Punt.com - A Blog About Gambling by a Professional Gambler.

Wimbledon 2008 roundup!

2008-07-06T23:32:17+01:00

Having just been treated by Rafael Nadal and Roger Federer to one of the most emotional and entertaining finals we're ever likely to see, I thought it might be a suitable time to give a punt.com round up of opinion (maybe some aftertiming too) from this year's Wimbledon.

Todays match was quite simply emotionally draining to watch, let alone trade. I feel sorry there has to be a loser, clearly Roger was gutted at the end, and no doubt many are circling him posing questions about his status in the game. He's still ranked number one, but Rafa's lead at the top of this years 'race', just got wider, it's a matter of time now till we crown a new World number 1.

I think all year there have been signs that Roger's mental strength under pressure from Nadal and sometimes Dokovic was on the wane. He's been tightening up when it matters the most. It's been all about pressure, we've all got our breaking point, even Nadal choked on two match points earlier.

It's been a slow death by pressure for Roger, he's put up a valiant fight, but he needs a release. Strangely, I feel losing today will probably help him to loosen the baggage. How much baggage needs releasing? I think there's still more to come, perhaps he won't win a grand slam this year, I feel sure he needs to lose (and will) the number one spot, before he can feel free. We all know the different pressures related to being the front runner, to be on top ready to be shot down for so long shows how great he really is.

Nadal got tight today! There were nerves everywhere on center court. He didn't play his best tennis, there were moments where even he wasn't hitting freely, his shots were dropping short, too much spin (when under pressure, go back to what you do best...). What a great kid though, you could tell he was knotted up at the end, and how much Wimbledon meant to him. Pure class, both of them and a great champ.

All of this said, it was a match statisticians wouldn't have made sense of. Nadal two sets up, yet the stats suggested Roger played the better tennis, he was ahead on points, winning more points on serve than Nadal. The big points are the ones that decide things, and this is where Rafa took a grip. At one stage I think Roger was 1/8 break points, Rafa, 3/4.

After the rain break, there was something different in the air however, more penetration on Roger's shots, less so on Rafa's, a genuine feel that the real grass court king had shown up... this, is how to play tennis on the green stuff, suddenly from thinking Roger had little chance, he looked in control (of his nerves more than anything).

My wallet would have been much fatter had Nadal taken this in 3. Due to the liquidity (a Betfair record volume of £49m was matched on this final!), I was able to comfortably swing a big bat at things without much risk. I felt ok about the prospect of losing (or winning) bigger due to the large size of trades, I had prepared mentally for it before I began... the plan, simply stick to what I normally do, but with bigger trade sizes.

I had the memorable position after set one of +£67k Nadal and -£50k Fed! To describe how I traded would take way to long however, and although this position was worth a lot, I ended up not winning as much by the end, having been chopped around so much, no one in their right mind could have 'picked' a winner in that final set. The back and forth nature of my trading resulted in a personal record turnover (£1.5m) too, along with the pain of my betting applications & Betfair website screeching to a near halt under the weight of number of trades to keep track of. The last set was virtually untradeable on the match odds market for me, I had to switch to tournament winner.

If I'm honest I'm still a bit of an emotional wreck after that match, I don't know what to do with myself. There's always this feeling the week after Wimbledon of aimlessness for me. I've immersed myself so much in the two weeks, that resurfacing takes some getting used to...what do I normally do on a Monday? I have no idea.

There's plenty of tournaments this week, but I'm not sure I'll get too involved, there will be some massive downsizing of trades to get used to again.

So what of the rest of the tournament... Personally I had a great one, apart from a silly encounter with the Fed v Ancic match, which I won't go into, suffice to say I layed a vast sum of Fed at shorts looking for a hold or two...cue Ancic broken in the first game. Easy to get over though, since it's just one market and something a bit out of the ordinary strategy wise.

Well done Venus Williams, beating sister Serena can never be easy, but for her it was an exercise in consistency. She was the steadier of the two, Serena more aggressive but at times all over the place. I'm happy for Venus though, she seems a nice girl and gracious in victory and defeat.

Andy Murray had a great performance against Gasquet, but showed the distance he needs to go to beat Nadal. He's surely not far behind in rankings terms now, but a considerable distance away from competing with him on a tennis court. Too strong, too fast, too powerful.

Safin was a bit of a turnup for the books, but then he's always a dangerous floater, if he has a week where he doesn't hit 25 shots a match long of the baseline, this is what happens. Surprising really considering the ball stays low on the grass.

Ivanovic looked a shadow of her French Open self, as if some imposter had been on court for the last 12 months, this was the 2006 version of Ana Ivanovic, shots hit hard for the sake of hard, sometimes a gentle reminder about a net and some white lines is a good idea.

Zheng Jie and Tamarine Tanasugarn did great representing the smaller girls! Two, smaller, feminine versions of Pong the computer game. They demonstrated the success you can have if you make like a wall and get everything back, let the opponent kill themselves off... I'm surprised this doesn't happen more often really, especially with the women.

