"Value", and the need to be right, straight away.

The two parts of this blog entry title are not compatible.  Value, and being right straight away do not go together.  It seems a lot of people think they do.  Someone who places a bet they believe is good value, who then sees the price become even better value or go against him, is a "mug" in some circles, and subject to much ridicule and merriment.

This person is not a "mug", they've simply either misjudged the situation, or have not executed it as well as they might.  Or, if they want a very large bet, they may have had to go through the market in order to get on... Especially if they don't have time to spend drip feeding to build a big position.  There's nothing wrong with any of these scenarios, what we have here is misunderstanding of what this punter is trying to acheive - and that is getting on with an edge and a view to running his position.

Our punter has no need to be "right" with immediate effect.  A price that goes against him is no cause for concern, because when he places his bet,  as far as he was concerned, the edge was there at that moment.  He's placed a bet for an amount he is happy losing and so there is no emotional attachment to the price movement at any time after he has had his bet.   These are far from the actions of a mug punter.

Why then, is there a need for many to think that he hasn't played this very well?  The fact of the matter is that many (most) people do have a need to be right, straight away.  This means that when they place a bet, the price must almost immediately head in a positive direction for them.  Should it take a negative tick or two, they will experience negative emotional pangs...  "Pain" for want of a better word.

Betfair markets are full of these types of traders.  They are extremely price sensitive.  Overly price sensitive.  (Sensitivity of price is generally a good thing, but once you are on, the sensitivity should be calmed with good judgements on taking profits / cutting losses.)

Lets take the Big Brother winners market as an example.  Here we have a market based upon who will win a tv show, decided by the voting public on what is going on in the house and being shown on tv.  As far as betting goes, there's few markets around which are as purely about opinion as this.  But even in this market, price sensitivty takes a firm grip. 

In fact, if you were to watch the market and the show at times, the two don't match up particularly well.  And that's due to the need for many to fidget over the prices.  The vast majority of people trading this are sensitive to the odds.  A tick this way.. emotional reaction, a tick the other way.. another set of emotions.  It's incredibly tough to trade this market (or any market) tick by tick, emotionally and physically.

Anyone attempting to, has to ackowledge that a single big player can come in and obliterate their position rapidly.  Anyone came come and do as they please,  and not everyone has the need for their bets to have immediate positive confirmation.  They should reassess whether their need for such a confirmation is a good or bad thing...  It's pretty obvious by now, that it's a huge hinderance.

Overly price sensitive traders have a big weight on their shoulders and emotions.  Minute by minute they watch the market, analysing the volumes on either side of the market, looking for the weight of money, big players that can cause damage and asking questions of their positions.  This is no way to spend hours trading, months if it's Big Brother. 

These emotional reactions can get you into numerous pointless trades, causing you to take profits quickly, run losers or never give things a decent chance to occur.  Decent trades are misted over by the noise created by the sheer number of reactionary trades.  Reactions based on nothing but the actions and reactions of other people in the market, and not on real life events.  If you are price sensitive, then you are at the mercy of every other person in the market.  Only one of these people has to do something you don't like to trigger a poor trade.

Remove the emotional impact of price movements from your game. 

Ackowledge the problems that exist with the various approaches.  A value punt needs executing well.  A trader needs to devise a trading plan to make it easy for himself to make calm clean judgements.  Both methods need to stake to a size which does not trigger too much price sensitivty and endless fidgetation.  Let other traders struggle with their market itches and scratches.

Comments

[Chris]

A great word, Punt, 'fidgetation', goes in the same dictionary as bouncebackability!

[Joshua]

Hi Punt,

There's some quality stuff on this blog - keep it up. :)

Do you have an email address at all?

I've got something I think might interest you, but I can't find an email address or anything to contact you with...

Take care now,

- Josh.

[Pete Nordsted]

Congratulations on your magnificent blog it is by far the most intelligent and informative blog on this subject. i have put a link on my blog. keep up the good work.

[Tony Quinlan]

Excellent article sir.
By the way....any chance of a link swap?
:-)

[Matt]

JOsh, you can find my email address on the left sidebar, near the top.

Cheers Chris :) Love that word as well. I'm lucky the blog makes sense at all sometimes.

Thanks Pete, link to your blog has gone live, sorry for the slowness in doing so. I've had a read, it looks good!