Australian Open Tennis Trading Tip

Don't.

Most readers of this blog will already be aware of my views on trading tennis, but just to be clear, if you are trading any market where there are court-siders, and we know for a fact that a top tournament such as the Australian Open has court-siders, then you are gambling and long-term, will lose.

From January 2014:

A few more details emerged at the court hearing in Melbourne yesterday, notably that Sporting Data employ six people to travel to tennis tournaments around the world, and that Mr Dobson had previously been kicked out of a tournament in New Zealand.

To be blunt, you are delusional if you think that you can get up in the wee hours of the night, pick a tennis match, and trade with a positive expectation in the face of such a disadvantage. 

Caan Berry blithely writes:

Instead of trying to predict what will happen ahead of time, they [best tennis traders] focus on what has happened previously and what’s happening in-the-moment. While being select and disciplined in where they enter or exit the market.

That last bit is crucial.

Only entering the market in opportune places in terms of numbers as-well-as on-court opportunity massively increases your chance of success.

The bit that is crucial, is that you will always be several seconds behind the play. Even if you trade [enter or exit] only between games or sets, you are still several seconds behind. Whatever money is available for you to take, it's there because it offers no value to you. If it had value, it would have already been taken.

Unless of course you think these syndicates are charitable foundations, that perhaps don't know what they are doing, and are failing to identify value while you, several thousand miles away, have the skill to spot what they are missing. 

Again, this is simply delusional. Sure, give some people information before others, and they won't know how to use it optimally, but tennis court-siding syndicates have been around for years. Do you seriously think they don't know what they are doing by now?  

Erroneous Selections

A belated, but nonetheless appreciated, comment on my opening post of 2017 Average Joe, about which Dean commented:

Hello I'm a recent follower coming from the School of Buchdahl. Very much enjoying your transparency and writing. You write above "...conversely a placed bet becomes a non-qualifier as a parameter moves and it is no longer a qualifier. These things tend to balance out over time, so there's no point stressing over them."

This issue vexes my decisions on market timing. Can I ask if you've written more extensively on the subject and if affirmative, for links to those posts. You're right that they balance out over time so really it's a question of mentally dealing with "erroneous" selections. Seeing the price drift may confirm one backed the right horse but - particularly in those instances - do you ever feel compelled to trade the other way to exit completely? 

Regards Dean

As much as I have written over almost nine years, I can't recall writing much specifically about market timing. It's generally accepted that the closer to the event start time that a bet is placed, the truer (i.e. more accurate the prices, and thus probabilities, are). As a disciple of Joseph Buchdahl, Dean has probably read Joseph's explanation for this:

The more information, through the opinions of bettors expressed via their wagers, that is brought to a market, arguably the more accurate (or efficient) it becomes at correctly estimating the true probabilities of sporting outcomes. Evidently, the point in a betting market at which the most number of opinions has been expressed occurs at its closing, i.e. at the start of the event.

The probability of an outcome will almost always change from when the market opens to when the event starts, in some cases dramatically so. For example, if word leaks out an hour before tip-off that the Cleveland Cavaliers will be unexpectedly playing without LeBron James, a player with a high VORP (value over replacement player), the lines will move several points.

This is an extreme example to make the point, although similar situations have happened to me in the past, most memorably in November 2012 when the San Antonio Spurs decided to rest their 'big three' (at Miami Heat) resulting in a huge line move - and a fine from the NBA. 

That I can't even recall now whether this move was in my favour or not is probably a good sign. Getting emotional about your betting is a trait that should be eliminated as much as possible.

Basically, I try to place system bets as close to start time as possible to minimise the possibility of the line disqualifying bets from a system or including others. And when such bets are missed or become invalid, I don't look at them as "errors", merely as one of those things that happen in the real world.

Clearly, the further out from start time that you place your bet, the more at risk you are from a market move, but for every bet you might have on the Spurs that goes against you, over time you'll be on the Heat just as often which is why I say it balances out. So long as you are staking sensibly, I don't see any point in trading out of your position - in fact, if you are able to trade out of your position, one might ask why you entered the bet earlier in the first place, rather than wait. 

Some people, notably in horse racing, specialise in trading pre-game movements, and this is a separate topic. My thoughts above pertain to the punter looking to bet and forget and have their actual results as close to verifiable 'official' results as possible.

Church On Sunday

Nenko Gachev, of The Church of Betting blog, commented on my NCAAF (College Football) post:

I have also noticed your reference to my post with some delay.

Just to clear things up: I follow the trend you have kindly shared with us and bet on it according to my own ability. Sometimes I would arbitrarily miss games or vary the spread. The t-test is based on my own results and ability to turn profit out of this strategy and not on the strategy itself. Hence why it only includes the bets I have made and does not take into account the long record that you have collected.

So with my post I did in no way mean to question the numbers you have reported. There are some faults in my betting that prevent me from unlocking the full potential of the trend. But since I just got started with it I am more than happy with the results. So thanks for sharing!

Cheers,
Nenko from The Church of Betting

Misunderstandings can easily arise when two people have different first languages, but if Nenko is concerned that I was in some way upset at his numbers, he is completely wrong. I produced my numbers simply because I have them, and for comparison purposes, not because I was in any way questioning Nenko's.

My results for a system will never be my actual results achieved. As with Nenko, and presumably anyone with a life, sometimes I miss bets for various reasons. Lines might move too close to the event start time, and I miss it, or conversely a placed bet becomes a non-qualifier as a parameter moves and it is no longer a qualifier. These things tend to balance out over time, so there's no point stressing over them.

