Cut Your Losses?? (Mean Reversion)

Learn sports betting strategies and discuss key factors to consider when placing a bet.
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Zenyatta
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Joined: Thu Mar 11, 2010 4:17 pm

It's fascinating to watch the price chart of a selection on the few occasions when I'd known in advance exactly what the starting SP should be (due to detailed info of a horse's form).

The market does move to the correct SP by the off-time, but doesn't get there in a linear fashion. For starters, the period from 10 minutes-5 minutes before the off has a high degree of randomness, the market splutters around and the price can sometimes move 5 ticks in the wrong direction. It's only in the final 5 minutes that the price really starts to rapidly 'home in' on the correct SP, and even then there can be temporary spikes or fluctuations of 2 or 3 ticks in the wrong direction.
Iron
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Hi Zenyatta

With steamers and drifters, do you find that, due to market hype, the price ends up much lower or higher respectively than its true price?

Jeff
Zenyatta wrote:It's fascinating to watch the price chart of a selection on the few occasions when I'd known in advance exactly what the starting SP should be (due to detailed info of a horse's form).
PeterLe
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Last edited by PeterLe on Mon Aug 06, 2012 12:41 pm, edited 1 time in total.
lesblakeman
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After a couple of near career ending losses in May I decided to go the "stop loss" route , lasted about an hour , the non linear movement of the markets just makes it unworkable on horse racing .
Iron
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Joined: Fri Dec 11, 2009 10:51 pm

I've found this thread very interesting.

Has anyone else experimented with random trading, where you enter at random with a stop of x ticks and an offset of y ticks?

Jeff
dogform
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Reversion to the mean is a suicidal strategy to employ in a distinct horse rate market and anyone who thinks different is deluded.
Iron
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What's your reasoning behind that belief?

Jeff
dogform wrote:Reversion to the mean is a suicidal strategy to employ in a distinct horse rate market and anyone who thinks different is deluded.
dogform
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Ferru123 wrote:What's your reasoning behind that belief?

Jeff
Reversion to the mean is generally applied to much longer time frames than the short life of a specific horse race market. How do you determine the mean of a distinct horse race market where the bulk of the activity is close to the off. A steamer is not likely to revert to the mean nor is a drifter. As I said before, suicidal policy and with no substance or foundation for horse race markets.

I made an exhaustive study on reversion to the mean for greyhound trainer statistics and trap statistics covering every BAGS race held in the UK for the past 18 months. The study did not yield any evidence that betting candidates due for mean reversion would be profitable.
Iron
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dogform wrote:A steamer is not likely to revert to the mean nor is a drifter.
Thanks for your reply Dogform.

I don't know whether it's 'likely' to revert to the mean, but trends often break down and reverse.
dogform wrote:I made an exhaustive study on reversion to the mean for greyhound trainer statistics and trap statistics covering every BAGS race held in the UK for the past 18 months. The study did not yield any evidence that betting candidates due for mean reversion would be profitable.
I'm not sure I follow. Are you talking about situations where you bet on a steamer or a drifter reversing? If so, what were your parameters?

Also, I think what applies to greyhounds may not apply to horses, given that the liquidity in greyhound races is much lower and you therefore possibly have different players in the greyhound market.

Jeff
dogform
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Ferru123 wrote:....I'm not sure I follow. Are you talking about situations where you bet on a steamer or a drifter reversing? If so, what were your parameters?

Jeff,

The application of reversion to the mean that I analysed for greyhound racing was to calculate daily the trainers winning percentage for their last 100 runners and create a daily evolving trend line. I then compared this trend line to their overall winning percentage for the previous 6 months which was used as a baseline.

By comparing the deviation of the trend line to the baseline I then checked what would have been the P/L by backing/laying the trainers runners whose percentages were quite a way from the mean and would be due some type of reversion.

I did the same thing for the trap stats and in both cases there was no significant P/L. The reversion to the mean does take place but not in a predictable pattern that can form the basis of a system.

Regards
dog
Iron
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Thanks Dog. I think we were talking at cross purposes. :) I'd thought you were referring to mean reversion in the sense of a going against the trend when trading in the hope that the market might revert to mean.

Jeff
dogform
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Ferru123 wrote:Thanks Dog. I think we were talking at cross purposes. :) I'd thought you were referring to mean reversion in the sense of a going against the trend when trading in the hope that the market might revert to mean.

Jeff
Yes, it seems we were at cross purposes to some degree. However, I still maintain that reversion to the mean in a specific race market cannot be guaranteed. The market will have its mean which can be calculated on a split second basis using the correct data capture and analysis model, however, to then use the current deviation from that mean as the basis for trading is fraught with risk.

It is in this light that I meant that a steamer will not revert to the mean, as it actively steams it will continue to diverge from the mean.


Regards
dog
freddy
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Ferru123 wrote:I've found this thread very interesting.

Has anyone else experimented with random trading, where you enter at random with a stop of x ticks and an offset of y ticks?

Jeff
Jeff don't know if this will help as have not tried trading at random exactly, but a few years ago i analysed my trading data and found out that something like 98% of my trades would have made a profit of some sort regardless of whether the initial bets placed were a back or a lay.

so to me that tells us that trading with a random entry point is very possible if we are able to spot a good exit point, if that makes sense ;)
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Euler
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I think you need to look at time scales as well with mean reversion.

You often see a price being chased out nowadays and that reverts to mean very often. That never used to happen a few years ago but is quite common now.
burdo77
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I agree with Euler that reversion to the mean needs to be measured at different timescales. I'm not an expert at trading horses, however many times you will notice that the ladder will display a skewed distribution, therefore no reversion to the mean. However at a smaller time scale eg 10 min pre off you may find it to be different.
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