number9systems

Chart Application Preview

2010-05-27T17:56:00.001-07:00

Well at last I am starting to get my charting application together for trading on the betting exchanges. (Only a year late)

It has some features that have already earned money on the exchanges and I will be working further on it to enhance the risk management and provide trend indicators.

At the moment it is really only at alpha level but if anyone is interested then do feel free to comment.

Predicting The Score

2010-05-13T05:40:00.000-07:00

I have been spending quite a bit of time at the bet your life blog over the past couple of weeks mainly in the chatroom.

Talking to other traders while trading adds a good dimension to the activity and the guys up there are good fun and willing to talk about some ideas.

Which brings me onto this post.

The other night I was discussing the Correct Score Markets and I decided to show them my price predictor for this market.

It's a very simple excel sheet where you enter what you believe to be the average goals for the home and away team in the table at the top.

The second table takes those averages and displays the probability of the home and the away team scoring a specific amount of goals based on a Poisson distribution.

The third table then takes the probabilities of specific goal counts and merges them together to create the odds for a specific scoreline.

While I just enter the average of the last 6 home matches for the home and away teams you could look at other factors that could modify the average.

i.e. If a striker is injured then deducted whatever goals he has scored from the average goal calculation.

You could also weight the goals scored by looking at who they were scored against.

i.e. A goal against Manchester United is worth 1.2 while a goal against Hull is only worth 0.7 but that is getting into a Rateform approach which I will talk about more later.

Take it for a drive and compare it to the prices on the exchanges.

I guarantee you will be surprised by the correlation between the predicted values from the excel sheet and the prices offered.

You will notice however that the most probable outcome is under priced on the exchange which could be an opportunity.....

The Initial Investigation into Fuzzy Logic

2010-02-09T14:59:00.000-08:00

OK so I started looked into the fuzzy model offered in the paper from the previous post and I found that I wasn't happy with it.

The main problem I see is the approach of using big win, little win, draw, little loss big loss based on goals scored misses the key point for me:

A big win against Burnley cannot be as significant as a big win against Chelsea.

Researching the problem I found it had been approached in a strategy called RateForm.

The rateform model given in that article is a generalization of the ELO system used in chess and I was lucky enough to have some old code for calculating chess ratings based on an article by Vincent Bisset of Malahide Chess Club on the Irish Chess Union website.

There are also some recommedations as to how this system could be tweaked to cater for home bias in this article from chessbase.

So after installing Visual Studio 2010 and taking Silverlight for a spin I now have an application that rates teams performance over time based on results against the opposition they play.
The screenshot shows the output for the past year in hard hitting Rugby League Football.

Now I am going to see how this plays into the fuzzy model.

An interesting article on prediction models

2010-01-21T12:57:00.000-08:00

I found this PDF on how to predict the result of association football matches this week.
You can download a copy here.

Its a great insight into how you might go about implementing fuzzy models and refine the results.

The basic premise is that you categorize results into big win, little win, draw little loss and big loss.
You then group these outputs with the results of the previous matches between the actual teams that are due to play and that gives a prediction model.
Smart tuning methods are then implemented on top of this model and your away in a hat!!

Although the whole point of the approach is to simplify analysis I think it could be worth incorporating some home and aways as weighting.

But what is REALLY interesting in this paper is the last paragraph on the first page.

"In the practice of prediction making the football experts and fans usually make good decisions using simple reasonings
on the common sense level."

This gave me the idea that it could be worth investigating if the model could be used to predict betting trends instead of actual results.

Watch this space!

The hard righthand side!

2009-05-26T16:52:00.000-07:00

In response to Leon on dontgiveupyourjob
(A very interesting blog if there ever was one!!)
I thought I would post my opinion on his latest question.

"Does this class as a swing trade?"

In my view if he got in exactly where he positioned A in the diagram then he took a speculative position.(A Bet NOT a trade)

If he got in four candles further on from the A when the Selection had broken the resistance of 4.7/8 as indicated at the start of the chart along with a stop loss around the previous 4.4 bottom with an initial 3-1 ratio sell at 6.0 then I would have said he was in a fairly risk free swing/scalp whatever you want to call it but at least it would be a trade.(Although I would have a question as to what led him to believe it would make 6 or even the 6.6 heights but that is for another day)

This may all sound like mumbo jumbo but if you look at the graph below I think it illustrates the point very well.... with the hard right handside in place what in the market is telling you to buy or sell?

In my humble opinion nothing...
There is nothing in that picture that gives me any reason to believe I should do something.

I am not saying that there is anything wrong with watching for news and predicting how the market will react but from my perspective this is closer to studying form and other fundamentals than it is to technical analysis.

Concurrent Programming Agents

2009-05-11T05:44:00.001-07:00

The traditional approach to devising possible trades is to analyse a set of charts to identify trends and then place trades placed on that trend.

