Markets seems perfectly efficient to me...

[offlimit88]

Who is comparing prelive markets like horse racing and tennis inplay markets is making a mistake, in my opinion.

Question , only about tennis markets : someone posted me a "overreaction" graph, but following the logic, you know that something is overreacting when you know the probability of that event to occurr, did you measure it?

[Euler]

When you are trading you are selling volatility, not looking to exploit whether the market is efficient or not.

[Kai]

Not surprised to see threads about market efficiency regularly pop up, it's an age old question about the markets overall long before Betfair showed up. Quants seem to often struggle in understanding how the markets work and where the edge is, while traders struggle with getting rid of their gambling habits. Best to keep an open mind and to avoid making final conclusions, it's very easy to change your mind several times over once you get immersed deeper into the market mechanics.

Think I've mentioned it a couple years ago but at least in tennis you have a very simple market with 2 outcomes and you can measure that however you like, all of the relevant data is there for you too see and analyze. If you look closer and break down a single tennis market that is not super liquid you can see and identify most of the market participants and their various trading styles, the nature of the market is that there are no suspend mechanics in place and because of its dynamic movement each point the ladder is often emptied and the money has to re-appear constantly so there aren't many hiding places like in other sports. You should be able to see the market making bots that hold the value prices for that particular moment, you'll see smaller market making traders who offer up their stakes on stupid prices when all the money is gone, hoping to get matched during that brief period before the courtsiders money swoops in, you'll see scalpers during breaks and you'll be able to see regular traders/punters entering and exiting with their obvious and flat stakes at key moments in a match where there's a lot matching going working out good risk/reward situations etc. On lower liquid markets you may see bigger manual market making traders that will simply control the whole market and crush it by absorbing most of the noise, although apparently there's been a steady decline of liquidity on tennis markets and some of the edges that people use has grown weaker, cannot confirm that since I haven't looked at a tennis market in a while, other than grand slams.

The point being that all of these market participants have an edge of their own, some big and some small, they wouldn't be active in the market if they didn't have an edge. As Euler says, you're asking the wrong question, you should just be looking to buy and sell volatility or trade the noise etc, don't worry whether the market is efficient in the long run or not or who is going to win a particular match.

[Derek27]

Who is comparing prelive markets like horse racing and tennis inplay markets is making a mistake, in my opinion.

Question , only about tennis markets : someone posted me a "overreaction" graph, but following the logic, you know that something is overreacting when you know the probability of that event to occurr, did you measure it?

You don't have to know the probability - you use your judgement on what the probability is and whether there has been an overreaction. If you make a long term profit then you know your judgement is accurate, or at least collectively more accurate than the people on the other side of your trades.

[offlimit88]

Not surprised to see threads about market efficiency regularly pop up, it's an age old question about the markets overall long before Betfair showed up. Quants seem to often struggle in understanding how the markets work and where the edge is, while traders struggle with getting rid of their gambling habits. Best to keep an open mind and to avoid making final conclusions, it's very easy to change your mind several times over once you get immersed deeper into the market mechanics.

Think I've mentioned it a couple years ago but at least in tennis you have a very simple market with 2 outcomes and you can measure that however you like, all of the relevant data is there for you too see and analyze. If you look closer and break down a single tennis market that is not super liquid you can see and identify most of the market participants and their various trading styles, the nature of the market is that there are no suspend mechanics in place and because of its dynamic movement each point the ladder is often emptied and the money has to re-appear constantly so there aren't many hiding places like in other sports. You should be able to see the market making bots that hold the value prices for that particular moment, you'll see smaller market making traders who offer up their stakes on stupid prices when all the money is gone, hoping to get matched during that brief period before the courtsiders money swoops in, you'll see scalpers during breaks and you'll be able to see regular traders/punters entering and exiting with their obvious and flat stakes at key moments in a match where there's a lot matching going working out good risk/reward situations etc. On lower liquid markets you may see bigger manual market making traders that will simply control the whole market and crush it by absorbing most of the noise, although apparently there's been a steady decline of liquidity on tennis markets and some of the edges that people use has grown weaker, cannot confirm that since I haven't looked at a tennis market in a while, other than grand slams.

