Spotting spoof money

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JollyGreen
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In the market mover thread the topic of spoof money came up so here are my thoughts on it.

I must start by saying you can never get it right 100% of the time, the market is changing constantly so what appeared to be a spoof amount suddenly isn't and vice versa. What is important is to stay calm about it because if the stress monkey on your shoulder starts chatting in your ear you are guaranteed to lose money! You know the stress monkey conversation by now, I still hear my monkey from time to time :P "That always happens" "Sod it just hold on and it will turn around"....I won't go on but you get my drift...forgive the pun!

This is how I approach the market and I know Peter thinks in a similar way. I have been sitting close to Peter when we are trading and one of us will say "have you seen the £xxxx at 2.50?" Assuming we are both active in the same market, chances are we have both seen it and we acknowledge one another. We are then preparing for our trade and will execute according to it being spoof or being smashed by an order. One evening we had a novice trader in the room, a researcher for Peter and I was trying to guide him in the market. I shouted to Peter to alert him of a potential spoof amount. He was working on a project but quickly switched to the market and instantly we were singing from the same hymn sheet. We both had some money matched at the best price but we also knew it would be time to jump in and grab money should this be spoof money. I advised the novice trader, let's call him Derek (not his name) about the potential for a good trade and explained my intentions. 20-30 seconds, Peter and I were giving a virtual high five as we had just pulled off the best trade of the day on an ordinary market at Lingfield. Derek was just entering as were exiting and he looked a bit miffed. His issue? He could not commit through fear of being wrong, I call it the "what if" millstone which a lot of traders have around their necks. The spoof amount had already convinced him it would push the market one way and when that didn't happen he wanted too much time to confirm it actually was a true move. By the time his stress monkey had stopped chattering it was too late. So why does that happen so often and I am sure some of you are saying "sh*t, that happens to me...in fact I could be Derek!" So let's try and put some common sense on it for anyone that is interested.

We must start with a few truths.

The market is never wrong
The market is better than me and you
Money is King in a simple market mechanism

Try not to get sucked in by the comments thrown around by experts on the TV who say "they got that wrong" or "that drifted like a barge and still won, boy did the market get that wrong!" The market is never wrong, it is a very basic mechanism and it only moves according to how the money enters...simples!! I bet someone is saying "if it is so simple then why can't I read it?" Let's try and demystify it for you.

A lot of traders fail and there are a plethora of reasons. Fear of getting it wrong cripples them and their hesitation results in losses. Some are belligerent and refuse to accept what is happening. Without getting all mumbo jumbo, once your brain is fixed on one outcome it will lose focus on all other outcomes and you will not actually see what is truly happening. Some think there is a silver bullet or magical indicator but trust me there isn't.

To spot spoof money you have to see what the market is actually doing. You don't need to know why, you just need to accept it's position. You must watch for a trend i.e. a steaming horse and then check which other horse or horses are not being supported. So let's assume a steaming favourite as this is generally the easiest to spot. First clear your thoughts, do not get crippled by a preconceived idea that it is "bound to reverse!" When a move starts, the momentum can be slow or inconsistent which is caused by indecision. If I push someone, they push me back, it's just human nature and the markets are the same. As someone offers up opposition to the move, someone takes that money. This is where we have to accept the market knows best and generally the layers are not stupid. I am not saying all backers are stupid but let's face it, betting horses doesn't pay for 99% of participants and the market is a simple reflection of that.

Spoof money can imapct in a couple of ways; there are probably more but I will cite two.
  • You believe the large amount and jump in front. It disappears...d'oh!
  • You hesitate too much or queue your order and when it does take off you miss the move...d'oh!
There is why you will have a much better chance of profiting if you have a general idea of what the market is doing. I know that sounds simplistic but read on. So we can see the money coming for the favourite and it's slowly gathering momentum. They fancy this one and the money is coming. You can often hear this mentioned on the TV but a good trader has already spotted it. Suddenly, there is large amount queued and this strikes fear into some people. I take a simple view "if the market is supporting this horse, why would a savvy person go against the move?" The chances are they wouldn't!! Think about it from the financial side of things whether a layer, a trader or bookmaker. Why would you lay something at X when you could safely lay it at X-Y where Y is the number of ticks lower which reduces your liability? I know which one I would choose!!

