Do Traders Typically Give Up Value when Closing Their Positions?

[Alexander_99]

So, I've been thinking about my trades I've done over the last couple of months. I am quite convinced that overall closing my trades early (before the final whistle) has cost me potential profits. I haven't done any rigorous analysis, but it looks to me like my profit margin would have been much higher in the long term had I just let my trades run, i.e. treated them as straight bets, rather than trades.

For example, I lost count of the amount of times I have opened a value back position around half time mark on 2 more goals to be scored, and have closed my position for over 50% stake loss around 70 minute mark when goals haven't arrived yet, only for them to arrive several mins later. And I lost count of the amount of times I laid the leading team, and again closed my position for a loss sometime later, only to see the team get the equaliser in the last minute of the match.

This leads me to believe that whenever one has identified value and opened their position accordingly, they should not trade out of their position and simply treat it as a value punt. Obviously I realise that trading out is sometimes necessary, but one should really only do it occasionally, rather than the "standard" tactic.

After all, isn't that what Psychoff does a lot? He simply scalps unders/correct score whenever there is a quiet period in the game, and usually does value punts on overs / match odds if he sees value. His Twitter account is full of screenshots where he has laid the leading team and the equaliser came in 90th minute, so he clearly must have treated these as straightforward "speculative" punts.

What does everyone think?

[dm1900]

A strategy only has positive expected value if each bet that you take is a value bet (e.g. you think there's an 80% chance of something happening, market thinks there's only a 50% chance, so you back it).

Assuming your opening trades *do* take value then you should not trade out of it _unless_ your closing trade is ALSO a value trade. If you close 100% of your opening trades by default without considering value then your closing trades are going to have negative value over time (due to fees and spread), and you'll lose money through them.

Ideally, forget the idea of "closing" a trade. Just run two strategies independently, a backing strategy and laying strategy. Ensure each of them only takes a position when there's value, and that'll make sure they have positive EV in long term. Sure, there'll be cases when you back something cus you think there's value, and 10 mins lay it because you think there's value given new stuff that's happened in the game. It looks like you closed your original back, but really you just took two value bets.

Unless you take the same approach with scalping, you're just taking an uneducated guess and over time will lose money. To apply the same principle to scalping, you ought to think: my prediction of no goal over next 5 mins is X% and the market says Y%. If X% > Y% then open your scalping position as this is value. Then when the 5 mins is over, revaluate your forecast. If X% > Y% then there's no reason to close your scalp. If X% < Y%, then you will close your scalp with a value bet.


Of course this assumes that your detection of value is actually somewhat sensible.

[Alexander_99]

Thanks for your detailed answer doovd, it's pretty informative.

[dm1900]

It's very easy to validate, plot a chart of cumulative pnl from your opening trades and cumulative pnl from your closing trades. Assuming you do have an edge, your opening positions will be profitable, your closing positions will not.

Sounds like you were thinking along these lines already anyway.

[Kai]

Very well said by doovd.

Don't think you can get a more eloquent reply than that, even from the best footy traders out there.

Just a quick note on the scalping part, if you're holding your position for 5 long minutes then you should really get a swing. If you only get a couple ticks scalp from 5 minutes of exposure that is definitely not worth it

[sa7med]

I don't think being in a value position is necessary to be profitable in trading. If the odds are undervalued yet from a trading perspective you determine that odds are still falling then you can profit from that as a trader but not as a value bettor. A value bettor would just lay those odds without necessarily determining the future direction of price. So as a trader you are exploiting market movements and as a result you hedge because you may not necessarily be in a position of value. Otherwise why would all these traders pay the spread each time? For long term pros limiting variance is not an issue. However value bettors have no need to pay the cost of the spread because they are in profit long term.