The skill in this is analysing the chart data to see if trends exist and how much they are potentially worth and how much risk is involved.

At the moment Microsoft are helping to tackle the problem by providing a Domain Specific Language to help deal with concurrent programming. Thus enabling access to the power required to perform the market analysis.

The Axum Parallel Programing Model helps deal with this and is worth keeping an eye on.

An interesting overview of the internals at Betfair

2009-05-08T01:38:00.001-07:00

As well as trading I also write software for a living.

If you use an API at a betting exchange its always worth while understanding how they have put it together.

You can get a very good over view of the betfair exchange at this address

There is a lot of detail here but at the very least it should make you curse less when the exchange is slow because you will understand the unique challenges they face.

Watching The Blues

2009-05-06T15:53:00.000-07:00

Looking for opportunities today at lunch time and I caught the week chart on BetDAQ for the Chelsea vs Barca game. I thought it might be worthwhile breaking down what I saw because I managed to achieve some value..

I don't recommend trades based primarily on the past performance of a selection.
So if you are looking for what I would term fundamental analysis such as
X horse has a wooden leg so take all lays or
Beckhams Grand Mothers sister heard that smoking witch hazel on a Tuesday gives you a score draw then this is not for you.

The approach I am taking is to use market analysis to understand where the prices might go to next.

I am not saying that you should ignore fundamentals but what I am saying is that the primary concern should trying to understand where the market is out of step and THEN use your understanding of the fundamentals to reap as much profit as possible.

Anyway back to today.

Below is a chart from this afternoon so I can illustrate the basic point.
Chelsea is Blue
Barcalona is Red
Draw is Black

If you look at the chart you see that Chelsea start favorites as you would expect when the home side win 66% of champions league games. (Info from the BBC sports site).

That is until Saturday when a dirty big X appears in the middle of the chart.

Wondering if there had been a breakout of swine flue at Stamford Bridge I looked up what had happened and found that Barca had beaten Real 6 - 2 away.

Not a bad result but should it affect the market that much?

I didn't think so.
(If your interested how I came to that conclusion I would recommend The Drunkards Walk for an entertaining laymans view on distributions and probabilities)

Apart from the result there was very little different in the world between Friday and Sunday.
If anything Henrys injury could be viewed as a negative for Barca and on Sunday we rightly see some corrective action in the market as sense starts to prevail.

My read is that from Monday onwards we see the news of Madrids tubbing hitting the punter on the streets. Followed by people getting bored at work and so the money starts to trickle in for Barca.(This could be validated by a look at volumes over the time period which is left as an exercise for the reader).

A key moment is Tuesday we see Chelsea making an attempt to break the 2.9 mark but it doesn't make it through. This is the first flag to me that the selection had gone out as far as it was going to go and any movement worth any value now would be down.

Then at 2pmish today I noticed some movement happening so I got in at 2.88 and took the chart shot when I decided I would blog it.

I put a tweet out too so don't say I didn't tell you when it was happening. TWEETS

So how did I know how far it was going to swing?
Well I didn't for sure but going from the chart the obvious point of support was the under 2.8 point that happened on Sunday.
But I know that humans have a problem with whole numbers so I set my Lay for 2.81 and so it all panned out nicely.

The prematch price made it all the way to the 2.76 low of Sunday but its best not to be greedy.

Of course after this I banked out the options as Chelsea were still outsiders to win the competition and a good trade like this should return the golden glow.

Til next time

A view on the champions league

2009-05-06T15:46:00.000-07:00

I thought I would use this post to explain some of the background of my tweets.

On 1st May Arsenal were 9.0 outsiders to win the champions league but favorites to win against Man U in the champions league SemiFinals?!

This divergence of an outsider being favourite to win the match but an outsider for the competition was something that interested me so I tried to extract some straight value.

I looked at spreads which layed Arsenal in the semis, hedged either in the +2 +2.5 +3 goal Markets or with straight bets on 2-1 3-2 with the final money maker a bet on the 9.0.
The basis being that if Arsenal qualify they would be a 3 point lay at worst to win the competition outright.
Therefore I would have a healthy 6 points to play with.

But try as I might I couldn't extract enough to make the position worth while so I decided to be a little less risk averse. I could have probably taken a little less hedge but with commentators predicting the worst I didn't fancy it.

So I took the view that the Arsenal price in the semi final was more emotionally charged than the steady 9-8.8 that had been in the outright market and so had a very good chance of moving back out.

So I took the 2.76 Lay and by close Monday it was a 2.86 bet as predicted by the Outright Winner Indicator. (Free point anybody?)

By kick off Tuesday it was back to 2.76 so I felt fully justified taking a piece of Man U at 2.8 as well as banking the swing.
I didn't expect the move backout to 2.8 for Man U and still haven't found an explanation why
But I took it anyway and the rest is history..

I hope to share more of these market divergences in my tweets as the software I am writing helps me to identify them more rapidly.