I have a meeting in ten minutes so I will break off for now. Please ask questions and I will try to cover them in a later update.

Sorry but I took longer than I expected to write this

JG
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megarain
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Excellent post.

Just to be clear, Your talk of spook money, is 100% related to pre-in-play horse-race trading, I think.

I happen to believe there are some markets, which spoof money in-play, but lets not get diverted.

Yesterday, in the first race at Worcester, the favourite had been backed from 7.0 to around 3.4, 2 mins before the off.

It had continued support, and broke thru 3.1, 3.0,2.9,2.8 v quickly, and was trading around 2.68.

At this point, a £60k lay amount appeared, at 2.60, and this was never taken. The 'backstop' seemed to indicate the charge for the favourite had
ended, and thou it didnt move v much (they were off shortly after), it definately didnt look like a spoof.

The £60k lay, may have enabled some traders to jump in front, and maybe scalp a few ticks.

It was a little odd, as the ATR comms, were saying the price was 'wrong', and no value. (the horse was thought to need soft going, and would be run off its feet, on the fast ground - which happened .. thou it did stay on for 4th)
Anna List
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JG

I'm not sure that I've understood your point exactly. If this is the case, my apologies in advance.

Q. You stated: "if the market is supporting this horse, why would a savvy person go against the move?"

A. In order to lay a supported horse, one has to oppose the move, by placing a lay bet, at some point. Or am I wrong?

I agree. Why lay at X when one can lay at X - Y? The odds could fall to X - Y, after all.

However, the odds could fall to X and then start rising again. In which case, because Y = 0, X - Y = X. Therefore, the lowest odds that the horse could have been layed at was X. However, because the odds begin to rise, X = X + Y NOT X = X - Y i.e. the horse now has to be layed at X + Y.

Therefore, when backing/laying/trading, one has to actually place a bet and that means that odds have to be selected and that means opposing the market at some point - unless there is a magic formula for calculating when a move on a horse will cease and go into reverse.
sionascaig
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Thanks for posting this JG...

On greyhounds you also see a lot of spoof money. It doesn't hang around for very long ( a few secs if that) and it appears (to me a least) the main purpose is to get bots to trigger on some WoM condition...

One interesting thing about the dogs though is that when the real money appears it can be very easy to see - more so on the back side - as the price gets driven down by large chunks that go chasing the price in...
Korattt
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not meaning to hi jack the thread JG but on the course you mention “forget scalping”, just asking would you mind posting an up to date thread on this in detail?,

Many thanks
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JollyGreen
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megarain wrote:
Tue Jul 10, 2018 10:28 am
Excellent post.

Just to be clear, Your talk of spook money, is 100% related to pre-in-play horse-race trading, I think.

I happen to believe there are some markets, which spoof money in-play, but lets not get diverted.

Yesterday, in the first race at Worcester, the favourite had been backed from 7.0 to around 3.4, 2 mins before the off.

It had continued support, and broke thru 3.1, 3.0,2.9,2.8 v quickly, and was trading around 2.68.

At this point, a £60k lay amount appeared, at 2.60, and this was never taken. The 'backstop' seemed to indicate the charge for the favourite had
ended, and thou it didnt move v much (they were off shortly after), it definately didnt look like a spoof.

The £60k lay, may have enabled some traders to jump in front, and maybe scalp a few ticks.

It was a little odd, as the ATR comms, were saying the price was 'wrong', and no value. (the horse was thought to need soft going, and would be run off its feet, on the fast ground - which happened .. thou it did stay on for 4th)
I am not sure if we are supposed to quote posts; I apologise if that is the case but it makes it easier to give an accurate answer.