I'm gonna leave it at that for now, a great championships. I hope the British press let young Laura Robson get on with things quietly for a while too. Only 14 and having the weight of a nation's expectations on her shoulders, she has a good 2 years to go before she can even begin to make real strides in the main draw. Here's hoping she can continue to progress. I won't know what to do with myself tomorrow, if only Wimbledon was on every week.

Gambling profit and loss, the numbers that matter.

2008-06-29T12:41:32+01:00

Lately I've been looking to do more analysis of my results. I think I've admitted in the past, that this hasn't been a strong point of mine. In the middle of April I decided to ask Betfair for a spreadsheet of all the tennis matches I had traded since the start of 2007, so that I could catch up. Since then, I have kept my own sheets with every match in it, the volumes I traded, average odds and match stats too. In that time, I've traded 200 matches, and the analysis of this is becoming very worthwhile, with some pleasing and not so pleasing results.

So what are the numbers that matter? And why?

You want to work out the average of your wins and losses. The mean of all your results. Clearly this is showing you what a match is worth on average, the sum of all your work is in this number, the bigger the better.

Next is your average win, and your average loss. When you win, how much on average is that? And the same for when you lose. Now compare these two numbers, are your wins on average bigger than your losses? If you lose on average more than you win then it's clearly going to be quite a battle, I know this from experience!

Now work out the percentage of markets you win on. The size doesn't matter, just look at where you won and lost and work out a %. This number, combined with the ave. win and ave. loss determines how well you are doing, and will describe to some degree how well your strategy is working, and maybe what type of strategy you are using.

For example, you might be someone who scalps a lot of trades or backs short prices where your win % is very high, but your average loss is much bigger than your average win. Or perhaps you don't win often, but when you do, the payoff is much bigger than the loss.

You have to juggle these numbers and get them in the right ratio in order to win with your strategy. If you are a trader, it describes something of the balancing act you are trying to perform. (Ideally, this analysis would be made on individual trades and not overall market results... if you keep detailed enough records to do such analysis, then that is excellent, I don't, yet...it gets complicated with uneven matched amounts etc) Though it's not an exact representation, your win % effectively shows how often you are right, but you will need to run your winners longer and cut your losses quicker than than this %.

For example, if you make 5% on an ave. win, or lose 5% on an ave. loss, then the % of times you are 'right' needs to be over 50% to make a profit.

My own figures show I lose slightly more on average than I win, but crucially, the % of markets I win on is 60%, so I'm ahead. This is not the way I would like it however, emotionally, it is much easier to average more on a win than on a loss, it can often feel like 2 steps forward, 3 back, but a 60% win ratio keeps it going in the right direction.

Emotional stability is important for maintaining discipline. Keeping records like this allows you to actually see a bigger picture of the war you are fighting rather than the losses you might take in individual battles - which inevitably stick in your mind longer than the wins.

It's this emotional side of things that can wear a trader down over time, we're all different in how we handle losses, some push on and are able to accept things, others suffer negative pangs on the back of each loss, causing further damage down the line. This is a good point to introduce another statistical measure - variance. More accurately, standard deviation!

Many people will remember this from school with some dread, it's worthwhile doing. It gives you a measure of a set of results around the mean.

Typically around two thirds of your results will fall within one standard deviation. In simple terms it's a display of steadiness or consistency of results. If you are one of those people uncomfortable with large swings in fortune, then you need to work on keeping this number lower. Regardless of how low you keep this, there will always be some randomness to the path your profits and losses take.

Here is a superb resource from vertical solutions called the P&L Forecaster. You enter your average trade, result, week or month etc and the standard deviation of those results and it produces a 'forecast' for the next 100 measures of your unit. Eg, you work out your average week, and the standard deviation of all your weekly results and enter these numbers, it forecasts for the next 100 weeks.

It's important to note that this is simply a measure of how varied your next 100 results could be. Try the same figures again and you will get a different looking chart each time, because of the variance in your P/L. Play around with it a bit, enter in some high standard deviations, and some low, notice how up and down a high variance set of results is and how smooth a low standard deviation chart looks.

This should be telling you how important the bigger picture is and how random you can expect your results to be. It helps to understand that losses (and wins) are part of the picture, you can't get down too much when you lose and high when you win. As Brett Steenbarger says, "chance alone will affect the paths of returns. A trader who understands that it's not just about returns, but risk-adjusted returns, can best adapt to these trading realities."

And so we return to the smaller picture. The interesting thing I think to be learnt from this is that the macro image is determined by the micro details and actions we take when trading. A series of results where the win is bigger than the average loss, is down to individual trades with good upsides and small downsides (which happened to be more likely to occur than the market thought).

Getting an extra 0.5% on an opening bet or closing bet can change the variance in your P/L, managing positions better in terms of risk and reward has the same effect. As does selectivity and patience. Cutting losses ultimately reduces the size of your ave. loss, running winners the opposite effect to your ave. win, both reduce the need to be 'right' so often.

