the bottom. For the first time since the advent of the current Premier League in 1992–1993, no club was assured of relegation going into the final day. The final matchday was publicised by Sky Sports as 'Survival Sunday', with accompanying promotional material advertising the last matchday like a title fight or epic movie blockbuster.

West Brom, who had been bottom of the table and eight points from safety at Christmas, did their part by defeating Portsmouth at home 2–0. Norwich, the only side to have their fate completely in their own hands, lost 6–0 at Fulham and went down. Southampton lost 2–1 at home to Manchester United. Palace, away to Charlton, were leading 2–1 after 71 minutes, but with eight minutes to go, the Addicks' Jonathan Fortune equalised to relegate the Eagles back to The Championship. Thus, West Brom stayed up, and changed history, becoming the first club in Premiership history to avoid relegation after being bottom of the table at Christmas.

One should never say never, but the drama of that 'never' to be forgotten (15.5.05) day will 'never' be beaten.

Rapture For AFC Wimbledon

I have the draw priced at 3.23, but perhaps Udinese v AC Milan should be added to the Strong Draw Picks based on their current price of 1.72. The draw has traded as low as 1.5 and no higher then 2.28 so clearly the usual rules do not apply. Udinese need just a point to advance through the "gates of paradise" (as coach Francesco Guidolin puts it) and seal the fourth Champions League spot, and one imagines that AC Milan won't be too concerned about winning. The two teams drew 4-4 in Milan. It's a huge opportunity for provincial Udinese, since qualifying for the Champions League will be a lot harder from next season, now that the Bundesliga has overtaken Serie A in UEFA’s table of coefficients.

Other than this game, with the relegation issues already settled, none are meaningful and probably not a good week to do much other than back the draw at Brescia and lay a few favourites for small stakes.

Spain wrapped up their domestic season yesterday, with Deportivo La Coruna being relegated after 20 seasons at the top. They wouldn't have been relegated if these things were decided on my Elo ratings, since they finished in a relatively decent 13th place, and it would have been Real Sociedad taking the drop with Almeria and Hercules, who finished the Spanish Strong Draw picks for this season with a 0-0 at a tasty 3.8.

A little over two years ago, I wrote

What price on AFC Wimbledon topping this league next season? I have to say that when the club was formed I thought the whole enterprise was doomed to failure, but in less than seven years the club are now just one step away from the Football League and playing the likes of former top division teams Luton Town and Oxford United. That is a great story.

The great story is even greater now as AFC Wimbledon win a deserved place in the Football League next season. (I say deserved in reference to the fact that they finished clear in second place, six points ahead of Luton Town, in the regular season).

Say of them what you will, but play-offs make for dramatic finales to a season. Luton should be back next season, but I suspect most neutral fans were behind Wimbledon yesterday.

Five promotions in eight seasons after starting their competitive life with a 1-2 loss against Chipstead in 2002 in front of 4,215 fans, is quite impressive, and only once have they failed to improve upon their previous season's finishing position.

The full-time Chief Executive's salary? - He receives the nominal sum of one guinea a year, because "it sounded posher than a pound".

How Not To Win

While in-play baseball has nothing like the liquidity of basketball, there are often games at a decent hour on weekends or getaway days, and the occasional opportunity. This weekend sees some inter-league games, and the American League teams have come out ahead in each of the last seven seasons. The Chicago White Sox have the second best record in these games, and at home to the National League's Los Angeles Dodgers were attractive at 2.0 today.

As is my wont, I had my in-play lay in at a low, but best available, 1.02, and with the score 1-0 to the White Sox, I was a little surprised to see £10 taken at this price - in the middle of the second innings! Eh? The probability of a team leading by 1 run at this stage going on to win the game is 65.4% (1.53) and 1.02 is a little greater than that at 98%.

At the time of writing, the fourth inning has just ended and the White Sox are up by 7-1 so the backer may well get away with it, but backing at 1.02 in one run games with 5/6 of the game still to go is not a long-term winning strategy.

I await O'Dwyers next screenshot with interest, as I suspect my 20p may be found on his baseball statement.

Incidentally, I have £275 currently sitting at 1.02 if anyone is interested. The correct price for a team leading by 4 at this stage of the game is 1.08, and while "The Book" doesn't list the probabilities for a bigger lead than four, 1.02 seems about right. Help yourselves - I don't care. The world could end at any moment.

Final Day

When I was a youngster, the football season seemed to last for ever, but these days, they're over in a flash. This weekend sees the final games in the EPL, and the screenshot above contains my selections. I'm also finding value in the Over 2.5 goal markets in the games at Fulham, West Ham United and Wolverhampton Wanderers.

I had a comment on the last post:

You mentioned in an earlier post that you have configured your Elo spreadsheet so that it can give you a goal expectation for each team in a forthcoming game. I maintain Elo ratings myself for a few leagues, and was wondering how you managed this. I don't expect you necessarily to reveal your workings and endanger your edge, but would you be able at all to point me at least in the right direction?

which I will address in the near future. I don't think my edge will be endangered too much. I've not noticed the price crashing on too many of my published selections.

EPL Penultimate Round

Mixed results this weekend. The Strong Draw system (I really must find a catchier name for next season) went 1 for 5, showing a loss on the weekend of 1.6 points, with the ROI in 2011 now at 13.57%, while the EPL Value spreadsheet had a poor Saturday but a great Sunday, finding winners today in lays of Arsenal and Chelsea, as well as backs of Fulham and Wigan Athletic at prices of 3.38, 4.7, 3.6 and 2.26 respectively.

Overall on the weekend, the Match Odds returned a profit of 8.18 points from 8 selections, while the Under / Over selections were up slightly, by 0.03 points with two winners from four selections.

It's hard to get too excited about results from games at this time of year given that matches are not necessarily being contested as they would have been earlier in the season, but the results are promising.

Perhaps a little fortunate today with late goals from Olympique Marseille, Newcastle United and Wigan Athletic, but it feels like I am owed a few of those.

A good weekend too for laying the EPL favourites, with only Wigan Athletic victorious out of nine selections, and odds-on non-winners in Manchester United, Arsenal, Chelsea and Liverpool.