FTS Pod & Blog 6th October – Preparation Part 1

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FTS Pod & Blog 6th October – Preparation Part 1

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06/10/2022

In this episode, I will continue on the road of the Right Pathway and preparation.  In the last episode, I mentioned the pillars of success we need to develop to be a successful bettor/trader.  These are preparation, development of a trading style, staking, money management, psychology, system performance analysis and commencement of trading.

If we ditch reading trading books, hanging about in chatrooms where we think people can educate us, and look to prepare for what we are going to be doing, we can arrest a lot of the wrong thinking and expectation before we start.

Preparation

I never fail to be mystified by the fact people just start trading.  There is very little thought process to what they do, and if there is, it is misguided; Episode 1, Wrong Thinking and the expectations levels are off the charts, Episode 2 – Expectations.  Of all the areas I deal in with people, money management and preparation are the two most significant points of failure.

Imagine going home and saying to your spouse/partner/family – “I am going to open a sweet shop”, and the conversation then playing out like this.

“Ok, darling, you’ve not mentioned that before.  That sounds good.  Can I ask why?”

“I’ve heard it is recession proof, everyone eats sweets, the best business to go in, be my own boss.  It’ll make some good money.”

“That sounds great, so you’ve looked into it.”

“Well, yes, I read on the internet everyone eats sweets and Dave at work agrees with me, so I have been to the cash and carry, bought £10000 worth of sweets, they are in the car, and I have hired a unit to start selling them tomorrow.”

“Whoah, Tonto, what skills do you have in this?  What experience do you have?  How much time will be involved?  How do you know your unit is in the right area?  What are your other costs to make this pay?”

Do you get the idea?  Whilst I may not have put it as eloquently as some, you simply wouldn’t do it, BUT people do the equivalent of that in the betting trading world daily.

We need to prepare as we would in any other business.  We’ll get to that.

Preparation covers a vast array of elements, and before I delve into it further, it is important to understand the many reasons why bettors traders lose.  Of course, we cannot just think ourselves to be winning bettors or traders.  It is not as simple to just think properly and ditch all your biases, and you will win.

We need a method with an edge, a way of trading it and a money management plan alongside that that we stick to.  Psychology, then, is the everyday challenge of operating those two variables.

We will get to all of this, but first, we need to examine further why people lose.

Ignorance of what they are doing and involved in.

This could be categorised as laziness and thinking it is easy.  Most who bet or trade on sport have an opinion on that event.  It is why they bet on Dutch Eredivisie for goals as opposed to Spanish Segunda, as mentioned in the last episode.  It offers the path of least resistance to goals, BUT they don’t understand the approach needed to monetise the markets.

I read/see people’s opinions every single day, and it is impossible to avoid them.  FTS has in its realms 100+ football managers, 50+ horse trainers; of course, we don’t, but if you read the history of posts over the 15 years of the site, you could easily believe we did have.

Widen that out to a world audience, and Twitter, for example, has experts on everything, Covid, Vaccines, Ukraine War, Interest Rates, Nuclear disarmament. People have learnt to grift by segueing from one of these topics to another with apparent ease.  They and their followers read and see what backs up these opinions, which further cements them—Confirmation Bias.  The bottom line is that no matter the topic, people are lazy, think they know more than they do, and seek confirmation (certainty) in what they believe or want to believe.

Bias in sports trading is so detrimental to how you think, and it is the first step of our preparation.  We need to identify an issue and then set ourselves up to tackle it.

Let’s assume you are watching a football game and see a goal go in.  Arsenal 1-0 Tottenham.  Yep, I said it.

You may have been planning to trade the game and were hesitating.  You may have fancied Arsenal to win the game.  When the Arsenal goal comes, you have not placed your trade and make a statement such as, “I knew that would happen”.  You didn’t, of course, but you train your brain to believe you actually have some form of predictable prowess.  We can all predict events after they happen – Hindsight Bias is rife in sports traders.

Goals in Holland – “it had to happen” – the ability again to predict inevitable outcomes after the fact.

