Losing strategies wanted

[Zenyatta]

i suspect that reading this and your earlier post that you're too slow off the mark and not being decisive enough when you see an opportunity (no good waiting for others to confirm it).
also you're deluding yourself if you think you call 90% of the moves right. it might feel like that but i very much doubt it - if you can prove it i'll offer you a job to be my co-trader (50/50 split) - you call the shots and i'll trade them!!
btw, don't use stop losses - they should be called loss bankers.

Yes, I've just constantly been too slow off the mark. Even when you know an opportunity is there, that alone isn't enough to win.

I do claim to be able to predict most price directions on selected runners. I didn't say 90% though, I claim my prediction rate is around 70-80% accurate on selected favourites.

Yes, the stop-losses have cost me an absolute fortune. I believe that there is clear evidence that people are targetting BetAngel users, you can clearly see massive deliberate spikes in prices at fixed times, often around the 10 minutes mark. I believe scammers are 'sweeping stops' ,and there is a range of other nasty price manipulation tricks going on also.

[rubysglory]

Hi Jeff. Betfair's example data is primarily flawed because at 2 hours out the market is still in its formative or booking stage. It is a period of cat and mouse tactics by the market makers - both backers and layers. It is the period in which the handicapper publishes an initial price line , fishing as it were, to see at what price other backers and layers are willing to bite. At the 2 hour mark, if, by example, the win market was at 110% (as is likely) and there were matched bets on every single runner, is quite feasible that every single runner in the event will drift prior to the off when the market will be much closer to 100%. What we are therefore essentially comparing is an inefficient formative market with a more efficient final market.We are not comparing apples with apples, to the point that it could be statistically argued that betfairs drifter market soley comprised horses that all drifted from 4.00 t0 5.20 for a market efficient strike rate of 19%. Phew !

rg

[Euler]

That's spot on RG

[Groovyelms]

Excellent thread,

My losing strategy is I guess the same as many others getting it right, right and right then BANG overcommitted at the wrong price and the wrong time in the race, For me this is a money management/risk problem!! which I believe is slowly solving itself, by asking the question why did I get in that position in the first place?
Manipulation I believe does of course happen, but surely that is part of the game! spotting it and useing it, if an opourtunity is created, by a "false trade" or whatever.
Fascinating that Peters automated tested strategy based on Jeffs suggestion comes out around the breakeven point..
I think it was Jake Bernstien who said that the trader is always the weakest link in the trade. The test results support that, and are really encouraging to myself and I suspect others working out how to trade profitably.
luck to all,
Groovy

[Iron]

RG I'm not saying that the initial prices were accurate. Merely that the market steamed or drifted to such an extent that, on average, the prices ended up significantly inaccurate at the off.

As an aside, I think that the early prices can reflect bets by people in the know. If you were a trainer who fancied his horse, you'd want to place your bet before the horse's owners and all their mates removed all the value.

These guys made a very good living from using market prices that were typicaly a few hours from the off: http://www.bettingautomation.com/results.php. I say 'made' because I don't know what their recent results are like, and a system I used to use, which was similar, possibly stopped working earlier this year (despite having delivered a 15% profit over thousands of bets previously). I suspect that may be due to people with insider or expert knowledge migrating away from Betfair due to the PC.

Jeff

[Akindwurd]

Surprsing that nobody has suggested going long on BF shares as a valid losing strategy.

More seriously, I suspect the reason that random strategies outperform many would-be traders is that you can't write an Excel macro to simulate fear and panic.

[Iron]

Surprsing that nobody has suggested going long on BF shares as a valid losing strategy.

Good point!

But the market can be an irrational beast. Betfair could offer some fancy new product that blows the market's socks off, causing the share price to soar (only for the market to discover a year later that the new product was a damp squib!).

Also, sometimes you get big moves in the financial markets that apparently aren't triggered by anything in the fundamentals. If Joe Bloggs at XYZ Hedge Fund decides to buy a million pounds of a company's shares, that could set in motion a chain of events that moves the price(just as the Mad Bomber has the power to change the course of a Betfair market).

Jeff

[Zenyatta]

Well, here is my take on why losing traders may be doing worse than chance:

I think the notion of stop-lossing is a huge loser unless you know exactly what you are doing, I believe that it is a naive interpretation of the idea 'stop losses, let profits run' that has been causing me (and almost all other losing traders) all the big losses.

I now totally disagree with Jeff and others when they repeat the mantra 'cut losses quickly', I believe this notion does far more harm than good to newbies, because they interpret it in a naive manner.

Yes, its the right principle, but there's a ton of experience needed to interpret when the market is truly moving against you and when the apparent move is only a temporary blip. In fact, I now realize that in many cases, cutting out just because the market suddenly moved against you is the total polar opposite to what winning traders do.