It makes more sense for me to produce complete and verifiable results which should be of interest to everyone, rather my actual results which are of interest only to me, and heaven forbid they are better than the 'official' results! They are intended to highlight areas where markets appear to be inefficient. 

Anyway, thanks to Nenko for his willingness, albeit unnecessary, to clear up any misunderstandings, and thanks also for stating that he is "more than happy with the results", which is always nice to hear.

As I am writing this post, I received another comment, this one from SportsPicksSystem who asked:

Cassini, did you play that system, or just follow it? I am asking because I was wondering if it's easy to follow since the system is based on the spread. I don't know much about NCAAF market, especially if the spread can move a lot before game time.

As stated above, I played this system last season, but not consistently. It's one of the more difficult systems to follow exactly, because the spreads can indeed be volatile, and a probable qualifier on Friday night drifts out of range by Saturday, or vice versa. The NFL sibling system is a lot easier to closely follow - not only are the lines steadier, but more sportsbooks offer these games.

Continuing on from my last post in which I looked at the last four completed EL seasons 2012-16 and in particular the Draw price, I thought I might share that using the implied probability of the Home team can be a useful trigger for backing the Draw.

The Draw ROI% peaked at 22.3%, from 236 bets, when the HIP (Home Implied Probability) was between 30% and 39.99%. Up to 4.Jan.2017, this season's results have added another 6.18 point from 33 bets.     

Draws And Ties, Averages Are Lies

Baz commented, passing on some thoughts on the Draw from Winabobatoo's Mike Lindley. I hope no one takes offence at my reproducing the comment in full:

Hi Cassini, I recall you believe fewer goals equals more draws, I'm not saying you're wrong, but here's an extract from Mike Lindley of the Winabobatoo weekly magazine, he's changed his mind. Copy and past from Mag.

"Is there a reason why some seasons produce higher/lower draws? Some years ago, I had a theory that if fewer goals were scored, the chance of a draw occurring would increase. In games that have two goals or fewer scored, the possible scorelines are 2-0; 0-2, 1-1, 1-0, 0-1 and 0-0. Out of the six possible combinations, two outcomes (33%) are draws. When up to three goals are scored in a game, the possible outcomes are 3-0, 2-1, 2-0, 1-0, 0-3, 1-2, 0-2, 0-1, 1-1 and 0-0. Out of the 10 possible combinations, there are only two combinations that result in a draw (20%). Do fewer goals mean more draws? The next table shows the average goals per game in each of the last 11 seasons:

The 2010-11 season saw the highest average goals per game but there were 26.88% draws, losing just -4.47%. The two rows at the bottom (the two lowest average goals seasons) do have smaller losses from backing the draw which does tie in with my theory, but 2006-07 was the 9th lowest for goals and draw bets lost -17.19% in that season. That blows my theory completely out of the water!

I can say that I've spent more hours than I care to remember over the last 17 years trying to fathom out the draw, and I always come back to the same conclusion: it's a semi-random result that we have no control over. We never know when it's going to be a pain, and we never know when it's going to go quiet. What we do know is that the evidence clearly shows that it eats up more than its fair share of the bookmakers' over-round. This means betting with the draw is the better long-term option than betting without the draw - Mike Lindley"

Mike's numbers above show that roughly 26.4% of matches result in a draw. 

Although I have no idea what leagues are included, it makes little difference - the last three completed seasons for the leagues I follow have 26.01% of matches ending as draws, but I do question whether the 'average' is useful when analysing the Draw. More on that later.

Yes, fewer goals will tend to result in more draws. 

An easy way to understand why, is to compare the relatively low scoring sport of football with higher scoring sports.

Ice hockey (NHL) averages around 5.35 goals per game and in the 2014-date period has had 1,116 draws (ties) from 4,601 games, i.e 24.25%, which is a lower Draw rate than football, but not that much lower. In fact the 24.25% is exactly the same as the lowest completed season from Mike's list above.  

Now we turn to baseball which in the three seasons 2014-16 averaged 8 runs a game and which saw 641 draws (ties) from 7,387 games, a Draw percentage of 8.7%.

English Premiership Rugby 2010-16, 792 matches averaging 43.19 points a game, and just 22 Draws, 2.78%.

American Football 2014-date, 782 matches averaging 45.6 points a game, 46 draws (ties), which is a Draw percentage of 5.9%.

For anyone wondering why American Football has a higher Draw percentage than Rugby, despite a similar points per game total, I believe this is due to greater parity in American sports. 

NBA basketball 2014-date, 3,226 matches averaging 203.5 points a game, resulting in 174 Draws (ties), a Draw percentage of 5.4%.

And finally a quantum leap to Test Match Cricket, 1877-date, 2,247 matches, with one tie - December 1960 Australia (505 + 232) v West Indies (453 + 284) - 0.04%.

I could go on, but it should be clear by now that the higher scoring an event, the less likely it is that a draw, or a tie will result. 

Mike's mistake is in comparing goals per game averages that are very close to each other, and expecting to see a difference in the number of resulting draws from a small sample.

My example above shows that even the jump in scoring from football (2.61) to ice hockey (5.35) only results in a small percentage decrease in Draws. The percentage drops more dramatically as the points per game climbs into double and triple digits, but to all intents and purposes, the difference between 2.29 and 2.76 in Mike's sample is negligible.

The image below from the interesting Eighty Five Points shows how a more significant decline in goals between 1960 and 1980 resulted in a noticeably higher number of draws:

The author notes "The uptick in draws in the 60's coincides with a drop in goals/game (it's a small effect though)". 