Red Card in a game, and your mental bias is that “games with red cards don’t have goals”.  No more goals scored in the game – “I knew that would happen”, you didn’t, you had no idea, you had a bias that affects it. We can examine that further with evidence on the current season. France this season has seen what certainly seems a perceived upturn in red cards. Like most I watch Livescore services whilst trading and could not help but notice a flurry of red cards come up on the screen when French games were on. Rather than just perceive it I looked into it. Apparently this season French referees have been told to apply a new firmness order. This has seen the margin for tolerance lowered and more red cards (I agree with this I hasten to add, the more players that get sent off football may return to a semblance of a competitive game as opposed to players cheating constantly but that is another pod topic). The top 3 leagues in France, Ligue 1, Ligue2 and France National this season all feature in the To p 8 leagues for red cards per game in world football, not just Europe or select leagues, in world football.

At the  time of this pod/blog there have been 90 games in French Ligue 1 and they have seen 39 red cards – 0.43  Red Cards per game (coincidentally the number for Ligue 2 is exactly the same). In those games average goals are 3.09. The first time in 5 years France has averaged over 3 goals a game. In 2021-22 Season the average goals per game was 2.8, Red cards per game for the season was 0.16. We have seen an almost 3 fold rise in red cards but goals have increased roughly 10% so far. That kind of flies in the face of the “I knew there would not be goals as we had a red card” theorists – don’t let numbers get in the way of bias and opinion. It may make sense if more defenders are getting sent off, the attackers have more space and score more goals. My whole point is most biases are misplaced and can be debunked very quickly. That goes for life in general let alone sports betting but again that is another pod altogether.

Breaking such bias and thought process is incredibly difficult.  It is a mental battle every day.  It is why the world now feeds on misinformation.  People want to believe they are right and seek that certainty, so they read what cements their thoughts and people who wish to either press an agenda or monetise a situation prey on it. Very few people break information down logically and objectively to arrive at outcomes. Too much these days is fed by a lack of evidence, or worse still against evidence that is staring you in the face or takes 30 seconds to find in our technological age, as the Mark Twain quote goes.

Let’s expand that thinking out further into the betting world. The kind of bias, as per the red card thinking, is one we use to protect ourselves from being wrong. We like that feeling of being right, so we use those instances when bets and matches go wrong to kid ourselves, we were right all along. The trouble is we cement those thought processes and they become standard, this will have an adverse affect on future performance and decision making. I once had a member of the FT Telegram group  astounded I paid no attention to red cards, it is quite simple, I am not good enough to determine the affect of a red card has. If that match is in France, for example, I have no idea if the player is a top defender, midfielder, I have no idea if a red card in say the 34th minute would have more effect than in the 65th minute. I have no idea how a red card will affect the game state of that game, is a red card at 2-1 the same as a red card at 1-2. I have no idea what substitutions the managers will make or how they will approach the rest of the game. I have no idea. There are people running these models but they are just models and anything again is their interpretation of the situation.

I have data based on over 40000 matches, 26 leagues and no idea which match had a red card or not and that is the way I like it. Even collecting that information,  I would have small samples that would not do anything other than confirm a bias I did or didn’t have. My view on red cards I am happy to admit, is I am clueless on the effect of red cards in football and I will happily say most if not all of you listening are equally clueless BUT you want to think you know more than you do. Dunning-Kruger and we will get to that shortly.

Lets continue to examine bias and its affects on your betting

We can go about doing everything possible to prepare.  We have found a great system, know we have an edge and have sorted our bank.  We have tested, and we are finally ready to commence trading.

We place our bets, and in month 1, we are 20 points down.  “I knew that would happen” – You didn’t, of course, but because we are involved in something that does not have short-term certainty, you convince yourself it is you.  You had the predictive power to foresee the loss.  You went ahead despite knowing it was going to lose, and you must have done, as you told me a month later, you knew it would happen.

Do you realise how daft it all sounds?  It is a gullibility to ourselves that needs to be broken before we start.  Unfortunately, most traders have only known losses, so that is the bias they have cemented (a phrase I call being scarred).  They then make silly decisions based on that bias.  People dive in thinking somewhere there are easy riches only to sink very quickly owing to lack of preparation.

The belief that we know more than we do is, in my opinion, detrimental to trading and a cognitive bias in itself known as the Dunning Kruger effect.  I will quote Wikipedia here as they say it as well as I could – “people with low ability, expertise, or experience regarding a certain type of a task or area of knowledge tend to overestimate their ability or knowledge.  Some researchers also include in their definition the opposite effect for high performers: their tendency to underestimate their skills.”