My post was about pre-race trading and the spoof money. However, you are correct, there is definitely spoof money in-play. I know a lot of big in-play traders/gamblers and they "flash" money into the market. They claim it is to fool BOTS but I cannot confirm their plan, I generally bet in play if I see something happening. That should be seen as past tense as I no longer do this.

I didn't see the £60K lay as I was not trading yesterday, I can only offer an educated guess to be honest. If it was Worcester then £60K is totally out of line with the market so why that amount would be placed is beyond me. I could offer a few conspiracy theories, one being I know the connections and they've told me it cannot win. That still makes it pointless because the money was not taken. You mention it would allow a few traders to nip in and scalp it but are you thinking the £60K was there to allow the layer to scalp or perhaps others (s)he knows. That is a big risk because if that £60K was taken in one hit you would expect the layer to have a horrible sphincter moment! :lol: I once witnessed a £150K back order placed at around 2.90 in a Cheltenham hurdle race (not the festival) and it was hit with approx £250K. That left £100K on the lay side and the price rocketed out. You could see the original backer desperately throwing money in to back the horse but there not enough money there and the race started. The horse was never sighted!!

If you offer money to spoof then you are running the risk of getting smashed. You therefore need to be careful where you place the orders and be ready to get out of Dodge if it goes pear shaped. It can give you a temporary opportunity but it is fleeting and you are playing with fire!
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JollyGreen
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Anna List wrote:
Tue Jul 10, 2018 11:01 am
JG

I'm not sure that I've understood your point exactly. If this is the case, my apologies in advance.

Q. You stated: "if the market is supporting this horse, why would a savvy person go against the move?"

A. In order to lay a supported horse, one has to oppose the move, by placing a lay bet, at some point. Or am I wrong?

I agree. Why lay at X when one can lay at X - Y? The odds could fall to X - Y, after all.

However, the odds could fall to X and then start rising again. In which case, because Y = 0, X - Y = X. Therefore, the lowest odds that the horse could have been layed at was X. However, because the odds begin to rise, X = X + Y NOT X = X - Y i.e. the horse now has to be layed at X + Y.

Therefore, when backing/laying/trading, one has to actually place a bet and that means that odds have to be selected and that means opposing the market at some point - unless there is a magic formula for calculating when a move on a horse will cease and go into reverse.
I understand what you are thinking, let me expand a bit.

When I am looking at a market where a favourite is steaming in, I can generally give you an idea of where the move is likely to stop. I would expect to be within 3-4 ticks of the bottom. Now before you think I am able to see into the future, I am basing this on my experience and the market conditions. I also will add the conditions can change and I could get it horribly wrong but over time I can get pretty close.

So if we imagine I am layer of a horse because I have done my research then I will often have a pain threshold which I am willing to accept. Some may call this value but to me it is still pain if I get it wrong! I am willing to lay the horse for £5000 and the price is falling as backers continue to support it. If I am playing with £5000 I should be able to spot the money as should most layers who do know the time of day. For arguments sake the price is 2.66 and the money is still coming. If I don't know what is happening then my £5000 is going to be lost pretty quickly. I may not lose it on this market but it is only a matter of time before I do. Like anyone in life I want bang for my buck. If I see money still coming then why offer a bigger price? Why not wait for the price to drop and then offer my money? Yes, it could reverse but that means I have either not read the market correctly or someone has placed a massive lay bet before me and the price has shot out. As a savvy player I am not just going to throw my money into the market, there will be plenty more chances. If I am determined to lay it then I could take money but then I am not acting professionally. Let's say the price has dropped to 2.54 but now it is stuttering. I could drop my money in at 2.66 (probably wouldn't do that) and my average lay price will be lower than it all being taken at the 2.66. Remember, I am talking as a layer NOT a trader who is placing a lay to open a position with a view to placing profitable back bet which I can hedge/green. We have to accept there are players who are just laying horses, they are accepting the full liability for their order and not looking to trade out.