So, everything is interlinked down to the fine detail in trading terms, but our mindset and emotions need to be centered on the macro scale of things, understanding how each individual trade, market, week and month, affects the bigger statistical calculations. Some things I have found most rewarding from this analysis:

Cutting losses quickly reduces my average loss, and in turn makes improving the bigger picture a lot easier to achieve.
Taking profits in order to 'get back on' later, (I call this my churn rate) has reduced my own variance slightly, by not looking for such big payoffs, which in turn require more time and potential for losses. Result: ave. wins and ave. losses are both slightly smaller, so standard deviation has dropped... My P/L Forecaster chart has been smoothed out slightly and perhaps I'm less on edge that I might be.
Waiting for more premium risk/reward opportunities has helped get the averages closer to one another or even favouring the win side since I did my analysis.

Most people still don't keep records of their activity, without records you can't really see where you are going wrong. You might not even know you are going wrong, which is the major hazard with 'mental accounting'. Perhaps this is a topic for another post.. for now I'll leave you with a couple of my figures, my win % is 60%, and the standard deviation of my wins and losses 3 days ago was 5018, now down to 4701.

Mini.Punt.com

2008-06-20T09:24:14+01:00

Just letting you all know, there's a new professional gambling sub-domain to look out for - Mini.Punt.com! I decided there was a need for something slightly different where I could post quick links, thoughts and ideas without diluting the more thoughtful pieces I post on punt.com. Hopefully a nice collection of mini posts will build up quickly as it takes less than a minute to enter them.

The site was built using Tumblr, if anyone else is interested in starting a blog or adding an extra sub domain blog as I have done I can recommend it, it's free and very quick to get going. It's a work in progress, but I'm quite pleased with it so far..

Now to prepare for that Wimbledon draw..

Free money for your predictions.

2008-06-16T18:14:03+01:00

I'm sure many users of betting exchanges are familiar with the term "free money" by now. Well, new-ish (they've been running for a few months now) website Predictify.com, is giving away small amounts of cash depending on the quality of your answers to the questions posted on their site.

Basically, it's cash for predictions, but it's not quite as simple as that. Here's a quick breakdown on how you can make some money.

When you visit the site you will see many questions asking for your predictions. Most of these will not have a 'pot' and therefore you won't earn anything from answering these questions. However, you still need to answer them, and fast, because the quality or your response to these pot-less questions will determine your expertise rating on the site. The higher your rating, the more you stand to earn when answering the money questions.

Expertise level doesn't just rely upon getting it right either, you need to answer the questions early, you get more points the fewer people have responded before you. When you see a new question, answer it quickly. It's quite a clever way to keep you coming back and checking the site regularly. You can also ask questions of your own, which is interesting and brings me to my next point..

"Prediction" is a hot topic at the moment. It's cropping up all over the place. Prediction markets are becoming quite the buzz phrase at the moment. MidasOracle chronicles their rise brilliantly, while bestseller The Black Swan, discusses prediction in depth, tackling our inability to predict and the many fallacy's we suffer from. I'll leave these fallacy's for further discussion at a later date, but it's my opinion that we have massive problems predicting anything.

Asking questions on predictify is certainly interesting and a lot of fun, but the answers you receive are very reliant on how you frame the question. Asking a negative question or a positive one will skew the results alone.

As a gambler / trader, I'm taking particular interest in this area at the moment, it's raised many a question about how we as humans see things, question things or are biased and prone to fallacy. What processes am I going through when I make a judgement on something for example.

Most casual gamblers and traders will actively seek to predict, completely unaware of the inherent problems residing in their own psychology. Engaging in the act of prediction alone can mess up your answer.

I trade and win, because of poor predictions, and this is not just the odd one or two people guessing wrong, it's whole crowds, entire markets of people, being skewed by one another and the media. Massive groups of people do get things wrong, and they do it time and again. Markets are rarely in an efficient state, for the most part they are simply an efficient representation of human inefficiency. Fallacy and bias depicted in chart form.

I'm not trying to turn people off Predictify, it's great fun and I'm currently really enjoying seeing the distribution of the answers to some of my questions and others. I certainly wouldn't base any judgements on the answers though. Traders and gamblers are very much better suited to approaching the markets they trade with an attitude of scepticism, and a firm belief in the old saying, "anything can happen", because literally anything can. 99.9% of "anything" in this case, is surely beyond the imagination of even the expert level predictors on Predictify or any other "prediction market".

All money is created equal.

2008-06-11T10:42:08+01:00

You may not have realised, but we all have a tendency to value money differently in certain situations. Let me begin with a story, this one does the rounds in Las Vegas, judging by the amounts of money involved I do have my doubts about the truth in it, but it does illustrate perfectly one of a few psychological problems we have with money, and it's in a gambling context, even better! It's called, "the legend of the man in the green bathrobe".

"By the third day of their honeymoon in Las Vegas the newlyweds had lost their $1,000 gambling allowance. That night the groom noticed a glowing object on the dresser. Upon closer inspection he realised it was a $5 chip they had saved as a souvenir. The number 17 was flashing on the chip’s face. Taking this as an omen, he put on his green bathrobe and rushed down to the roulette table where, not surprisingly, he bet on number 17. He let his winnings ride and eventually he was worth $7.5 million. Unfortunately the floor manager intervened, claiming the casino didn’t have the money to pay should 17 win again. Not to be deterred, the groom caught a taxi to another casino where he bet all on 17 again, when it hit it was worth $262 million. Needless to say, with such luck he bet again, only to lose it all when the ball fell on 18. Broke and dejected, the groom walked the several miles back to his hotel. ‘Where were you?’ asked his wife. ‘Playing roulette!’ he replied. ‘How did you do?’ ‘Not bad, I lost $5.’ "

This had me laughing when I read it, but then I realised this is exactly the sort of mind set that affects some people, particularly gamblers. Admitedly, no one in their right mind is going to bet $7.5m on 17, let alone $262m! But the point about how he felt he only lost $5 is perfectly apt.

