High probability Betfair trading
Sounds nice doesn’t it, winning positions regularly topping up your account?
If you look at any ebook or system sellers nearly all of them focus on high probability trades. Basically positions that win very frequently. That’s great, it makes the person who just shelled out some cash feel really good. They keep winning on a regular basis and in an excited hubris they often credit the author with some positive feedback, then booooooom; It all goes wrong. Eventully reality dawns that it just doesn’t work.
To understand what you real objective is when trading, let us assume we are betting on a coin toss. With a 50/50 chance we won’t make any money in the long term, but we may go on some nice winning runs. If we want to make money we have to up the strike rate or reduce losses, easier than it sounds, but possible.
Whatever strike rate, you look at the equation in basically the same way. If you participate at random in the long term you can’t make any money if the market is efficient, which it is! So you have to increase your strike rate or reduce you losses when you make them. Not by hedging, because you shift the exposure to loss to another scenario, but by finding a way to reduce your loss inside the way the market functions. I’ll have to explain the significance of that sentence at some point!
High probability trading is actually very easy. You can pretty much custom make a strike rate in any sports. It’s impossible to get 100%, but you can go all the way up to 99.9%. If you ask me on a horse racing market, I can deliver a stragtegy that will deliver pretty much any number you want up to that limit. But the problem is, it still wont make money without modification of some of the elements. Better entry, better exit etc. etc.
Why wont it make money on it’s own? Because if you make £1.00 profit 99 times but lose £100 on the 100th go you will still be net negative overall. The detailed maths is complicated, but you could actually get away with it and go on incredible winning runs, but eventually your luck will run out. But that’s why people like high probability trading and why people push them, they look and feel really nice.
The major problem you see, in the data coming off the markets, is that this end of the market is where the least value exists. It is saturated with people trying to wing it, hoping that it’s somebody else that takes the eventual hit. That pretty much destroys all chances of getting a profit.
So the moral of this story is….
It’s actually at the other end of the scale, the “low strike rate, big occasional win” were value is more abundant. Unfortunately very few people have the mindset or mettle to recommend or pursue a low probability strategy. That probably also explains why there is value hiding away in that little niche.
At the end of the day if you recommend a strategy that loses frequently then you look a fool and people will complain, very few will see it through to the eventual pay off. But if you pursue a high probability strategy then you look like a god because the pay off is frequent in the short term. But even if it is negative in the long term, you can always blame ‘luck’.
When it comes to being profitable, luck just doesn’t enter the equation.
Category: Trading strategies