Think about it like this. Bookmakers make their money by selling you 100% for >100%. It is 100% a horse will win so if they sell it for >100% they cannot lose. However, we know most money is placed on the favourite. The favourite wins, the bookmaker loses...in most markets! If I walked up to an on-course bookmaker and said I wanted £5000 at 3.0 he would ignore me if the current offer was 2.88, he is not going to give away that much margin/percentage. That is why a horse can drift on Betfair but is still trading much shorter on-course. If the bookmakers have mugs lining up to hand over their money at 2.88 why would they offer anything bigger? So why would a savvy player offer bigger on Betfair when he can lower his risk at a lower price?

I hope that makes sense?

JG
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Derek27
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JollyGreen wrote:
Tue Jul 10, 2018 9:53 am
I advised the novice trader, let's call him Derek...
Thanks a lot!

:lol:
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JollyGreen
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:lol: :lol:
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Derek27
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JollyGreen wrote:
Tue Jul 10, 2018 2:58 pm
If I see money still coming then why offer a bigger price? Why not wait for the price to drop and then offer my money? Yes, it could reverse but that means I have either not read the market correctly or someone has placed a massive lay bet before me and the price has shot out. As a savvy player I am not just going to throw my money into the market, there will be plenty more chances.
Very interesting thread.

It took me quite a while to realise that if you're too keen to get your money on for fear of missing out, sure you get your money on every time, but you get a worse deal every time. If you're prepared to wait and look for a few more ticks, it's either a better deal or no deal.

It's easy to imagine a trader who always get's his money on and breaks even. Being more selective and going for the better price or nothing could make enough difference to turn his trading into profit.
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ruthlessimon
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JollyGreen wrote:
Tue Jul 10, 2018 9:53 am
I know that sounds simplistic but read on. So we can see the money coming for the favourite and it's slowly gathering momentum. They fancy this one and the money is coming. Suddenly, there is large amount queued and this strikes fear into some people. I take a simple view "if the market is supporting this horse, why would a savvy person go against the move?" The chances are they wouldn't!!
Nice to see ya again JG :)

Talking of simplicity, couldn't this be simplified to just time & price (i.e. avoiding spoof entirely - for say a newbie trader), who could then learn to incorporate volume in the future?

Below are two ideas, put forward by two traders, & I just wondered, 1. Which strategy would you recommend 2. Where would you see the problems in the following ideas? 3. If you recommended a strategy, what steps would you take to improve the strategy further (after all volume is completely omitted)

Strategy 1. A trader is looking to only trade markets priced at 2.xx. The trader finds that over a large sample size, the average race end is xx:xx. Said trader then takes the price of the fav at xx:xx, & sets two boundaries (these will be the trader's future entries) 2.xx + x ticks, & 2.xx - x ticks (let's assume x is 8 ticks - a decent "sustained" move in one direction). If one of those boundaries gets hit, he enters in that direction & holds to 00:00.

Strategy 2. A trader is only looking to trade markets price at 2.xx. The trader finds that over a large sample size, the average race end is xx:xx. The trader backs at xx:xx & holds to 00:00.
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JollyGreen
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ruthlessimon wrote:
Tue Jul 10, 2018 5:10 pm
JollyGreen wrote:
Tue Jul 10, 2018 9:53 am
I know that sounds simplistic but read on. So we can see the money coming for the favourite and it's slowly gathering momentum. They fancy this one and the money is coming. Suddenly, there is large amount queued and this strikes fear into some people. I take a simple view "if the market is supporting this horse, why would a savvy person go against the move?" The chances are they wouldn't!!
Nice to see ya again JG :)

Talking of simplicity, couldn't this be simplified to just time & price (i.e. avoiding spoof entirely - for say a newbie trader), who could then learn to incorporate volume in the future?

