Back to writing with a new trading post on why you should pay a visit to the pub, drink a pint and observe the locals while they watch football. Let’s see if this makes sense…
If trading is a war you better read some Sun Tzu quotes!
There is controversy around it but it’s generally accepted that Sun Tzu, a Chinese military general and strategist, wrote “The art of war” somewhere in the BC era. This war strategy manual was translated to English in 1910, being nowadays overly cited in virtually any field involving some type of competition.
Sports trading and competition goes hand in hand as one of trading components is precisely a sort of battle between people with different skillsets. In “Game of trades – the fight for the green throne!”, I described the armies involved, today I’ll look at it from another angle: how can you apply some of Sun Tzu or Sun Pin (who knows?) reasoning and become or at least understand your enemy?
Took a trading course in the pub drinking cheap lager before knowing about Betfair and craft beer!
Before the explosion of internet streaming, there was only one way to have access to all football, a paid TV channel which was out of my financial reach. Since I’m a football fanatic way before I started trading, I’d often find myself in the Portuguese equivalent to an English pub.
So, before I even knew what a ladder or a lay were, I had already spent almost 10 years watching football in public places, really close to some of my future trading enemies! Today with Twitter, you can have a pre-game feel on the public perception but understanding how a group of people think during a football match is invaluable, if like mine, your trading portfolio includes trading volatility and especially if you do it in short time frames.
10 years in the pub don’t come handy so I present you John, the regular!
To cut it short, John likes action. It can be a shot from downtown (he doesn’t rate xG or “money ball(s)”!), a cross from far away or virtually any set-piece, but the ball should come close to the opposition area, fast and often. Otherwise, he’ll start to get a sense of disbelief on his team chances and criticize every single backwards or sideways pass, saying stuff like “Backwards pisses the donkey!”. Defenders are rated by the outcome of individual duels, while strikers are defined by goals. Talking about goals, they are always a surprise when they come from the underdog with the match tied (Peter Webb wrote about this perception problem with statistic detail here). Midfielders like Busquets will pass anonymous if the team wins but will be in the first line of criticism otherwise. On the other hand, managers are judged by results and referees can dictate the season classification.
Don’t get me wrong, everyone has a bit of John when watching their own football club. Moreover, when I started trading football I was John. Later and still nowadays, I have a mental exercise when a major event happens (goal, key injury, red card, etc), which consists on asking: what would John do if he was trading this match? There are trading lessons to be taken from the general crowd opinion during a live match and I’m pretty sure this also applies to other sports like tennis. For instance, understanding how people react to a possible but not certain injury, can't hurt.
Is John a good representation of the enemy?
It depends on what you are doing in the market and your trading time frames. This could be material for another post but the shorter your time frame and the more reactive rather than predictive you are, the more you should care about John. Of course, I’m aware that even if the sum of Johns represent the collective majority, they probably don’t represent the money majority. Nonetheless, more than advocating that understanding John is the key to success, I'm telling: you should never forget you are trading against people. Bots and mathematical models are involved too but they are also created by people. Bottom-line being, depending on your trading style, identify your enemy and for every kind, put yourself in their own skin. As an example, what you would do if you were using a bot? In what situations are they in advantage or disadvantage?