The point being that all of these market participants have an edge of their own, some big and some small, they wouldn't be active in the market if they didn't have an edge. As Euler says, you're asking the wrong question, you should just be looking to buy and sell volatility or trade the noise etc, don't worry whether the market is efficient in the long run or not or who is going to win a particular match.

Interesting post, in your description i m a trader who trades on keypoints, i understand you re more into cold trading, i guess. But if i trade live, i have to know who are the players, probabilities etc...
Is there anyone trading order flow in live horse racing? i don t think so...

[offlimit88]

Who is comparing prelive markets like horse racing and tennis inplay markets is making a mistake, in my opinion.

Question , only about tennis markets : someone posted me a "overreaction" graph, but following the logic, you know that something is overreacting when you know the probability of that event to occurr, did you measure it?

You don't have to know the probability - you use your judgement on what the probability is and whether there has been an overreaction. If you make a long term profit then you know your judgement is accurate, or at least collectively more accurate than the people on the other side of your trades.

Guessing is the worst thing one can do, i think the reason to enter a trade must be more solid

[Kai]

Is there anyone trading order flow in live horse racing? i don t think so...

Yes, there are hundreds of traders from Portugal and Brazil alone on racing inplay, they're not big fans of prerace markets like the British. Bickat is their most famous inplay trader, although there are others as well, some who sell video courses on how to read the order flow and read the race itself, so that's why it's so popular over there.

[gutuami]

Guessing is the worst thing one can do, i think the reason to enter a trade must be more solid

if you mean by "guessing" doing random stuff then you're right although it's not easy to be random in actions. But when you have a bit of logic on your side that's not guessing that's calculated risk. and very soon your pnl will tell you whether you're guessing or not.

[Derek27]

Who is comparing prelive markets like horse racing and tennis inplay markets is making a mistake, in my opinion.

Question , only about tennis markets : someone posted me a "overreaction" graph, but following the logic, you know that something is overreacting when you know the probability of that event to occurr, did you measure it?

You don't have to know the probability - you use your judgement on what the probability is and whether there has been an overreaction. If you make a long term profit then you know your judgement is accurate, or at least collectively more accurate than the people on the other side of your trades.

Guessing is the worst thing one can do, i think the reason to enter a trade must be more solid

There's a clear distinction between guessing and using your judgement. If you're not guessing or using your judgement, what the hell are you doing, calculating the precise probability?

[offlimit88]

You don't have to know the probability - you use your judgement on what the probability is and whether there has been an overreaction. If you make a long term profit then you know your judgement is accurate, or at least collectively more accurate than the people on the other side of your trades.

Guessing is the worst thing one can do, i think the reason to enter a trade must be more solid

There's a clear distinction between guessing and using your judgement. If you're not guessing or using your judgement, what the hell are you doing, calculating the precise probability?

Well, everyone has his method. The problem is, if you don't have solid and empirical proofs thatt you have an edge over them markets, how will you behave when you will make bad judgements for days, or a month?

[Derek27]

Guessing is the worst thing one can do, i think the reason to enter a trade must be more solid

There's a clear distinction between guessing and using your judgement. If you're not guessing or using your judgement, what the hell are you doing, calculating the precise probability?

Well, everyone has his method. The problem is, if you don't have solid and empirical proofs thatt you have an edge over them markets, how will you behave when you will make bad judgements for days, or a month?

The proof that you have an edge is your profit/loss account - it's as simple as that!

I don't mean to sound smug but I don't make bad judgements for days or a month. If I continuously made bad judgements I would have to question whether my overall judgement of whatever particular market I was losing money on was bad.

[ShaunWhite]

how will you behave when you will make bad judgements for days, or a month?

Good judgement is something you either have or haven't got, unlike an edge found in data which can vanish permanently overnight. Judgement also improves as you trade more markets which is something that rarely happens with a formulaic edge. Belief in your judgment to sustain you though the inevitable losing spells is something that grows as the profitable months stack up.

There's more than one way to trade, some people make their guesses using stats and Excel, some do it by hiring a room full of PhDs and subject specialists, other people might use their judgement honed after trading 1000s of markets. Stick to whatever suits you best and don't worry too much if other people do it differently.