Another illustrative scenario is one where you have two items to buy, one is worth £50, and the other is worth £2000. In both cases, you arrive at a store selling these items to find that they are priced at £75 and £2025, but there are locations 5 minutes drive away which have them at the correct price. Almost everyone would decide to drive 5 minutes to save £25 on the £50 item, a much smaller percentage would do so for the £2000 item. Yet both £25 savings are equated to a 5 minute drive.

Finally one more scene for you, imagine there is an item you've wanted for a very long time, but it's not quite been easily affordable. Let's say this item is £500, and you've seen a deal for one priced at £470. Later on, you are investing in a very big lifestyle purchase, perhaps a car or some expensive equipment, the cost for this is £15000. The dealer selling you this, then takes the opportunity to offer you the item you really wanted earlier as an add-on for an extra £600. Suddenly this doesn't seem like such an expense, you are already spending £15k, you take the opportunity to get something you've wanted for ages whist spending the money, "what's an extra £600 on the top of £15k?".

Each scenario slightly different in psychology, they all have particularly wide ranging importance when looking at how we manage and save our money generally, but they are also brilliantly applicable to gambling and trading. Lets deal with the last one, first.

The first thing that struck me was how easy it is to view money as cheaper the more you spend, and how often I have been affected by it. I have to wonder how often others are struck down by this mentality too. Clearly when we think of this scenario in a gambling context, we are talking about adding to losses, or averaging down a losing position by making the bet even bigger, because we see it as cheap.

It became obvious to me that this is one of the reasons a lot of people go bust or never get anywhere. In fact, the three scenarios together form a big part of whether you will win, win for a while then give it back, or go bust.

If you are losing whilst trading, it's very easy at times to convince yourself to add to your position - if you are already losing £10k, what's another £1000 ? The answer of course is £1000! And that's a lot of money. It's also money that you will potentially have to work many hours to make back. The more hours you work making back 'throw away money', the more pressure it places on you. It defeats many people in the long run. Before you know it, you are simply treading water / money, and that's if you are lucky enough to be fairly strong willed.

Don't add to losing positions. Just because you are losing money, it doesn't make losing more money any cheaper, all money is equal and it's all work. Cut your losing positions, save yourself hours more work, heartache and money.

Lets go back to the man in the green bathrobe. They call this the mentality of playing with 'house money'. Mentally you consider it the casino's money rather than your own, because you 'won' it rather than earned it. In other words, it's not real money. ...It's always real money.

This is a classic example of how people who do well for a while, give it all back many times faster than they made it. All the while justifying their actions by telling themselves that they were 'just playing with the profits', 'it wasn't really my money', 'I started with £100, I still haven't lost that, so I haven't lost anything'... what about the £5,000 you just lost then?

You put this in writing and it looks crazy, but this happens all the time in gambling and trading circles. The forums are littered with stories of 'giving it all back' etc.

Finally, lets look at our second scenario. The one where the amount of effort is worth the same amount of money, but is disguised by the amounts being spent. You have to think and act efficiently to make gambling / trading pay. That tick you gave up in order to get matched, that cost you. That time you crossed the spread, took someone else's offer, that can cost you on many levels in the long run.

I've recently done a lot of work on analysing my activities for the last 15 months. Betfair were kind enough to send me through a detailed spreadsheet with all the matches that I had traded on in that time, my profits and losses and traded volumes etc. The sheer scale of what I had done was quite a surprise, even to me. 1066 matches traded and matched volumes of many £10m's, seeing figures like these made me realise many things,

My edge during that time was a tiny %.
This was the sum of all my actions, good and bad, during many hours of work.
Because of the sums traded, a very small improvement in my actions could result in a massive leap in the amount I could win.
The efficiency of my actions was incredibly important over long periods of time.
Every £ is equal ! I needed to value all money.
All the times where there had been 'throw away money', I had spent days and weeks making it back, had I not thrown it away, the profit column might look very different.

How do you avoid these psychological traps? Three ideas for three scenes.

Avoid the 'house money' mentality, by keeping physical/electronic records of your activity. Avoid accounting for things in your head, if it's in your head alone it is very easy to write off as not being real. This will also help you analyse your actions over longer periods of time.
Withdraw your winnings. Don't keep them in your online accounts, whilst they are there it is much easier to see them as just that - "winnings". It becomes tempting to mentally reassign this money as just profits and not really yours. Take the money back to a designated amount every so often. I know people that do this every day, it's a good idea.
Cut losing trades, don't add to them. Set your limits on size, don't go over them. Evaluate each opportunity and trade them as efficiently as you can - get as many ticks as you can, ask for prices rather than take them. Every action you make over the course of a year makes a difference to your bottom line. Value every £ that you play with as real.