To reiterate: I believe the vague advise that top traders give out is in many cases totally disastrous to newbies, the reason being, that although the general principles are correct, the actual application needs a ton of experience to apply it correctly.

What I'm saying: a little bit of knowledge is a dangerous thing, and can do more harm than good, because it can create the illusion of understanding.

[Iron]

Zenyatta

My losing system generated an ROI of -0.33%. Trading at random, you'd have got closer to -0.05%. Doesn't that suggest that cutting your profits and letting your losses run is a good way of losing money?

You are convinced that the market is full of manipulators, so my guess is that you'll grab any profit the market gives you, however tiny.

Also, as you don't believe in stoplosses, I suspect you'll find yourself on the wrong end of major moves before bailing out (if you bail out at all). You probably reason that the market will probably reverse sooner or later, and you'll take a small loss or maybe even nick a single tick's profit (rather than the 10 tick loss you're currently looking at). Sometimes the market does reverse, and the manipulators won't take money off you. But often, you'll end up on the wrong side of a 20+ tick move...

Am I warm?

Jeff

[Iron]

In the wrong hands, I agree that it can be.

Sometimes I've been guilty of reading something written by an experienced trader, and risking money without first asking myself critical questions like:

'How do I know that this works?'

'In what precise circumstances does it work?'

'Under precisely what circumstances do I open and close my trade?'

Jeff

What I'm saying: a little bit of knowledge is a dangerous thing, and can do more harm than good, because it can create the illusion of understanding.

[Zenyatta]

Zenyatta

My losing system generated an ROI of -0.33%. Trading at random, you'd have got closer to -0.05%. Doesn't that suggest that cutting your profits and letting your losses run is a good way of losing money?

Depends on the type of market perhaps?

You are convinced that the market is full of manipulators, so my guess is that you'll grab any profit the market gives you, however tiny.

I'm not sure how many actual manipulators there are, but certainly I'm now convinced that the market is full of people who have no idea what they are doing. My big mistake was to ascribe too much intelligence to the market. In fact, I'm sure that the attitude of winning traders is that the market is full of know-nothings. And I now realize that's the attitude I should have taken all along.

Also, as you don't believe in stoplosses, I suspect you'll find yourself on the wrong end of major moves before bailing out (if you bail out at all). You probably reason that the market will probably reverse sooner or later, and you'll take a small loss or maybe even nick a single tick's profit (rather than the 10 tick loss you're currently looking at). Sometimes the market does reverse, and the manipulators won't take money off you. But often, you'll end up on the wrong side of a 20+ tick move...

Am I warm?

Jeff

When I look at where all my huge losses were coming from, I'm telling you its the use of the stops. Other traders confirm my statements. Peter Le did an experiment proving that the use of stop-losses results in greater losses than not using them (pre-race). See what I said above again:

"...In fact, I now realize that in many cases, cutting out just because the market suddenly moved against you is the total polar opposite to what winning traders do."

Interpret my opinions as you like Jeff

[Iron]

Zenyatta

Imagine you're at the wheel of a car. The car starts to roll downhill. Do you apply the handbrake, or hope that gravity will be kind to you?

Whether you lose a stoploss to exit your trade, or just use wom, you need some mechanism for limiting your losses. BTW, I do think that there's such a thing as exiting your trades too quickly, but I'd rather exit losses too quickly than too late!

You previously wrote (in this thread: viewtopic.php?f=17&t=2021&start=140) that 'it's very rare that you get a move of bigger than 15-20 ticks', yet I posted 3 examples from a single afternoon's racing! Extreme moves aren't extremely rare on Betfair.

Jeff

[superfrank]

imho stops are one of the reasons why the vast-majority of financial day traders fail too.

i think the best financial traders (who trade manually) don't use fixed stops for short term trading (especially for non-breakout strategies). they will use mental stops where they will decide whether or not they want to exit a trade when a price reaches a certain point (but the important point is that they'll give the trade a chance). yeah sometimes you might wish that you'd been out of the market immediately, but on balance i think it's a bad policy.

my thinking on exiting trades (from a high probability/profitability point of view) is that the more times you can exit when the price moves in your favour, the more profitable you will be... whether that's for profit, more profit, or a reduced loss.

edit: longer-term trading can require a different approach.

[Iron]

the more times you can exit when the price moves in your favour, the more profitable you will be...

If you're scalping, maybe. If you're swing trading, then you're failing to ensure that your winners pay for your losers...

Mark Douglas, author of Trading In The Zone (http://www.amazon.co.uk/dp/0735201447/? ... wkdo63z8_b) once said that the mistake most traders make is that they eat like birds and **** like elephants, when it should be the other way around!

Jeff

[superfrank]

the key is whether the trading is short or long term imho.

if you are trading a horse race from 10 mins out that is the equivalent of long term trading (scalping is a mugsgame at that time especially with poor liquidity).