Another way of confirming that fewer goals means more draws is to look at the Under / Over 2.5 results. Some of you may remember that years ago I suggested backing the Unders as a less volatile alternative to backing the Draw, which can result in long losing runs even with value on your side. 

In the four completed EPL season for which we have Pinnacle's Closing (i.e. most accurate) prices, 2012-16, 727 matches went Under, 783 went Over. 70.47% of the draws were also Unders, i.e. were 0:0 or 1:1.

37.4% of Unders games ended as Draws. When three or more goals are scored, only 14.38% of matches ended in Draws.

I mentioned at the beginning that I don't feel using averages is helpful in this debate. The average (mean) Draw price on the four season sample is 4.11, and blindly backing the Draw at higher than this price isn't a sensible strategy and would have cost you 88.84 points. 

The Draw price is higher sometimes than others, for a reason. 

Given that backing every Draw would have 'only' lost you 43.01 points, and it doesn't take a genius to work out that there was value backing the Draw up to a certain point. I've previously referred to this basic system as the Draw-4 (it's catchier than the Draw-4.11, and the 4.0 / Implied Probability 0.25 is close enough) but if you're going to be backing the Draw, you're generally not helping yourself by looking at games like Manchester City v Cardiff City at 12.38.

The above table shows the average Draw odds (Avg D) from Pinnacle, with numbers for the Under / Over totals as well as highlighting the futility of backing Draws with a sub ~25% probability.

In conclusion, in my opinion Mike is expecting too much from small differences in goals per game, and in using sweeping averages.

The two images to the left are from one of my spreadsheets sorted by Goals Per Game. 

On top we'd expect the Draw percentages to be higher, while the below image showing the lowest, should see the Draw percentages lower.

Overall it looks reasonable - the lowest goals per game did result in a lot of 29% and higher draws but there are some anomalous 25% seasons in there.

Conversely, while there's a lot of red in the second image, there are some rogue greenies in there. The correlation is never going to be perfect or perhaps even close to it, but the fewer the goals, the higher the probability of a Draw.

Mike concluded that the Draw is "a semi-random result that we have no control over. We never know when it's going to be a pain, and we never know when it's going to go quiet". 

Aren't ALL bets "semi-random"? Football is "semi-random" because it is low scoring and luck often plays a big part. The best team doesn't always win. Would we have it any other way? 

As for not having 'control over' it, I'm not really sure what that means. We have control over what bets we place and how much we stake, but of course we can’t control results. 

Every time you place a bet, you risk taking a loss, but you can help yourself hugely by researching trends and identifying areas where value is more likely to be found, and just as importantly eliminating bets where value is unlikely to exist.

Yes, there's the occasional Draw at 10.0 that's a winner (e.g. Manchester City v Sunderland in 2013-14) and backing long-shot Draws in the second half of the season in this sample would have been profitable, but bet before Xmas and you'd have had just the one winner at longer than 5.5 - from 65 bets. Ouch.   

For Thine Is The Kingdom

Lambretta of Thoughts of a Football Trader's latest post, rather strangely titled "the chicken or the edge" opens with:

What stops us from becoming the trader we aspire to be? Why, when we look at the market, do we see all this money available yet fail to extract any on a consistent basis? The answer is fear.

The answer to why most traders lose is because they have no edge, or their edge is so small that it fails to cover commission costs. This is another of those posts that suggests if you can't make a profit, it's because of an emotional flaw, in this case that you can't handle the emotion of fear.

The statement implies that if all traders active in the markets are 'fearless', every trader would be a long term winner. It's nonsense of course. In a zero-sum game, with commission costs, that would be impossible.  

He continues:

What can we do to remove those fears, to build confidence, knowledge and therefore control? We find our edge.

The problem here is that the statement implies we all have an edge to find, and if you can't find yours, it's your fault. For God's sake man. it's there - just find it! What the heck is the matter with you?
  
Later in the post, Lambretta acknowledges that the key to mastering fear is in having an edge, writing in a somewhat biblical style:

The kingdom is on offer to us, there for the taking, but without an edge it remains so close but so firmly out of reach. Ask yourself, right now "What is my edge?"

If your answer is quantifiable and based on positive probability, you're likely already profitable.

If you're not, maybe your execution needs work.

What else is an edge, if not a positive expectation?

Speaking of which, someone very generously pointed me towards an idea which has led me to come up with what would have been a very profitable system over the last four and a half seasons using Pinnacle's closing prices available for free courtesy of Football Data.co.uk.

Using just two filters in one league, the system would have generated 417 bets for a profit of 174.25 points, an ROI of 41.8%. My P-value calculator gives a value of 0.000368, (or 1 in 2,716) for these results. 

Too good to be true? With half the season left, I'm adding this to my portfolio and will provide updates here from time to time. 

Although no Pinnacle prices are available prior to the 2012-13 season, I'll take a look back to earlier seasons and see if this bias goes back even further. The Bundeslayga System has shown that inefficiencies can persist for a long time, but an ROI of 41.8% from this sample size is quite ridiculous.   

2016 NFL Regular Season Summary

The NFL regular season records for Small Road 'Dogs since the eight division format was adopted in 2002 are below, left.

As with the College version of the system, the record over the recent years has been solid, with just one losing season since 2005. 

Back in early October I mentioned a "Vanilla Thursday" system idea which at least had a logical premise that "with less time to prepare, coaches play with a 'vanilla offense' which results in low scoring games" and the results were positive. 