"Chance favours the prepared".

2008-05-14T23:34:52+01:00

I love this quote from Louis Pasteur, "In the field of observation chance favours the prepared mind". I'm probably going to take this out of it's context, but I think the sentiment applies in many ways to trading and gambling.

I've been reading a fantastic book lately called "The Black Swan", by Nassim Taleb (links to be added later). A man rather a lot cleverer than I, with a clarity of thought on the subjects of randomness and prediction which is superior to most. I won't turn this into a book review, but I recommend everyone read it, the humour might not be to everyones taste, particularly the French, but it's extremely worthwhile.

Central to his theme is our inability to predict. Especially things which are extreme or unimaginable to us. It left me with a very healthy respect for randomness and much less respect for 'opinion'. I was a big fan of his previous book too, (link on the left side of the page half way down) "Fooled By Randomness". Taleb's background is in options trading, he specialised in setting up positions which exposed him to randomness well beyond the expectation of the market. The payoff for which was vastly beyond what anyone could imagine the probability of it's occurance was. Simply because it was unimaginable, the bets he was making were of fantastic value.

This was a new idea to me, a sort of 'exposure to randomness'. Getting the unexpected, 'onside', in a cheap or even free way, that would pay large dividends if these unexpected events ever occured. Conversly, the people trading in the opposite direction had no clue to the downside of their options and bets. These were people who focused on small, repeatable profits (read short odds) which crucially, were "expected" to happen. The lesson, never expect anything! Especially profits.

Back to the quote. He is not talking about taking your chances, or predicting your chances, or spotting a chance and predicting whether it will happen or not. It's about being exposed to chance in the right way. There is no expectation or prediction involved here. Prepare yourself / your position so that chance's happenings pay off with the most reward.

Taleb says, "you do not look for something particular every morning but work hard to let contingency enter your working life". This is wonderful advice.

On a practical level, I've been doing a lot of work on my trading to do with this. Specifically the realisation that I am reliant on the market to allow me out of a position, really I've not been giving enough priority to this... I hesitate to use the word respect in this instance, having read The Black Swan, I'm fairly convinced the market as a whole underestimates many unexpected things. What I am talking about is the fact that if I am to trade out of a position, then it is the market's position that allows me to do so, not me somehow bulldozing through it or willing it to get to a certain level before I can close.

How does this tie in ? Basically I am allowing market contingency to enter my trading. I'm exposed to the unexpected and thus, ultimately - panic and over-reaction. My reward is greater than it should be, the risk (downside) is minimal. These are the best trades you can have.

A lot of people use the term 'free lay', a bet with no downside and all upside should the unexpected happen. Taleb calls these, "free lottery tickets" and suggests we collect as many of these as we can. He's right you know.

Most of all, look for situations where the unexpected will hurt you, and ones where it will reward you. Minimise the former and expose yourself in as cheap a way possible to the later.

Can we still trust Betfair?

2008-04-20T18:57:19+01:00

...Should we trust Betfair? Or indeed, any betting exchange?

Trust is such a powerful concept, a search on wikipedia says that a "trusted party is presumed to seek to fulfill policies, ethical codes, law and their previous promises." The degree to which we trust is a measure of honesty and competence, and the degree to which we forgive broken trust is reliant on whether trust failed due to an issue of competence or honesty, the later being rather harder to forgive.

This is going to be a lengthy entry. But I owe it to you, it's been a while. This entry is not going to talk about tennis, or my performance, which has been fairly unspectacular but steady (the bank roll is up a further 29% on the year). I'm going to post about an issue doing the rounds right now, and that is whether the recent actions of Betfair (the leading betting exchange) have caused us to lose trust in them. Do we believe they have our best interests at heart, further to this, should we? Why did many of us blindly trust them for years, were we naive?

Some of you noticed I made a post (and withdrew it) a few weeks ago about the recent bet matching controversy at Betfair. It was a strong entry, I was pleased with it, but I took it down, people wanted to know why. Sometimes it is better to hold your cards closer to your chest, to withhold judgement for as long as possible... I decided to give Betfair a few days to sort things out, given what I had been hearing, there was a good chance things would change, and outdate the post. In fact they did change not long after that..

Without going into too much detail for those that don't know, Betfair changed the way they matched bets 'in running' for a while. They did this secretly, and they did so in a way which made them around 15-20% extra profit. Profit, being the critical element here, (previously Betfair made no profit at all from the bet matching process) when you match bets and profit from it, you are in fact trading on the exchange. A concept that Betfair clearly didn't grasp.

The term 'exchange' no longer applies in this case, because you are in fact dealing with the exchange themselves. This method of profiting from the bet matching process was only open to Betfair, because it was done using it's own platform software and technology. ie. it was automatic and without choice, part of the site. If you used Betfair during this period, you would have been vulnerable to this occuring, there was no way around it.

If an 'exchange' profits from the process of matching bets (buy and sells) then it is insider trading.

