A question of scale (part three)
Click on the text for part one and part two
Curiously for some, it is actually quite easy to work out the maximum upside you can get in any market over time, that’s a definite calculable variable. See my previous blog post ‘profit exists everywhere’. You can also do the same for losses. When you look at those stats, you suddenly realise that the market is capped in either direction. That has advantages and disadvantages.
But the ‘market capped’ thing is a point that’s missed by many, but is really important. This is because it means your maximum loss is capped in a sports market. Knowing this is key because your mission is, bascially, to exceed that mamimum downside by seeking equally positve upside and then a little on top, or optionally you can choose work on reducing your chance of a loss.
However the cap on the upside creates a problem. If you are confident, you can up your stakes and go for it. But no matter what you do, you can’t possibly exceed the maximum available in the market, it’s just not possible. When trading this is linked to the variability in the underlying odds, which is also fixed. You can up stakes but, as previously discussed, there comes a point at which you influence the outcome by accepting odds that are less favourable. With that in mind, you can conclude that the only way around this and to continue to grow your stakes, is for the market to grow and grow, but that generally hasn’t happened. The amount of money in certain markets hasn’t really grown much year on a year. Some have grown, but quite a lot have not. So without that growth there is no ability to scale to any great extent.
So when we talk about problems of scale you have two key points. You also have the general issue that the market will respond to your activity. This is why I will always be very sceptical on people who say they need your money to ‘invest’ in sports markets. If you have something that works, you very quickly hit this upper ceiling and from that point you have to take a different tack.
Category: General, Trading strategies