18 games, a record of 11-6-1 and a profit of 4.47 points. 

In that same post, Martin asked:

cassini, what about a system that back away teams in divisional NFL games ? I think can be profitable

The 2016 results are in, but not so good for this one. The 2016 record in the 96 Divisional games for away (road) teams was 46-49-1. 

If you stuck with small road 'dogs in these games, the record improves to 21-19-1 and a small 0.99 point profit.

Since the NFL reorganised for the 2002 season, Martin's suggestion has merit. 916 games would have generated 35.2 points (3.84% ROI) while backing road teams in every game would have seen a loss of 17.95 points. 

Betting around the 'key' numbers of 3 and 7 points is interesting. As lines move, I've included the 2.5, 3.5, 6.5 and 7.5 lines and the profit since 2002 in all games is 49.17 points from 1,079 games (ROI 4.56%), which improves to 30.59 points from 365 Divisional games (ROI 8.38%).

Looking ahead to next weekend's Divisional Playoff games, history favours the road teams who have a record against the spread of 33-23 since 2002. 

The 15.5 points the Houston Texans are getting at New England Patriots is a record high for this round, beating the 13.5 the Denver Broncos received in 2012 when they played the Patriots who won by 35. 

That the Patriots are 9-0 for the Overs since 2006 in home Wild Card or Divisional Playoff games is merely a curiosity of course.

Also noteworthy is that after road teams won all four Wild Card Playoff games last year, home teams have won the subsequent 10 playoff games, covering the spread in the last six.  

2016 NCAAF (College Football) Summary

The Church of Betting blog had a post from the end of last year which I hadn't seen until today, on the subject of T-tests for evaluating tipsters. 

I am following an American Football strategy from the Green-All-Over blog, which is about backing away underdogs on the spread. So far this year it has performed pretty well with a yield of 5.83% with average odds of 1.954 from 177 bets. Placing these inputs in the formula gives me a t-score of 0.7967 and a p-value of 21.33%. So according to the t-test the chance that there is some merit to the system is lower here than in the first example, but still high enough for me to continue to follow it and give it a chance. If anyone is interested, I might report on those numbers later in the season again.

I'd like to emphasise that I am not a tipster. The systems I share are generic and highlight trends, but any individual game should be evaluated on its own merits. 

My records for the Small Road 'Dogs systems this season for both the College and NFL regular seasons are as follows:

As previously mentioned in this blog, I use Pinnacle Sports 1.952 binary market price when calculating returns. 

This strategy has been profitable in College Football since the 2001 season, with 110.12 points profit in those 16 seasons, an ROI of 7.3%. 

Only two seasons have seen losses, and both of those were modest - 2003 saw a loss of 0.97 points and 2010 a loss of 1.11 points.

I can find nothing that changed in College Football in 2001 that might account for little 'dogs starting to perform better than expected. That "charged team time-outs were reduced to 30 seconds if the team taking the time-out requests it" hardly seems a likely cause, but what is strange is that the market has failed to correct, nor does it show any sign of doing so.

College Football has plenty of mismatches, with handicaps sometimes as high as 64.5 points as seen in the 2012 Savannah State @ Florida State game.

Some readers may have noticed that 2016 would have been profitable backing bigger road underdogs too, but this was the first season since 2001 when this strategy would have been profitable. On the other side of the coin, 2016 was the first season since 2011 when backing small road favourites was not profitable.

The National Championship game is tomorrow (Monday 9th January), a repeat of last season's Clemson v Alabama game when the Crimson Tide were favoured by 6.5 points but Clemson covered losing 40-45. The total line was 50.5 and this year both the handicap and totals are a repeat.

Alabama have won by fewer than 10 points just once this season, and are 9-4-1 against the spread while Clemson are 6-7. Alabama are looking to add to their National Championships of 2009, 2011, 2012 and 2015 with the same Head Coach, if not the same players.     

I'll post a summary of the NFL Regular Season, and how my systems fared, in the next few days.

Takes Allsorts

James had a comment on my last post: 

Trading firms take allsorts in The City. I've met history graduates and classicists who have worked on trading floors. They are usually Oxbridge types or they know someone who gave them a reference and a shoe in. They usually do the phone work, pushing rubbish upon high net-worth nincompoops.

High-frequency and quant trading again has no interest in economics or finance types, preferring intelligent people who can problem solve, such as maths, sciences and computing graduates.

What economics and finance graduates are actually for, I have yet to discover.

Whether the allsorts are liquorice or a hyphen got dropped I'm not sure, but I suspect it was the latter. The 'old boys' network is sadly alive and well, and in the same way that marrying your cousin doesn't bode well for the gene pool, giving positions to unqualified individuals isn't great for an employer either.

I was also puzzled by the term "shoe in", which of course should have been "shoo in". It's doubly unfortunate as to "shoehorn" something in is to squeeze it in with great difficulty, quite the opposite of the meaning James intended.

Anyway, having no degree in either economics or finance, I feel I should apply for a job as a quant immediately. Unlike some elite traders, I do actually have a qualification higher than a GCSE in Maths and Statistics (Economics too, but I'd better keep quiet about that one), as well as a career in IT (almost) behind me. I'm also, according to my Mum and possibly others, a nincompoop, although my net-worth is probably not high by James' definition. I can also write English without throwing in apostrophes, capitalisations and full-stops where they don't belong. 

Add caption

I finding reading my writing back to myself (out loud, of course) not only entertaining, but also helpful in catching. Any error's, dangling modifiers and missing Oxford commas.   