In dealing with people, I see this every single day.  People tell me how good they are at something; I am good at predicting goals – I am not sure they are aware of how daft they sound.  Imagine, just imagine having the skill to predict goals.  You wouldn’t just be betting; every top club would want you on their books sitting there awaiting your prediction so they can do something about it.  “Pep, there is a goal coming here, mate.  They are about to score.  You better do something your end to change the course of this inevitable outcome.”  You would be laden in league titles, World Cups and Golden Boots.

Successful bettors/traders are not wise after the event; they can put their biases aside and set themselves up for the day’s trading to present what it will deliver on that given day.  Each day will be different and present its own opportunities and challenges.  Your opinions, biases, and overestimating your skills will have no positive effect on what that day offers, most likely quite the opposite.  Your expectation of weeks and calendar months will never align.  It just is not going to happen.

Betting should be easy if we look at one of life’s great lessons “Learn from others mistakes”. I am a great believer in evolution. We evolve and learn from generation to generation. In its most basic form if we look at fire. Imagine seeing fire for the first time whilst stood with your friend. Your friend gets inquisitive and runs towards it and reaches out to touch it. He goes up in flames and you witness it. 3 months later your stood with another friend and come across another fire. The new friend, inquisitive takes a step towards it and you hold your hand out to stop him. You have learnt from what you saw happen previously.
Apply the same to your betting – simple. 90% of people lose, the mistakes they make are all the same. They spread them around their chat rooms, Twitter, Facebook, Insta, openly talk about them. Betting is easy – do exactly the opposite to what you see in most places and you will get on just fine. Don’t run head first into the fire, pause, hold your hand up and think about what to do.

Reasons for failure in betting include,

Listening to others and following tips, we touched on this in the last episode,

Asking ill-informed people for their opinions,

Failure to understand the numbers behind your method,

Strike rates,

Average prices and entry/exit prices.

Failure to have a trading plan and a failure if you do have a plan to stick to it.

Wanting to trade for excitement.

Over trading, over staking,

No money management,

No understanding of the longest losing run,

No understanding of drawdown

No understanding of bank hit.

No plan to increase stakes

No knowledge of when to have a higher stake on

Being impatient

Loss chasing

Having unrealistic expectations,

Switching methods on a whim,

FOMO,

Copying others with no knowledge of how they really do or if tailing them will work

Believing spreadsheets and technical analysis is all you need

Believing markets cannot be beat

Focusing on profit, not process

Failing to understand and embrace risk and risk management

That list is already quite long and in no way exhaustive.  The good news is that most of it can be staved off by preparing for what you do.

If we ditch reading the trading books, hanging about in chatrooms where we think people can educate us, and look to actually prepare for what we are going to be doing, we can arrest a lot of the wrong thinking and expectation before we start.

Of course, going back to the start we would not just open a sweet shop.  We would do extensive research, financial analysis, SWOT analysis, and market research.  We wouldn’t just pitch up at a unit with a carload of sweets.  Why are you turning up at a betting Exchange with a “car” load of cash, thinking it will miraculously grow with no preparation?

We need to prepare as we would in any other business.

I wrote a blog a while back on Goals and Plans –

I will copy a bit of that blog here.

Goals must be realistic, so let’s say a goal is – I want to become a successful trader/bettor.

What does that actually mean, and what is involved?  What research have you done to see how that plays out?  What are you going to do to make it happen?  If you think it will take 12 months, I can tell you; you are miles out, 3-5 years minimum, minimum if you start today to look to do it properly.

It then becomes a series of questions, and this list is not exhaustive.

  1. What are you defining as successful – it will be unique to you?
  2. What skills do you have now?
  3. What experience do you have?
  4. What sport are you going to focus on?
  5. What time do you have available?
  6. What funds do you have available?
  7. What weaknesses do you have?
  8. What threats are there to you achieving this goal?
  9. How will it impact your family?

Fail to prepare, prepare to fail.  These questions here coming on the back of the questions last episode will start to give you clarity of thoughts about what you want to do and how you wish to go about it.  In my opinion. We can then put in the building blocks along the way but expecting anything less than a 3-5 year journey is frankly madness.

The simple answer is if you commit today to do it properly, you will take your first step to the winner’s circle.  And the simple plan and preparation are to identify what everyone else does wrong, the simple mistakes they make listed above and do totally the opposite.  Train yourself to think differently, prepare properly and execute.  You will be a winner.

3 Responses

  1. Excellent POD as always.
    Personally I listen to them returning from work and I also print the written element out to refer to and re-read.

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