Below are two ideas, put forward by two traders, & I just wondered, 1. Which strategy would you recommend 2. Where would you see the problems in the following ideas? 3. If you recommended a strategy, what steps would you take to improve the strategy further (after all volume is completely omitted)

Strategy 1. A trader is looking to only trade markets priced at 2.xx. The trader finds that over a large sample size, the average race end is xx:xx. Said trader then takes the price of the fav at xx:xx, & sets two boundaries (these will be the trader's future entries) 2.xx + x ticks, & 2.xx - x ticks (let's assume x is 8 ticks - a decent "sustained" move in one direction). If one of those boundaries gets hit, he enters in that direction & holds to 00:00.

Strategy 2. A trader is only looking to trade markets price at 2.xx. The trader finds that over a large sample size, the average race end is xx:xx. The trader backs at xx:xx & holds to 00:00.
Is this automation you are considering? You have totally lost me on the strategies...sorry :oops:
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ruthlessimon
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JollyGreen wrote:
Tue Jul 10, 2018 5:35 pm
Is this automation you are considering? You have totally lost me on the strategies...sorry :oops:
Not entirely, more as a way of removing the "what if".

I just think any trader who struggles to read volume, especially newbies (as you suggest i.e. hesitant with spoof). Should cut volume entirely from the ladders - & focus on just time & price. For example, the researcher in your example would never have been hesitant - because he's unable to see the volume.
JollyGreen wrote:
Tue Jul 10, 2018 5:35 pm
You have totally lost me on the strategies...sorry :oops:
The two strategies mentioned, are two ways the researcher could have used only time & price to roughly match your entry - independently (without volume). Had the researcher been myself, I would've asked you those 3 questions :)

Sorry if it was confusing - it might still be :D
spreadbetting
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Derek27 wrote:
Tue Jul 10, 2018 5:09 pm
JollyGreen wrote:
Tue Jul 10, 2018 2:58 pm
If I see money still coming then why offer a bigger price? Why not wait for the price to drop and then offer my money? Yes, it could reverse but that means I have either not read the market correctly or someone has placed a massive lay bet before me and the price has shot out. As a savvy player I am not just going to throw my money into the market, there will be plenty more chances.
Very interesting thread.

It took me quite a while to realise that if you're too keen to get your money on for fear of missing out, sure you get your money on every time, but you get a worse deal every time. If you're prepared to wait and look for a few more ticks, it's either a better deal or no deal.

It's easy to imagine a trader who always get's his money on and breaks even. Being more selective and going for the better price or nothing could make enough difference to turn his trading into profit.
I don't think JG was talking about entering a trade, Derek, more the fact that there's little point taking a price, or being generous, when the market is coming towards you.

When you open a trade it's always going to be a judgement call whether to take, or offer, odds and so much of that depends on what you expect to make from the move. If you think the market is going to move 8 ticks there's little point you offering odds and risking losing the trade for the sake of an extra tick especially when you've already decided the momentum is in the opposite direction. If you're just playing the noise to take a tick or two it's a different matter
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ruthlessimon
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JollyGreen wrote:
Tue Jul 10, 2018 9:53 am
The spoof amount had already convinced him it would push the market one way
That's testable though (in a basic quantitative sense). I'm guessing the WOM was a huge factor for the researcher in that scenario. Let's assume the WOM was 90% - I would've asked the researcher, "what's the probability of a drift/steam when then markets hits a 90% WOM? is it profitable to back/lay when the market hits 90% WOM? Does this differ after a substantial move? Does this differ by volume (i.e. £5000 90% WOM vs £500 90% WOM etc etc"

If the researcher didn't know the answers to those questions, how can it be fair to blame the "what if" (psychological noose)? Those few questions could quickly find out how well he understands the "backbone" of his edge.

Surely Peter & yourself know those figures inside out?
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