An alternative to Betfair?

Long, short, Bitcoin, forex - Plenty of alternate market disuccsion.
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Iron
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Euler wrote: (1) Transaction costs, lower on Betfair.
Hi Peter

Not sure I'd agree, particularly if you're paying the premium charge.

If you're trading EUR/USD, the spread is just 1 pip with Capital Spreads.
Euler wrote:(2) All Betfair markets are framed at 100%, that doesn't happen on financials.
True, but to what extent does that help your trading? If you were trading a particular horse, would you focus purely on what's happening with that horse, or would you look at other horses?
Euler wrote:I'd still favour spread betting on Betfair
I think the main advantages of Betfair are that:

A. You can act as a market maker by offering money to the market, rather than taking the available price.

B. The number of races per day gives a skilled trader the opportunity to rapidly grow their bank.

But with the financial markets, as there's virtually unlimited liquidity, the potential earnings are higher.

And IMHO, financial markets and Betfair markets are fundamentally similar in the way they operate. This quote (by John W Henry) applies as much to Betfair as to the financial markets:

I don’t believe that I am the only person who cannot predict future prices. No one consistently can predict anything, especially investors. Prices, not investors, predict the future. Despite this, investors hope or believe that they can predict the future, or someone else can. ... We rely on the fact that other investors are convinced that they can predict the future, and I believe that’s where our profits come from. I believe it’s that simple.

Jeff
Iron
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Today's oil chart is a case in point.

It looks a lot like a horse that drifted and drifted, only to steam when the market realised it had over-reacted.

Jeff
Ferru123 wrote:
And IMHO, financial markets and Betfair markets are fundamentally similar in the way they operate.

Jeff
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Euler
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The downside of Betfair is that you can't scale very much, but it's usually more than enough for most people. On financials you only start running into issues if you start working in hundreds of millions or billions.

I think you are 100% wrong on the predicting future element. You can predict the future, not exactly, but enough to make sound rational judgements and profit from them. People who make no attempt and working out what should be the true underlying value of something will always struggle as all they are doing is trying to second guess somebody else's move and that is pretty unpredictable.
Iron
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Euler wrote:The downside of Betfair is that you can't scale very much, but it's usually more than enough for most people.
True.
Euler wrote:I think you are 100% wrong on the predicting future element. You can predict the future, not exactly, but enough to make sound rational judgements and profit from them.
I think it depends on what you mean by 'predict'. You can't say what will definitely happen, but I agree that a select few people can make money from fundamental analysis.
Euler wrote:People who make no attempt and working out what should be the true underlying value of something will always struggle as all they are doing is trying to second guess somebody else's move and that is pretty unpredictable.
Trend followers (which is what Henry is) admit that they cannot predict where the market will go. In fact, two thirds of their trades lose money.

However, the third of trades that are successful pay for the unsuccessful trends. The reason is that trends self-perpetuate due to crowd psychology. Because of this, if you were to map trends on a Bell Curve, you wouldn't see a normal distribution pattern. Instead, you'd have what's called kurtosis - a fat right tail - meaning that the longer trends are longer than you would expect. Therefore, by cutting their losses and letting their profits run, trend following hedge funds can make about 20% per annum on average.

Jeff
PeterLe
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Hi Jeff,

The problem I found with Forex is that when I was using a dummy account, I made something like £15K in 10 days (using the BlackDog strategy)..I though I had found the Holy Grail and then on the 11 day I lost it!

It scared me. The market moved so fast :o (Yes I know I could have had stop losses etc, but I didnt), whereas Betfair, yes it sometimes goes against you, but moves so slow by comparison. I dont think I would ever feel relaxed trading these markets

The other point is, when you enter the Forex arena (or whatever you are trading) you are up against TOP professionals who have every tool at their disposal, much tougher in my opinion.

Why not just focus on Betfair and be the best you can be. Yes it's a much smaller pond, but still plenty of fish? The top traders on here must be making £60K - £100K year easily, probably more for a few. Pound for Pound (net of tax) thats more than the prime Minister!

Regards
Peter
hgodden
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Interesting comments.

Peterle - how much were you using to make the 15k? Sounds like a right rollercoaster!
Iron
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Hi Peter

Thanks for the advice. :)

My aim is to succeed at both Betfair and Forex - I don't see it as an 'either/or'. And I'm pleased to say that, although I'm not yet making a consistent profit, I'm making progress. I think that, one it clicks, I'll be able to up my stakes and make rapid progress.

Yes, with Forex you're up against top pros. That said, like Betfair, the Forex market is irrational due to traders' emotion-based decisions. You didn't make that 15K due to random chance. :)

It's true you get big swings on Forex. But I've also found that can happen with Betfair too. And at least with Forex you can use a stoploss.

