Before I get on with reviewing system 8, I think it’s worth touching on a journal I had the pleasure of reading today at my lunch.
As commented before on here, I’ve been reading Cassini’s Green All Over blog since its inception and it’s a great source of knowledge, wisdom and amusement and that’s just Big Al’s comments. Joking aside, it’s a must read blog for anyone trading or betting and there are snippets of information I’ve picked up over the years that have served me very well while I was trading the horseracing markets and more recently, betting on football.
I came across a comment today on the blog where Peter posted up the following link to a journal. http://pricetheory.uchicago.edu/levitt/Papers/LevittWhyAreGamblingMarkets2004.pdf
Coming from an higher educational background myself, when I started out with the footie project, I obviously spent a while reading up on all the old journals to do with football ratings and as I’ve said before, many of the ideas I’ve used came from these journals. I actually listed them before in a piece for the SBC and I can’t find it now but I know I discussed the Dixon and Coles papers before on the blog.
Anyway, it’s a long winded way of saying that the paper above is well worth a read. I’ve touched on some of these points myself at various times on the blog and I’ve discussed some of the underlying themes with people away from the blog but it’s the first journal I’ve read that captures all the points in a salient way and in a clear and understandable manner.
I can’t summarise the paper and do it justice if I’m honest but here goes with what I think of it.
Firstly, I believe it is the case that bookmakers set prices that aren't fully based on demand and supply. I honestly believe that there are a large bunch of mug punters (for want of a better phrase!) who are only interested in backing short priced Homes and Away teams and the odds compilers know this and therefore, if they started offering more realistic odds on these teams, they’d be knocked over in the rush and end up with huge liabilities on these teams. Take into account the amount of mug punters who include these teams in permutation bets (10 team accumulators and so on) and before you know it, bookies would be closing down and we’d have many more winning punters than we have nowadays even though they aren't backing value bets!
Secondly, on the whole, bookmakers are more skilled at setting prices than punters. I think this is definitely true and isn’t even worth arguing about. Obviously, there are people and systems which can outsmart the odds compilers in the long-term but ultimately, if this was a single person, they would reach the stage where they struggled to place any bets due to restrictions and being closed down for winning.
Thirdly, the bookmakers use a combination of the two points above to maximise profits. They may know that team A is bad value but they know they’ll be knocked over in the rush if they quote the ‘real’ price of that team, so they set a price which enables them to take money on the team from mugs and ensure that they adjust the prices enough so that regardless of the outcome, they make a profit. Value bettors undoubtedly back more losers than winners at football betting.
Obviously, it isn’t quite as easy it that sounds as if they stray too far from the correct value odds, those who have an edge will spot the pricing errors and hammer the bookies accordingly in the long-term, even though their strike rate will be fairly low.
What does any of this have to do with my football systems?
Well, I’ve said this before on the blog lots of times but if anyone studies the selections my systems throw up, in the main, they are capitalising on the fact the odds compilers are setting prices early on in the week based on point 1 above in the sense they set prices based on what they think people will back and not what is actually the true prices. Of course, the market corrects itself as more liquidity enters the market and that’s why the majority of my selections start at a lower price than I back them at or tell others to back them at. My systems ultimately go against the mug punter bets and that's why so many big priced aways are thrown up who appear to have no chance at the odds quoted.
I strongly believe that the odds at kick-off are generally representative of the true odds for each team and therefore, being able to beat these odds is one reason my systems have the edge they do. Calculate the edge my systems have at kick-off prices in a live environment and I guarantee the edge isn't as big as it is at the moment. It still exists though as those following on the blog for the last two seasons weren't getting the prices my members got!
The only thing I disagree with in the paper is the fact that it suggests that it couldn’t find anyone who was better than the bookmakers at the game they play in the long-term. There are a number of tipsters and systems that have stood the test of time in horseracing and football betting that have shown they have an edge IMO.
One last thing before I go. One comment that irritates me more than any other in life is when I discuss the football betting and the systems with people and they say ‘why don’t you just place higher stakes on the teams yourself and make more money that way’. As outlined in the paper, in the long-term, this is unsustainable as you can never get the liquidity you’d need and before you know it, you’d be struggling to get a bet on at the prices needed to maintain the edge. I wouldn’t class myself as a big gambler although my winnings last season were in 5 figures for the first time. I suffer quite badly from restrictions now and more and more of my business is going to be pushed down the AH bookmakers route as restrictions grow which ultimately erodes a little of my edge since the odds aren’t as competitive in many cases.
If I wasn’t able to sell the information to others and help them make a profit, I’m not sure I could invest the time and effort into the systems long-term and I would give up I’m sure. Each bookmaker has a team of odds compilers doing similar things to me with rating algorithms to protect their profits from people like me. Hence, the only way this becomes sustainable for me long-term is to share the information with others and help them make a profit. In return, I receive a fee. This has to be the way this market works long-term. If it isn’t, I’d be as well selling the systems to a bookmaker and tell them which teams to under-price each week!
System 8's review will follow next!