How on Earth did Betfair think they could do this? Well, probably quite easily I'm guessing. In the betting exchange market, Befair are by far the biggest, and for good reason - the liquidity exists there. As a punter and trader, you go where there are people to bet against, where competition and liquidity offers up sizable bets at good odds. Everyone feels the same way, and so you end up with an exchange that has the vast majority of the action. Indeed, this is the ideal scenario for people looking to use 'exchanges' of any sort. You welcome the liquidity.

This puts this particular exchange in a position of extreme responsibility. It effectively declares them the custodians of our marketplace, this is a great deal of trust to place in one company. Particularly a 'betting' company.

Betfair is a registered bookmaker. Without rehashing the issues of their license and whether this is really right or not, whether they like it or not they are also an 'exchange', running an exchange brings a higher level of responsibility that is perhaps not best bestowed upon a 'betting' company, but a 'financial' one. Not just any financial one either, an 'exchange'.

You see, as a business, having the vast majority of customers turns them from not just any company, into a monopoly. Monopolies have massive power over the market, indeed they control it, the customers are at their control - more so when this issue of liquidity is involved. Rival products cannot gain any share of the userbase without taking them away from liquidity. Who wants to populate an exchange with no liquidity? No one! The customers hurt themselves here, but are beyond blame. It's chicken and egg stuff.

Monopolies have little competition by definition. Competition is good for customers, they get fair deals, they have choice and they can vote with their custom. They don't have to put up with the decisions made by a monopoly.

Why would a 'financial' company be better? FSA (Financial Services Authority) Regulation.

No one expects Betfair or any other betting exchange company not to do it's best to make profits. They are a business afterall. But an 'exchange' has responsibilities to it's users, which restrict some of the ways in which it could make profit. There are ethical and moral (and legal) issues that come into play.

You would never for example see the London Stock Exchange trading on it's own platform, let alone profiting from the way it's software worked. Such actions would have severe consequences for those involved.

Betfair has many times the transactions of the London Stock Exchange per day. Something which amazed me when I learnt of it. They have hundreds of thousands of registered users, matched volumes on the biggest tennis matches are well into 10s of £millions, you can imagine what horse racing is like. All of these transactions have to take place in a fair way, speedily and transparently between customers.

Is this the sort of thing best suited to a betting company? A business with a very strong desire to grow, and to continue growing. Can you imagine the potential conflict of interest at play here. With so many people making deals on their platform, millions of transactions per day, this must seem like a goldmine to some at Betfair.

Indeed, given they make the rules, they own the technology and platform software, the temptation must be huge. Further to this, they are regulated as a betting company, to a large degree this gives them a massive freedom to run their product as they see fit, including the ability to change the rules, the way bets are matched or the degree to which they seem like a bookmaker and not an exchange.

Lets throw in the size of the company and the amount it's grown. Betfair is now in all likelihood a 1000 person plus company. All of these people to be managed well, to tow the company line... and all of those bonuses to pay. It's unlikely most of the company know what is going on elsewhere at HQ, there's hierarchy and politics at play, agendas form and the company comes under the influence of various departments and the way they view the direction of the company.

The attitudes of employees is now quite random and unpredictable, given the nature and size of the company. Employee attitudes are going to be very different to that of a 'user'. They are concerned with internal issues, politics, climbing the company ladder and getting their bonus. Does fairness and 'exchange' ethics, play an important part for them, perhaps not. How many people go to work thinking about such lofty ideals? Yet the question of fairness is not one that is thoroughly regulated. Regulated to a sufficient degree where it becomes unquestionable, and a matter of legality, rather than company direction and temptation.

Many of these employees will be privy to the sorts of knowledge about customer accounts that might best be protected. Many know for example how much some of their users are making, and it's rather a lot more than their pay packet. Money talks, and it does strange things to people..

Which brings us back to the original question. Can we trust them? And, should we? In my opinion, no and no.

2 or more years ago I would have unquestionably trusted them. Why though? They have a great product, it's innovative, I enjoy using it and yes I can make a living. I was naive enough to think this was enough. They also acted differently, the company was smaller, guided by different people with no evidence that they wanted to run anything other than a fair 'exchange' between punters. In hindsight, this was not particularly clever from myself..

Why would a company regulated as a bookmaker, wanting to grow rapidly, never think about the goldmine on it's doorsteps. Especially when a point is reached where it becomes harder for them to continue to grow as fast.

This applies not only to Betfair but all betting exchanges. I began by saying 'trust' is a strong word, but lacking trust in someone does not incriminate them, it just means we must keep a close eye and remain healthy skeptics given the lack of proper regulation in this area.

I also said the ideal is to have all the money in one place. That is common sense, but the responsibility placed upon the people running that company is huge, and it's not one we should simply give to a business without strict rules to ensure absolutely no potential for conflict of interests in the future.

January roundup.

2008-02-01T13:08:17+00:00

Well, I did say once a month didnt I...

The Tennis..

We started the year in Qatar, it's always good to catch as much early action as you can before the Aussie Open, or indeed the rest of the year and there were a few notable points that came out of this one (all my opinions of course). Firstly, Ivan Ljubicic looked out of sorts, looked slow and inaccurate, based his entire game on his serve - nothing unusual there, just more so than normal. He'll need to sort himself out to stay somewhere near the top of the game..