BTW, another advantage of Forex is that, with one trade, you can make more than you make all day with Betfair, once your bank has grown sufficiently. Also, you can practice with a dummy account, meaning that you can hone your technique and build your confidence without risking real money.

Jeff
PeterLe wrote:Hi Jeff,

The problem I found with Forex is that when I was using a dummy account, I made something like £15K in 10 days (using the BlackDog strategy)..I though I had found the Holy Grail and then on the 11 day I lost it!

It scared me. The market moved so fast :o (Yes I know I could have had stop losses etc, but I didnt), whereas Betfair, yes it sometimes goes against you, but moves so slow by comparison. I dont think I would ever feel relaxed trading these markets

The other point is, when you enter the Forex arena (or whatever you are trading) you are up against TOP professionals who have every tool at their disposal, much tougher in my opinion.

Why not just focus on Betfair and be the best you can be. Yes it's a much smaller pond, but still plenty of fish? The top traders on here must be making £60K - £100K year easily, probably more for a few. Pound for Pound (net of tax) thats more than the prime Minister!

Regards
Peter
PeterLe
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Hi H
Initially I was using £1 ticks and 0.10p, depending upon what I was doing.
I"ve just looked for the last dummy statement but it is on my personal laptop and the PSU has failed.
I did find this one thought from the week before. This was my very first venture (never touched it before)..It seemed quite easy to be honest once I got the hang of it? Beginners luck?
When I got confident (and remember It was only dummy money!), I thought, right lets put it up to £10 ticks!).. Once I upped the Tick size, it was generating big money...but then I realised Its like stroking a Rotweiller!
Regards
Peter
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PeterLe
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Sorry - Just to add to this...Jeff actually helped me with this off line (thanks for your help jeff), so he does know what he is talking about.

For me, I enjoying doing what I am doing on Betfair and doing well, and I know that I am only just scraping the surface, so decided to focus my efforts there..

I think if you trade the Forex, 100% to the strategy, you should be in the positive...but you will have to live and breath it for a good length of time..
Iron
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Thanks Peter

I should clarify though, in case anyone thinks that I'm a Forex guru, that I've yet to make a consistent profit! :)

I think the reason I'm not making a living from Forex is due to a variety of psychological factors, such as over-complicating trading. I'm pretty confident that I possess techniques that will give me an edge over time, however.

The Black Dog system that Peter referred to sums up the correct approach to trading Forex IMHO:

'Everyone keeps saying KISS, KISS, KISS; simple is good, then they start talking about ratios! Geez! The market goes up and it comes down. Period. It can get a little more complicated than this, but not by much'.

Jeff
PeterLe wrote:Jeff actually helped me with this off line (thanks for your help jeff), so he does know what he is talking about.
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jimrobo
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The professionals I know laugh when you mention forex and say it's full of cowboys and to avoid it like the plague.
Iron
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If it is full of cowboys, surely that's a good thing, as it means that the market will be easier to exploit. But that's a sweeping statement to make about a market whose fortnightly turnover is equivalent to the world's GDP... :)

As for avoiding it like the plague, try telling that to some of the financial traders I know who make a very good living from it. :)

The challenge with Forex is to find a technique that works (and there's a lot of useless systems out there!), and to apply it to the letter. As the author of the system Peter was referring to points out, if you don't follow the rules strictly, you might as well save yourself the bother of trading and just send off a large cheque to the traders you're up against! So as with Betfair trading, it's a case of 'many are called, few are chosen'.

Jeff
jimrobo wrote:The professionals I know laugh when you mention forex and say it's full of cowboys and to avoid it like the plague.
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Euler
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jimrobo wrote:The professionals I know laugh when you mention forex and say it's full of cowboys and to avoid it like the plague.
I've got several friends who I have met over time who work in the city, generally on the trading and IT side of things, and it's clear some of the big institutions invest a lot of money to get any edge they can. I just can't compete with that. I seem to have done very well at long term investing but that's thanks to Buffett and Graham. I know it's not everybodies cup of tea but I earn money whether I do something or not, whether I sit in front of my PC or not and that's a great feeling.
Iron
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Euler wrote: Some of the big institutions invest a lot of money to get any edge they can. I just can't compete with that.
Peter, I think you're underestimating yourself. :)

On Betfair, you're up against highly intelligent people and sophisticated organisations, yet you beat the market day after day.

Also, when you take the long-term value approach, you're buying shares from the big institutions you refer to. So whichever method you use, you need to be able to outsmart the City traders.

But each to their own... :)

Jeff
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Euler
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A couple of Eureka moments for me in the markets.

(1) When I started doing the football pools when I was young. I realised that a lot of people used no skill at all to make thier selections.

(2) The fact that gamblers thought, because something had happened a lot in the past it was thought to be more likely in the future.

Those two guiding principles have stuck in my mind for years.

I think exploiting this behaviour is difficult, because people who are seeking to profit it often fall victim to it themselves!
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