[dm1900]

When you say a "trader is exploiting market movements", you're still talking about value betting IMO. In the common sense of value betting, the person placing the bet has a forecast horizon that extends over a large period - e.g. to the end of the event. The trader that exploits market movements that you refer to is doing exactly the same - but their forecast horizon is much smaller. If I think that odds are going to drop in the next 5 seconds, then with respect to my horizon of size 5 seconds I've determined a value bet. Traders keep paying the spread because each time they enter they determine they're taking a position of value. To put it simply, traders are doing the same as longer-term value bettors - they're just betting not on the outcome of an event but on price direction. The principles are the same IMO, just need to think about exactly what you're betting on.

The mistake lots of traders make is scalping for a fixed number of ticks, and _always_ closing their position after getting their fixed number of ticks. Instead, they should close their scalp when they really think a reversal is about to occur, which circles back to the idea of closing your opening positions only when you think there is value in the closing trade itself.

To summarise, value to a trader is different to a value to an outright bettor. A trader doesn't guage the value of their trade in the same way, but they most certainly need to ensure their trades are of value with respect to what they are predicting (price action and not the outcome of the event).

[Anbell]

Otherwise why would all these traders pay the spread each time?

I think that the idea of 'greening up' makes some sense as a concept, but/and I think BA would do its users a great service if it 'promoted' reverse greening (even by just making it more visible)

Peter makes the point all the time that he never 'takes' a price.

I suggest that next to the 'trade profit' column on the one-click screen (and wherever else) there is a 'reverse trade profit' column. I think most people would be shocked at the difference, and if you're trading hundreds of markets a week, the variance is negligible, and the costs/spread/margin are huge.

[wearthefoxhat]

This leads me to believe that whenever one has identified value and opened their position accordingly, they should not trade out of their position and simply treat it as a value punt. Obviously I realise that trading out is sometimes necessary, but one should really only do it occasionally, rather than the "standard" tactic. *

After all, isn't that what Psychoff does a lot? He simply scalps unders/correct score whenever there is a quiet period in the game, and usually does value punts on overs / match odds if he sees value. His Twitter account is full of screenshots where he has laid the leading team and the equaliser came in 90th minute, so he clearly must have treated these as straightforward "speculative" punts. **

What does everyone think?

* Yep, I believe "let it ride" to a conclusion, is a valid part of trading. ie: In-Play horse race where a front runner (B2L trade) hits the front and gets an easier lead and it's clear others are struggling to close gap. The value in the moment is a stronger probability that the B2L selection will win a 100% trade. If it starts to falter, or something else finds wings, that value has gone and closing out is now the value. (sometimes at a loss)

** It seems (I'm guessing) that Psychoff, when watching a game, predicts a goal will come. If the odds are wrong, and offers value, treats it like a "let it ride" unless he sees something that changes his view. This would be more likely towards the end of the game.

[ShaunWhite]

Peter makes the point all the time that he never 'takes' a price.

I'd heard him say it depends on the situation, pos 80% offers, it's certainly not 'never'.

I think BA would do its users a great service if it 'promoted' reverse greening (even by just making it more visible)

I think this just illustrates why even using the word 'closing' is misleading. People make a series of back and lay bets, quite often offering no doubt, then the big special 'close' comes long and they have a rush of blood to the head and take whatever price is there. Closing is just another back or lay so why treat it differently? All it is is adjusting your position to maintain the required level exposure for the current situation, usually because the market is about to enter a more volatile period (ie in-play). Sometimes that's about going to a zero position, ie greening, and sometimes it's about taking out some or even non of your position if you think it still have value.

Every mouse click should follow exactly the same thought process and if you want to call one 'opening' and another 'closing' then you've already setup a mental barrier and start to think of them as different somehow. They're not...it's simply "how confident am I that the market will move in certain direction, and how much money do I want to bet on that"....and repeat.

[Anbell]

I think this just illustrates why even using the word 'closing' is misleading. People make a series of back and lay bets, quite often offering no doubt, then the big special 'close' comes long and they have a rush of blood to the head and take whatever price is there. Closing is just another back or lay so why treat it differently? All it is is adjusting your position to maintain the required level exposure for the current situation, usually because the market is about to enter a more volatile period (ie in-play). Sometimes that's about going to a zero position, ie greening, and sometimes it's about taking out some or even non of your position if you think it still have value.