Andy Murray won the tournament, but more than just playing great tennis, he was also looking considerably leaner and fitter than I've ever seen him. Clearly putting on some muscle and losing any shred of fat he had last year... his speed around the court was unbelievable at times.

The Aussie Open was fantastic this year. Loads of great matches, even on the first day which is usually awash with one sided, boring matches. Plenty of matches went the distance, it was great trading and surprisingly - good liquidity too during the night, very happy to see that.

Murray will be gutted he went out first round to Tsonga, I'm sure he fancied a very good run after Qatar. Tsonga was unreal however, we all know that if he hits it inside the lines, he's fairly unstoppable.. huge forehand, big serve.. anyone who watched him go close to beating Roddick in the first round of the Aussie's the year before knew what he could do. A breath of fresh air.

Fed looked slow and out of sorts, I'm a Fed fan, so I'm hoping it's just a result of his pre tournament illness and not the beginnings of a decline..

Roddick had a huge match with Kohlschreiber which went deep into the 5th. Personally I felt he had little game in that match and lent on his serve to get him out of all sorts of trouble.. the match stats suggest a very high quality battle, my opinion is they flattered Roddick hugely, the winners were coming from the German's racquet, Roddick simply far too passive.. no attacking intent from his ground strokes. Massive improvement needed from him in this area otherwise I see him doing nothing this year.

Nadal looked pretty sharp, not something I was fully expecting given something of a flat finish to last year. He looks ready to go, but was beating by a man playing out of his brains.

We haven't mentioned the winner yet, Djokovic. I think a fair winner in the end, his level was above that of Tsonga in the final... most noteworthy point on the Serb.. backhand down the line! where has that come from ?!

On the Womens side, although I dislike Maria, it was good ot see her come back and play perhaps the best she's ever played.. makes this year very interesting, with pressure back on Justine Henin now who was head and shoulders above everyone last year. Maria's got herself a new set of wheels to get around the court it seems. Gone is the heavy goods vehicle reverse beep.. impressive change in her movement, credit to her fitness coach, she was getting balls back that previously she had no hope of getting close to.

Wierdest match of the tournament, Serena Williams v Jankovic. What the hell went on here ?! Serena was playing some reasonable tennis before this, and Jankovic could barely run with all the injuries she has been accumulating recently. Williams looked in pieces on court, serving at 75mph, hitting 25 backhands into the net and moved like the Sharapova of old. She goes a set down, and suddenly, it's 110mph serves and the odd lashed winner... but alas, the effort was too late, Jankovic fell over the line, almost literally. I did a packet on this, but I'll live.. and learn.

The trading..

It was a good month. The first good one for a while actually, I've been treading water for a while, but December's month off gave me a chance to reassess, and to work on everything I've been doing over the previous year. A lot of experience had been accumulated which needed processing, experience with various ways of approaching things. December gave me the chance to put a lot of things together into a clear structure.

Really I think the best thing to have come out of this month is the importance of the work I've done away from trading. The preparation of my strategy, the work I've done on spreadsheets and the maths and continually thinking about and improving these things as I went along, between trading sessions.

As things stand now, I have a spreadsheet telling me what I should be staking and when, and you might think that sounds like something I should have had before.. you'd probably be right ! I certainly know now how much help it is being able to know without thinking all of the numbers that are important to me during a match. I feel this has helped me massively.

I've said previously how important just acting out a plan is, well now the thought process has been distilled to it's simplest form - seeing numbers and acting on them. Not just seeing numbers, but being told how much and at what price.. I'm faster than before, and I'm not making the errors of judgement I was. In fact, "judgement" itself has been removed from the equation and that is the error I made in the Williams match.. a mistake I won't be wanting to make again. That was my one screw up of the month and my biggest loss.

My biggest win was Djokovic beating Federer. Incredible value on Djokovic during this match, infact it kept growing bigger and bigger and for a while I thought the market might get away with it, but in reality, there's only so much pretence the market can maintain - if one player is out playing the other then it will go his way eventually. I remember one instance of laying Fed at 1.8ish with the belief that the right price was 1.7 on Djokovic.

My big loss took 13.2% off the bank, the big win added 13.8% on and for the month, it finished up 38%.

If you fancy reading more, Paul at Selectabet has been interviewing me and has recently posted the first part of it on his excellent blog. Here's to a good Feb.

Update: I notice Part 2 is also up over at selectabet.

A punt.com Christmas message & review of 2007.

2007-12-24T16:50:49+00:00

Well, it's been a while. Apologies and also thanks to those that have so clearly continued to check back to this page for new entries in the time I've been away.

Another year has passed us all by, and what a year it has been.. I don't think I've ever crammed as much into 12 months as I have done this year. Many trips away, all over the world, New Zealand, New York, Portugal (twice), Sweden.. all for pleasure I must add and not work. Some may think I've taken it easy this year, and although at times they could be right, in the times I have worked - I worked very hard, and not always with satisfying results, though certainly with many lessons.