I received James's latest book in the mail this week, Betfair Trading Techniques, and I hope I'm not going to find any errors in there! I could be asking for a refund, and compensation. After ten pages, I have to say that I have no complaints so far. 

This weekend sees the NFL's Wild-Card Round, and since the current format started in the 2002 season, the small sample of 56 games have seen a tendency to go Under with a record of 32-23-1 (ROI 13.3%). Over the past six seasons, the Under record is 16-8 (ROI 30.1%).

NFL Small Road Dog Results 2016

Followers of the NFL Small Road Dog System this season will have a few quid spare (above) to play the Play-Off Version of the system which has a record of 14-9-1 (ROI 18%) since the 2002 re-organisation of the League.

If we stick to Road teams that are either small 'dogs or small favourites (small being defined as within one field goal), the ROI jumps to 34% with a record against the spread of 17-7-3. 

Be wary that these results are over 14 seasons and is a small sample size.

No Nobel, Maybe Abel

A couple of comments, one from Trader 24/7 last year on the Biased Coin post:

The 18 that lost their entire bank in one toss were possibly bored, didn't take the study seriously or dim. The excuses for the outcomes - curiosity/questioning the facts/control illusion/gamblers fallacy/etc - may have some combined term, I call it being human. No matter how well a strategy people start out with, the effect of an unexpectedly high win or any loss will cause most to prematurely interfere with their plan as they are acting in the moment. It may be unsurprising to see me write that this gives good reason to why bots can and will out perform us.

Possibly bored? I'd agree if they weren't playing for real money, or if they were already wealthy individuals. Dumb? Maybe, but the study group was comprised of college age students in economics and finance and young professionals at finance firms, so for the sake of any of you investing in actively managed funds, I would hope not. 

I'd have thought for 30 minutes they might have stayed focused, although I admit that when I tried the experiment knowing there was no money to be won, boredom crept in. 

Being human means being undisciplined, and as Trader 24/7 says, the study is perhaps a good example of why emotionless bots will often have an edge over us emotional (six basic emotions of happiness, sadness, fear, anger, surprise and disgust) humans.

Second comment is from my old friend James, who has re-posted a very funny post that he deleted last month. First his comment:

New Year's resolution - Must hold tongue. Okay, enough of that. Mr Webb has often said on his website that he is not too hot at maths and academically he was a washout. His website is indeed a testament to those facts. Of course, any mention of The Tangled One often gets a visit from the Fan Boys. Their usual refrain is "Your (sic) sad/pathetic to say this about a great trader". What proof have they other than The Tangled One says he is a great trader? After I recommended to readers of my website that they use the WayBack Machine to see if a site has removed pages, I used it on my site to recover a certain page that I deleted, last month, out of kindness and the Christmas spirit. After receiving nothing in reciprocation, I shall pop it back. ;) 

And well worth a read it is too. Lest James remove it again, it is here in its entirety and in perpetuity:

A leading trader has made a shock discovery after 16 years of diligent work. The trader announced to the world this evening that the Martingale system might not be good for your wealth.

Staff at Betfair Pro Trader can confirm that the term "Martingale" has never been used before on the trader's news blog. The research paper, entitled  Loss recovery systems, yet to be published in Nature, gets off to a rambling start and loses the reader in the middle but finally hits the nail on the head when the last line states "Find an edge and don’t chase. Take your losses like a man!"

Why it has taken 16 years for the trader to discuss the mathematics of trading on such a deep level is not yet known. One theory is that the doctor has started to read the research of others rather than isolating himself and thought it was time he pulled his finger out. If this is the case then the trader community welcomes this recluse into open discussion.

Other ground breaking research from the trader in question includes "How to cheat at cards" and "Moving a mouse across a table in three easy lessons". Surely the Nobel committee can no longer overlook such genius.

I think James misspeaks when he talks of Nobel prizes, since there is no such prize for Mathematics. There is however the Fields Medal but unfortunately for Peter, it is awarded for outstanding mathematical achievement only every four years at the International Congress of the International Mathematical Union, and even more unfortunately for Peter at age 48, one has to be under the age of 40 to be eligible. To make that clear for any non-mathematicians out there, you have to be 39 or less. 

Peter's research paper, while yet to be peer reviewed, is actually full of useful information, with well phrased and clearly stated nuggets like these:

So you have to either win more, lose less or win more often than you lose in percentage terms. It’s nothing more complicated than that. Either in percentage or monetary terms you have to win more than you lose. If you have a higher strike rate it’s possible to end up positive in the long term even though you may lose more when you lose. But it’s because that happens less often.

Anyhow, putting the complexity aside. You have to win more than you lose, that’s how you make money.

Even if you have an edge, depending on how big that edge is, you may still lose money on a session but still make it profitable at the end of the week, month or year. This is somewhat dependant on how you have framed the opportunity.

So most of these processes start with a high probability trade. By that, we mean one that has a good chance of happening.

Apparently English wasn't a strong subject at school either, and a Nobel Prize for Literature appears unlikely. 

The Abel Prize is more likely, or at least theoretically possible, as it is awarded annually, and older gentlemen are eligible for this, but I fear the paper came too late for the 2017 award which will be in Barcelona later this month.

Last year's winner was the UK's Sir Andrew Wiles "for his stunning proof of Fermat's Last Theorem by way of the modularity conjecture for semi-stable elliptic curves, opening a new era in number theory".