Every mouse click should follow exactly the same thought process and if you want to call one 'opening' and another 'closing' then you've already setup a mental barrier and start to think of them as different somehow. They're not...it's simply "how confident am I that the market will move in certain direction, and how much money do I want to bet on that"....and repeat.

But that's not true in all circumstances.

An entirely reasonable logic might be that you think that, on average, the favorite's will reduce will shorten between the 5 minute mark and race time, so you set up an automation to back it at 5 mins and green up at race time.

There's no rush of blood. There aren't any mouse clicks. There aren't any issues about whether or not you still have value because you haven't taken a position on value. And yes, you take whatever the price is, because that's the model. (or the model might be to offer the reverse price so you don't pay the spread every time, and as you often say, the swings and roundabouts will balance themselves out)

[drwho]

A strategy only has positive expected value if each bet that you take is a value bet (e.g. you think there's an 80% chance of something happening, market thinks there's only a 50% chance, so you back it).

Assuming your opening trades *do* take value then you should not trade out of it _unless_ your closing trade is ALSO a value trade. If you close 100% of your opening trades by default without considering value then your closing trades are going to have negative value over time (due to fees and spread), and you'll lose money through them.

Ideally, forget the idea of "closing" a trade. Just run two strategies independently, a backing strategy and laying strategy. Ensure each of them only takes a position when there's value, and that'll make sure they have positive EV in long term. Sure, there'll be cases when you back something cus you think there's value, and 10 mins lay it because you think there's value given new stuff that's happened in the game. It looks like you closed your original back, but really you just took two value bets.

Unless you take the same approach with scalping, you're just taking an uneducated guess and over time will lose money. To apply the same principle to scalping, you ought to think: my prediction of no goal over next 5 mins is X% and the market says Y%. If X% > Y% then open your scalping position as this is value. Then when the 5 mins is over, revaluate your forecast. If X% > Y% then there's no reason to close your scalp. If X% < Y%, then you will close your scalp with a value bet.


Of course this assumes that your detection of value is actually somewhat sensible.

Great to see an intelligent and well thought through forum post

[rik]

A strategy only has positive expected value if each bet that you take If you close 100% of your opening trades by default without considering value then your closing trades are going to have negative value over time (due to fees and spread), and you'll lose money through them

generally youd save fees by trading out as its opposing your initial bet so less turnover - less comission
also why would you have to lose spread when trading out more so than when the trade

[Tuco]

Do Traders Typically Give Up Value when Closing Their Positions?

...the answer to that is it depends on the market dynamics.

That said, if you close or green at current odds you are generally giving up some value - better if you can close and/or green at reverse odds. However there is always the risk you won't get matched and the price could move away from your position, so as with everything in life, for the additional reverse odds reward, there is some risk.

It always struck me as a little strange in Peter's excellent YouTube videos that having traded a horse or two at reverse odds, he would then close his position by greening up at current odds, thereby giving away some value.

Anyone who doesn't want to give away any value, or at least would like the chance not to do so really should be asking for the following "Trade Closure P & L column" additions and updates to be added to the next BetAngel version:

viewtopic.php?f=20&t=21562

If you would like these one-click column additions and updates, please post a +1 in the above suggestion link. Thank you.

I'm a big fan of reverse closing and reverse greening. For more information on this subject please see Dallas's excellent tips and tricks posts, links as below:

"What is Reverse Greening and How to use Reverse Greening"
viewtopic.php?f=47&t=14200

"Reverse Greening & Greening at Custom Reverse Prices on One-Click Screen"
viewtopic.php?f=61&t=21159

[nivi7]

you need a reason for closing a trade
and usually it is not because you want to lose value
rather you want to not lose your money