Cut Your Losses?? (Mean Reversion)

Learn sports betting strategies and discuss key factors to consider when placing a bet.
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.
matekus
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PeterLe
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The markets have changed a lot since the original post four years ago. However, I still dont use stop losses as such (just mental ones)
The ebb and flow of the markets are significantly different too. You can see the traders money hit the ladder now and more often than not you can see corresponding closing trades too, i.e. their money comes it, pushes the price in one direction and then they trade it out (and often push it back to where it stated). I know its always been like that, but it's more pronounced now
Regards
Peter

PS When I look back now to the original post so long ago,I learned a lot from that experiment (and all the subsequent ones). I still run tests each day to 'keep my hand in' as the markets change so fast and when real fundamental changes do occur (i.e. Cross matching) you need to ready to capitalise on them. The six months following Post cross matching probably represents half of my lifetime earnings on betfair.
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LeTiss
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Blimey, 4 years ago

Things have changed significantly since then, but I stand by original disapproval of stop losses.

We have seen BA automation go to a new level since then, so a stop loss is obviously a key part of an automated trade. However, if you are watching a market, a good trader should be able to rescue a situation manually far better than an automated stop loss
PeterLe
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LeTiss 4pm wrote:Blimey, 4 years ago...........
Its passed quick hasn't it! :D
Do you think we will still be here in another four years mate?
....If so, Ill reply to this post in march 2018! :D
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jimibt
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peterle - sorry for digging this up sooner than you had forecast. however, it is interesting to note that market efficiency even back then (2011-2014) had all but negated the stoploss. as we stand today, i'd say that the efficiencies are such that there is no way on earth that one could calculate the *best* stoploss methodology generically, without entering into a labyrinth of mishap and loss. have to agree with leTiss in an earlier post regards using gut feel and experience to guide exit.. sure, it means baby sitting the markets but if there was a one button approach, we'd all be there (peterle and pw excepted of course!! :D).

so in true ronnie corbett style, i unwittingly arrived here (and digressed in my story above ) as i was actually implementing vwap into a sneaky little test piece that i'm working on - funny how the interwebs always brings you back home in a ridiculous and circuitous fashion ;)
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Crazyskier
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LeTiss 4pm wrote:Blimey, 4 years ago

Things have changed significantly since then, but I stand by original disapproval of stop losses.

We have seen BA automation go to a new level since then, so a stop loss is obviously a key part of an automated trade. However, if you are watching a market, a good trader should be able to rescue a situation manually far better than an automated stop loss
Agree absolutely!

Even on my set and forget daytime automation I have several green ups / hedge outs before the off, so that I don't actually need a prefixed stop loss, and on the overwhelming majority of cases, the profits outweigh the losses per event. The loss amounts are bigger when they occur but the wins are also far more frequent to balance this out.
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dlbanks2015
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I've had problems with the stop loss too. I don't trust it anymore to be honest. I've tried to stop out on a 10 tick stop loss(say £5 and it's shafted me for £35. It's come to the point where I won't use it now. I'd rather hover over the hedge (left of ladder) or the opposing side to get out at my exit limit. Or just close the trade with a short key.
I think the stop loss may need to be set up so that you up ur stake on the stop loss so it evens out the loss???
I've only been trading a year so..... I'm still figuring things out to be honest
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ShaunWhite
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dlbanks2015 wrote:
Thu Oct 19, 2017 11:19 am
I've had problems with the stop loss too. I don't trust it anymore to be honest. I've tried to stop out on a 10 tick stop loss(say £5 and it's shafted me for £35.
Is that because a rapid movement has meant that your stop transaction remained unmatched? It's reasonable to use stop losses in certain situations but the actual closing trade might need to be placed a little deeper to ensure it's matched. Once it's matched you can the tidy up the odd bit of rounding at a more leisurely pace.

On right click 'Stop losses': Should BA keep them if you go and look at a different market? It doesn't seem to.
I'd personally only use stop losses if I'm not going to be watching a market for a while, but when I toggle to a different market, the right-click stop loss on the first market gets removed.

I thought that's really the whole point of stop losses, if you're watching the market you don't need them, but if you're going to be away from your desk or otherwise occupied, they watch your back.
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GaryCook
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Anytime I do a stop/loss it just works out worse than seeing it all the way through whatever I would have done.
Strategies tend to work or not with or without stop/loss. In my experience.
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ShaunWhite
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GaryCook wrote:
Sat Feb 03, 2018 3:48 am
Anytime I do a stop/loss it just works out worse than seeing it all the way through whatever I would have done.
Strategies tend to work or not with or without stop/loss. In my experience.
That's simply not correct. If you don't have an exit strategy, you're not trading.
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