I can see 2018 now, awarded to Professor Peter Webb "for his stunning observation that Martingale doesn't work by way of the poorly framed opportunity which happens less often in monetary terms although the percentage can mean you lose less than you win in monetary terms putting dependant (sic) complexity aside, opening a new era in horse-racing trading classes". 

Interestingly, back in 2011, Peter claimed in an interview to be paying the Premium Charge at the 60% rate, which means his win to loss ratio is actually very high, but he hasn't mentioned the Premium Charge on his vendor-blog for almost six years since, which is rather strange. I'm also not sure about the "plus" part of the 60%+ rate. It's 60% to the rounded penny. 

Q: What is your view on the new Premium Charge that was introduced by Betfair in July 2011? Taking away 40% of profits from big earners such as yourself. Is this the end of your time on Betfair?

A: I wish I was only on 40%, I’m on 60%+

My first thought on hearing the charge was disbelief, but once I’d taken it in I went through a quiet cathartic period. I realised at 60% there was no way to beat my previous year’s total net of commission so I just stopped trying and got a bit of my life back. I’ve worked so hard since I joined I’d been guilty of not taking enough time off so it was nice to do that.

The net effect of the charge is that it will take me 25 years to do what I just did in 10. So it boils down to whether I can increase my activity. I think this is unlikely given the rate of growth I currently see. So it will force me to change a few things.

I tend to pick and choose what I do now as a result, it’s not worth me doing some things anymore .It’s also made me want to automate my activity on Betfair and exploit opportunities in the market as this is less overhead to me. Pretty much the opposite of what Betfair would want I should imagine! A lot of prior activity was definitely 100% net accretive to the exchange. So the PC seems like a bit of a strategic error in my case.

Of course, for new users who are not facing similar charges, you have a limit of £250k before you pay the PC so there is still plenty of room left for you. I imagine lots of people would happily want £250k. If you know the right strategies you can now accrue that 2.5 times faster than I can using exactly the same strategy.

While the 60% was a shock it’s nice to get recognition that you are among a very small elite group of users.;)

Personally I'd be happy to go without the recognition of eliteness and get back to the days of 5% or even 20% commission! 

Moving on, and Aussie Steve has a new post on his betting fortunes (misfortunes) in the last part of the year, and things didn't get any better.

What a miserable end to the worst punting year of my life. With only the American sports in action, I still managed to bet $572,040.00 over the 2 months. Am I the only losing gambler on the entire internet? it seems that way if you ever have a look at twitter, apart from me everyone else is winning. They say 2% of gamblers win, but in social media land, it’s flipped on its head, with 99% winning and just me sitting in the 1% of losers. But hey, honesty doesn’t sell subscriptions or get likes.

We will have a much closer look at the 2016 loss next week when I do my yearly review, but 2016 will show a total loss of $168,620.00.

Stop being so honest Steve, or people are going to think betting isn't a viable full-time career option and will continue building their careers. 

I make that loss almost exactly £100,000, which may not be a lot to moneybags Steve, but would make a dent in the pockets of many of us. Stand by for his annual review and thoughts for the future which are always an interesting read.

Machine Betting also had an annual review, and a more positive one it was too. Going into 2016, Tobias (from Sweden) wrote:

“So what do I hope for 2016? It's not of any value to have financial goals, I will just try to improve the model, bot and risk management as much as possible and hope for the best… But walking into 2016 with much better starting point than in 2015, a reasonable guess would be to turn at least 4 MSEK, and reach a ROI of 1 %. If that’s the case it would mean a profit around 40000 SEK.”

A sensible goal and the actuals were impressive:

I managed to increase both turnover and ROI, instead of the prognosis to turn 4 MSEK I turned 6.1 MSEK and instead of 1 % yield I got 1.2%. Increasing both of them gave me a profit of 75 865 SEK (instead of the anticipated 40 000 SEK).

Good for Tobias!  It can be done, just maybe not by humans. 

And finally, what's going on with my hit count? Another five yesterday and it would have been a 1k day.

Average Joe

A Happy New Year to all. I thought I'd share some of my 2017 resolutions with you, and they are:

1. Stop making lists
B. Be consistent
7. Learn to count

That wasn't original of course, I may be incredibly charismatic (read on), but my jokes aren't always my own, and that one comes to you courtesy of @shitjokes on Twitter. I thought it was funny.

I'm sure many bloggers will be doing an end of year review, and I'll join the crowd again.

Two years ago, I wrote:

One of the terms economists talk about is 'utility' and it's a fact that the more money you accrue, the less valuable each pound you win becomes. When you need to gross double what you end up with, and what you end up with is worth less than it used to be to you, it's hardly surprising that enthusiasm wanes. There is no viable option to Betfair, and none on the horizon. 

Last year I looked at the evidence for a waning interest and noted that I'd had the fewest blog posts since I started in 2008, just 162 with four of the last five months in single digits. This year, there were even fewer (135) but nevertheless, the hits keep coming, (average 437 per day over the last year) although the more content that is out there, the more casual hits there will be.

Another sign of waning enthusiasm is that in the first nine years of trading, I was idle for just 291 days. In 2015, the number of idle days was 63, almost exactly double the previous average, and in 2016 I was inactive on 99 days.