Although I've spent many times on the blog bemoaning the solitude and boredom of working alone and being something of an outsider, I do know how lucky I am to be in this position and to continue to be in this position. This year has had some stark reminders about how fragile an existence the professional gambler's career can be.. it is said by some that all gamblers / traders are terminal, we fight a continual battle within to keep this termination from occuring. Many it seems succomb eventually, it serves to pay close attention when it does, no one is safe.

The idea of having 'time off' for the pro gambler is perhaps one that displays the relative health of ones mentality (and probably ones bank account too).. though without one, you don't achieve the other. Time off is essential to good performance, time off is also tricky to manage when you have a near constant stream of gambling opportunities coming at you. The gambler in you wants to stay home to trade, sense, mental and physical well-being dictates otherwise... it's for this reason that one might call 'time off' one of the fairest indicators of a gambler's psychological health.

More critical is the relationship between time off and losing runs.. Do you follow a losing run by working harder, or do you restore mental balance with some time off ? If you work harder and continue to lose, the pressure of having put in more hours will only hurt the cause more. There's something special about the Human mind when it's given time to mull over the experiences you've fed it recently.. particularly if you are looking for answers. Never giving yourself and your mind the time to perform this function will inhibit your chances of learning greatly. I don't claim to understand what's going on here, but I think most people will have appreciated at times the positive effects giving something some time to settle, the mist can mysteriously clear without you actually doing much at all.

This year more than any other re-established for me the importance of process over profits (or losses). I had a lot of streaks (good and bad). I put this down to a few things, thinking about money and also spending a lot of time learning, testing and changing strategies. This takes a lot of time, as a gambler you don't really know if something is working until you have a decent set of data - and even then you are at the mercy of randomness. Data in this case being your P&Ls, the tendency to watch them perhaps a little easier when trying or changing strategies and in large part - watching profits and changing strategies tend to cause each other.

But, I think it's been worthwhile, come November I felt I could settle on something which encompassed all I had learnt in the previous 12 months. November not really being the ideal time to become settled with the season finishing at the end of that Month. Still, it has me looking forward to next year, the season being only a week away.

Not only did I settle on a strategy, but I defined all my risks and come up with a fool proof method of handling my risk point by point... a defined risk should be the backbone of any trading plan.. I have one, finally. Had I been naive to not have one before ?- definitely, I don't mind admiting that. I've always been a sensible person (my nickname is 'steady' afterall), but having all of these things defined really does take the pressure off and focus the mind on the process of executing the plan. 2008, will hopefully see my direction head firmly away from chopping and changing, and turn towards working hard and carrying out what I have planned.

It's been an interesting year on the blog too. I began this blog one year ago, not knowing what to expect from it or myself writing it. I have to say I've enjoyed it, though as my out of head post suggested, I think it's occasionally a hinderance writing about what I'm learning all the time! I'd like to thank all of the people that took the time to comment on my postings and email me too, I really appreciate that.. also the other bloggers that have been writing steadily online, you are a constant source of interest, some of you have done very well this year, I wish you continued success.

So what of the blog in 2008? The frequency of postings slowed towards the end of this year, partly due to me taking time off and partly because it was time for me to focus solely on producing a more complete plan of my strategy. I didn't want to have to think much about anything else and this is probably going to be the case in 2008. Expect fewer postings next year, perhaps one a month or one every fortnight to be the norm. I expect these will be longer pieces though with plenty of good food for thought. I may well post something in between if I really need to get something published.

A couple of figures from 2007 seeing as people ask me a lot.. Largest win of the year; £37000, Serena Williams beating Hantuchova at Wimbledon, largest loss in 2007; £31000 Henman beating Tursunov at the US Open (win rounded down, loss rounded up as I don't have my spreadsheet through from Betfair yet..)

Time now to relax and enjoy the festivities (and my Betfair hamper;), all the best to my friends out there, and good luck for 2008!

Matt

Out of head and onto blog = empty head?

2007-10-25T22:26:21+01:00

Just a quick post this evening about something I've been noticing more and more each time I make a blog entry. What I'm writing is not necessarily staying in my head once I've written it. Not exactly an ideal situation, and not what I had in mind when I began the blog at all! What I'm writing here is supposed to help me as much as it seems to be helping a few of the readers, lately it's been more of the opposite.

What seems to be happening is that once an idea has been published, it's leaving my head, and has to be re-learnt again! I actually seem to drop the ideas on a personal level once I've put them online! Crazy. I need to give this some thought, why is this happening?.. First thought: perhaps the blog is appealing a little too much to my ego than it should. Am I feeding my ego too much here?

A lot of people think gamblers and big egos go hand in hand.. the stereotypical high roller is what they picture the professional gambler to be. Successful gamblers and traders know the dangers of the ego, I would say those that do win are much more likely to have humility, and be willing to admit they are wrong much sooner than the ordinary punter. They don't see this as anything to do with pride or shame, as is the case in so many walks of ordinary life... definitely pencil this topic in for another posting.

A few things to ponder anyway, not that it spells the end of the blog, but I certainly need to be more careful about dumping ideas here and not being focused on retaining them for personal use!

Idea for the week - you can't beat good pricing. (note to self: don't forget this!)