The year's most popular post was August's Building Castles In The Sky which highlighted the nonsense being written by Big Pairs, who claimed to be CEO of a "multi-billion dollar organization". Really? Most saw through the lies, but one or two were fooled. Challenging nonsense is something that's long overdue in sports betting. Sadly, not many bloggers to this. Most play it safe, posting sanitised and non-controversial articles from time to time hoping to attract a following of admirers, but occasionally someone like Big Pairs comes along whose exaggerations and totally unrealistic claims need to be challenged. The problem is that some vulnerable people believe what they read, in this example that it's possible to start with £1,000, have no proven edge, and yet be retired in "exactly 136 weeks". And it doesn't help the reputation of sports traders to turn a blind eye, or worse, throw your support behind the project as one former blogger did.

As James over at Betfair Pro Trader has been saying over the past few months, this betting / trading thing is anything but easy and it's getting more difficult by the day. James had a review of the past year which mentioned yours truly:

Cassini still shines amongst the sports trading websites. I think I'll start calling him the Teflon Don from now on as nothing will stick to him. Like myself, Cassini is never one to shy away from controversial statements but he never seems to get the flak that I get. Certainly, he doesn't get any offers of a chat from The Management for speaking out of line. Obviously, I am not as charismatic as Cassini. However, one characteristic we do share is that we never attract sycophants and fan boys. We don't need anyone to huddle around us when we are feeling a little sensitive.

What does James mean when he talks of "speaking out of line"? In my view, he's referring to the unwritten rule that we all (traders / bloggers), have to pretend that everybody wins all the time. It's acceptable to mention the occasional loss, but always with the qualifier that you "have learned from it".

It's acceptable to say "buy this software / attend this training class" and riches will come, but always qualify it with the line that if you should lose, it's your fault. Sometimes it's impossible to lose in a market, unless you are really dumb. It's not acceptable to point out that logically, not everybody can win.

What big fish need when they get hungry is smaller fish. The line "come on in - the water's lovely" is far more likely to attract new entrants, and more importantly their money, than a more honest "look, you can swim with us if you like, but I should warn you that it's dangerous, and the survival classes you attended missed out a few key details because I need to keep my edge".

Back in 2012, a comment on my Risky Business post was this one:

Very interesting article. This just shows what the average Joe is up against.

Thanks for your insight into your staking too. It's interesting that you say punting profits are more value when you factor in the hourly rate as it's for this reason I'm trying to turn my attentions more to these. It's obviously much harder but if I'm honest I am starting to resent the amount of my free time I spend betting inplay and I do fear each time another blog opens of a young person who aims to make a living from inplay trading. Their lives will consist of staring at a screen 24-7 and if I had to price it up, I'd say it's 1.01 that they don't make anything close to a living out of it.

Almost five years later, and my conversion from trading to punting is almost complete, and I remain in full agreement with the sentiment expressed.

Some readers might well be surprised to know that the comment was from none other than Peter Webb who apparently has no problem selling software and trading classes today to "young persons who are 1.01 wasting their time and money". If anything has changed in the last four years, I would have thought it would have resulted in that 1.01 shortening to 1.001, but as shortly after as 2013, Peter was coming up with quotes such as this logic defying one:

So in this particular match you should have struggled to lose money if you were trading.

I suspect a few people found it quite easy to lose money on that game, and indeed any game or event. It's kind of how an exchange works.

Peter's mathematical talents provided a couple of the more amusing highlights of 2016. In December he revealed to all that Martingale is not a good strategy to employ.

The most famous loss recovery process is the good old, double after every loss, ‘martingale‘ system. The problem with all these systems is that they ultimately fail.

What? They don't work? Who knew? Well hopefully everyone, and that article wasn't a revelation to a single reader, but possibly more amusing was Peter's claim in October that:

But despite this, I still got 14 out of 14 trades right and have delivered similar results on courses prior to and after this one. If I trade without doing this then I, obviously, do even better.

Not sure how bettering 14 out of 14 is possible, but there you have it. Perhaps the laws of Mathematics are about to be re-written? 2017 could be an interesting year.

For those excitedly looking forward to the annual Benford's Law update, make the most of this one, for it will be the last. My spreadsheet still tracks my Benford numbers, but since they are not very interesting, or at least not once the observation have been confirmed, and because they are no longer random (due to the move from trading to punting), this will be the last update on these. Cue deep sighs of relief from all around.

As my betting and trading of sports takes up less and less time this year, so will blogging, although I shall continue to shine in an attempt to repeat as James' Blog Of The Year winner

Back in the early days I'd post something most days, even if it was just a few lines, but for many years now, I've favoured quality over quantity rather than posting rubbish every day like a mad jew.

Good luck in 2017. We'll need it!  

Biased Coin Study

A Xmas Day hit count of 915 might not have been quite the best present ever, (that would have been my claret and blue Crystal Palace socks in 1969), but it was a surprise that so many people stopped by after attending church services and opening Santa's presents.

I know the Queen came up with a good excuse to miss church, and there were a number of hits from the Sandringham area on Xmas morning, but I'm not one to speculate.

Courtesy of the Sports Trader blog, I did read an interesting post on a 'biased coin' study, (Victor Haghani , Richard Dewey, 2016) which found that even when told a coin would come up heads 60% of the time, a group of 61 people managed to significantly under-perform expectations over a 30 minute period. 

The sample was largely comprised of college age students in economics and finance and young professionals at finance firms. We had 14 analyst and associate level employees at two leading asset management firms. The sample consisted of 49 males and 12 females. Our prior was that these participants should have been well prepared to play a simple game with a defined positive expected value.

There were a number of surprises in the study, not least that of the 61 financially sophisticated students and young investment professionals involved, only five had ever heard of the Kelly criterion, and:

Interestingly, having heard of Kelly did not seem to help two of them: one barely managed to double his stake, and the other one only broke even after about 100 flips.

28 people managed to lose their starting stake of $25, and only 21 managed to win the maximum sum (capped at $250), significantly fewer than the the "95% that should have reached it given a simple constant percentage betting strategy of anywhere from 10% to 20%."

Some other highlights for me were that

of the 61 subjects, 18 subjects bet their entire bankroll on one flip, which increased the probability of ruin from close to 0% using Kelly to 40% if their all-in flip was on heads, or 60% if they bet it all on tails, which amazingly some of them did.

And then there was this:

Betting patterns and post experiment interviews revealed that quite a few participants felt that some sort of doubling down, or Martingale betting strategy, was optimal, wherein the gambler increases the size of his wagers after losses.

We observed 41 subjects (67%) betting on tails at some point during the experiment. Betting on tails once or twice could potentially be attributed to curiosity about the game, but 29 players (48%) bet on tails more than 5 times in the game. It is possible that some of these subjects questioned whether the coin truly had a 60% bias towards heads, but that hypothesis is not supported by the fact that within the subset of 13 subjects who bet on tails more than 25% of the time, we found they were more likely to make that bet right after the arrival of a string of heads. This leads us to believe that some combination of the illusion of control, law of smallnumbers bias, gamblers fallacy or hot hand fallacy was at work. 

Even though you won't win any real money, you can try the experiment here if you have 30 minutes of your day free, but even going in armed with a full understanding of Kelly isn't a guarantee of success! I found myself questioning whether Heads really did have a 60% probability after sequences such as those pictured, though I have no reason to doubt the claim. 

In the conclusion, and the study is well worth reading in full, the authors write:

These results raise important questions. If a high fraction of quantitatively sophisticated, financially trained individuals have so much difficulty in playing a simple game with a biased coin, what should we expect when it comes to the more complex and long-term task of investing one's savings? Is it any surprise that people will pay for patently useless advice, as documented in studies like Powdthavee (2012)? What do the results of this experiment say about the prospects for reducing wealth inequality, or ensuring the stability of our financial system? 

As mentioned here many times, don't pay for financial advice - use low cost index funds and time to make your fortune! 

When it comes to sports betting, where our edge is typically small at best, and likely to be of limited duration, a losing run is psychologically even more devastating. 

One edge that shows signs of finally dissipating this season is that of the Bundeslayga System. In Bundeslayga.1 results are still positive (+6.89%), but Bundeslayga.2 is headed for a first losing season with an ROI of -9.18%.

Dead Man Dancing

It's not sudden death Alan, game's still going on...

I drily observed back in August that:

This all but guarantees that by November, Leicester City will be a top three team, Crystal Palace will be relegated, Alan Pardew will be the first managerial casualty of the EPL season, Donald Trump will win the Presidential Election by a landslide and Article 50 will have been triggered.

With yesterday's announcement that Alan Pardew had been asked to stand down, my 'success rate' on the above predictions became much higher than the zero I'd expected. 

My lays of Leicester City are looking good, and Article 50 won't be triggered in 2016, but the others were scarily prescient, or at least too close fr comfort. Crystal Palace are far too good to go down of course, but as Palace's terrible 2016 form continued into the new season, it was hardly a surprise that Alan Pardew has 'stepped down'. 

In my opinion, a year is long enough and while Steve Parish might have given him more time, the US owners were less patient, and Pardew did himself no favours in suggesting they didn't understand football or in almost completely ignoring their interest in analytics: 

They put one of their key American sports analytics specialists at his disposal but that individual found Pardew actively responded to his work once every six weeks.

It is one of the unspoken rules of working for new owners that you at least pay lip service to their ideas and some rudimentary homework would have told Pardew that analytics was fundamental to Harris, in particular.

As some readers will know, I was in Philadelphia last month when Crystal Palace let a 4:3 lead became a 5:4 defeat (at Swansea City) in stoppage time, and shortly after the game, a Philadelphia based (American) supporter in the pub took a call from none other than Josh Harris who, from what I could tell, was not a happy man.

Less consequentially I admit, but Pardew lost my support in May, and looking back to that month I wrote:

Taking the lead with 12 minutes to go was incredible, but when the big screen showed Pardew - "He's Alan Pardew, he shags who he wants" - gyrating on the touchline, I had a bad feeling. Seriously, your team has just taken the lead in a Cup Final, and rather than calm the players down, warn them of the pressure that now must come, make some adjustments etc., he's out there dancing "hey world, look at me". I thought he didn't want attention these days. Less than three minutes later, and the lead was gone.

And seven months later Pardew is gone, with a tidy sum in compensation it must be said, so don't feel too sorry for him losing his job shortly before Xmas. 

I'm sorry it didn't work out for him - a former player and club hero is always a bonus as a manager - but it didn't work out, and a change was needed. I thought it might come after the Swansea City game next month, but now is fine with me. 

Time to move on. Looking back even further in the archives, I found this post on his unsuitability for the Newcastle United job back in 2010 which some of you may find interesting.

On the topic of Premium Charges, a very seasonal and optimistic Baz commented:

I just wish I was smart enough to pay PC, maybe next year. Best wishes for Christmas and New Year, hopefully you will be around to amuse and educate us for another year and annoy those who deserve to be annoyed, Barrie.

Barrie must be a new reader if he's not yet paying Premium Charges! Hopefully that will change for him by the end of next year. 

I have no plans to go anywhere, so prepare to be amused and educated for a little longer, and if you're out there telling porkies about how it is all but impossible to lose, expect to be called out.