State of the Market
I’ll cover the current market this week and then I’ve got plenty more on last weeks analysis piece on site performance since pre-season. It throws up some really interesting stuff that is well worth a read.
In particular, it again shows why a “tight aggressive” approach with very high standards for selecting players and money focused in the very best picks results in vastly improved portfolio performance.
This is really important – it’s not just who you pick that dictates your returns. It’s who you do NOT pick and how you carve up your portfolio that can be the difference between 50% profit or 200-300%+ over a season.
On the market we are pretty much as we were, overall it’s generally bumping along with good days and bad days.
This is fine by me. With the strategy I am using I do not anticipate a particular bull run at this stage “just because” unless a new “Try January” offer from FI sparks renewed optimism in general which is possible.
With my big hitting, full season fit “Cornerstone 1” strategy players, it’s a case of just leave them be provided their performance strength and trend fit holds up the way it is. We have already made a lot of money from these. And I believe their time will come again, this is about preparation for the second half of the season.
If we want to make money at the moment – we have to work harder than we did in October where any mug can make money (although better traders can make even more!).
Times like this can give you interesting information about your own trading.
This current state is more reflective of a more “organic” market that is functioning without boosts like dividend increases or bonuses from FI themselves.
We have to know how to keep making progress in these times or at least avoid losing money. If we can’t, it’s a warning sign that we will likely struggle when FI becomes more mainstream and the competition is fiercer.
Looking at the list of players who are dropping, it is often, as it has always been in recent months, the players who have been overhyped and reached too high a price that are falling the hardest. Not always, some good players are falling along with the bad and knowing who they are is crucial.
Players like Sabitzer, Messi, TAA, Hudson-Odoi, Rodrygo, Kevin De Bruyne, Ihatteren, Golovin, Fati, Mbappé, Sensi, Alberto, Savanier are all taking a beating and my concerns at their prices can be found recently in scouting for all of these. It is predictable and it is avoidable – as it has been since pre-season in the analysis below.
But not always. When a market is going down you can expect some good value players to fall as well, just generally not quite as much. Coman has been dropping. Insigne. Ruiz. Olmo. Griezmann. All decent players.
You can also see the elite veterans starting to take a hit and as I’ve said since the new strategy, early season was the time to make the most of these, with Christmas probably the time they will be moved on. You can see that happening already and I will be tightening up on elite veterans as I said in this weeks scouting.
Di Maria took a particular savaging, he was the most profitable choice in pre-season IF sold at his peak of 228% increase, but only a 113% increase if still holding now. He hasn’t done much wrong and is still very much a challenger – but age takes it’s toll as you get through the season.
Elite veterans from here out may be best used for short term punts when they reach value prices and have nice fixtures. Ideally, if you expect them to pick up where they left off next season and still have a contract and are not going to be over 32 next season, they won’t be too risky.
If I know a player is retiring or moving to China – holding them at anytime is probably a no because one bad injury could be curtains. That’s rarely a risk worth running.
We are heading into the business end come January and the importance of the “full season fit” from Key Strategy will become more and more clear as we get closer to knockout European nights and the Euros. Make sure that any selections with that in mind are mostly sewn up – we don’t want to be buying full season fit players come January onwards unless something has changed to make them good value – that’s not working ahead of the market.
Rather, to make short term progress we want to first of all cut off any predictable losses in overpriced players as above. And then, it’s the hard way. Our players have to win to make progress usually. Or, we do some dealing in the Cornerstone 2 area of the market like transfer trades, IPDs or high potential value youth.
Finding the value punts with the help of Scouting is also a good way to make progress. Digging out Iheanacho who had a bad reputation until recently and a price to match was really profitable this week for example.
From his recent stats he had a good chance of success relative to his 62p price tag. £1.22 just a week later which is a fantastic profit in a very short time with IPD on top.
As other examples from scouting. Brozovic is back in value range. Keita is high potential if he can get pitch time. Chukwueze. Thauvin. Napoli assets. There are others. New players emerge or come back towards sensible value every week.
Site Stats - Corrections and additional conclusions!
Last week I shared some draft stats on site performance which had some very interesting results.
I’ve been refining them over the week with the help of @BuzzingPaul (well worth a follow) who is well known for posting some great FI stats. He’s been running due diligence on my numbers to make sure my method is accurate.
I’ve also looked into the total rise in the market from June – November with help from @FIMarketCap who spends a lot of time working that out.
Calculation Method Change
Average profit from the positive, neutral and negative lists are reduced as follows due to a change in calculation method.
Paul advised that it is more accurate to calculate this using the sum of the total price increase in each category. Before, I had averaged the percentages which is a statistical sin and I was correctly told off.
So the average price increase of the players in each category is better calculated as follows:
Positive List: Was: 79% to 99% is now: 73% to 89%
Neutral List: Was: 23% to 37% is now: 20% to 33%
Negative List: Was: -2.8% to 17.8% is now: -5% to 14%
As you can see this takes the estimate down for all categories which is more accurate, but doesn’t change the overall picture.
Estimate of Market Rise
Last week I used an estimate of 37% which is the change in the FOOTIE over June to November.
But as many will know, FI do not release details of how the FOOTIE is calculated so using that is shaky at best.
Having discussed with @FIMarketCap, a better way may be to use his Tracker which is essentially equal to purchasing 1 share in every player (a proxy for if you just did no research and made no real choices at all).
I think this is a decent way of judging progress.
It will also be quite surprising to many that in order to beat “doing nothing except buying 1 of every player” you have to improve on 57% from June to November!
These are two interesting additions to the analysis from last week.
The calculation method change is more accurate although has broadly the same results.
It’s important to bear in mind that this does not represent the total profit possible. Total possible profit was much higher.
It represents what would have happened if using pre-season scouting from June to August (inclusive of the first match scouting reports) to make our buys and then not doing anything at all until November.
This is a measure of how well my predictions turn out over a run of months.
Obviously, in real life, we would have improved these results by cutting off under performers as we go along in our analysis each week, and by adding new additions who show ability and value.
If we are using the new tougher measure (57%) of outperforming the market as a bench mark the stats are staggering:
Of players I identified in scouting as strong, good value and a match for my Key Strategy 73% of them out performed the market over the period by rising more than 57%. For these players, there was a price rise 100% of the time.
Of players I was neutral on, highlighting some key strengths but also significant weaknesses (usually value) just 16% of them outperformed the market over the period. But 66.1% at least made some profit, with 33.9% ending up in a loss.
Of players I considered weak or significantly overpriced just 3.4% (!) of them outperformed the market over the period. 32% made some form of profit and 66% made a loss. Of the 58 well known players on this list, only Sabitzer and Chilwell out performed the market.
The Key Takeaways
Readers will know that for a long time I have used a “tight aggressive” trading style which I have brought with me from online poker and adapted to suit FI. I talk about this in my free trading guide.
It was used to good effect in my 18/19 season New Trader Challenge series where I publically blogged my trades each week (in pre members area days!). That resulted in a 220% profit over the season, the primary reason for which was making sure all my money was focused tightly in a small number of high quality, strong value picks.
That means ignoring the overpriced players being peddled at high prices on social media and in chat groups however tempting it is – the Fear of Missing Out is a con. The majority of the time, you aren’t missing out. You are killing your own profits by following into it.
This approach has been working for me for a long time.
And these numbers show exactly why. If you ever wonder why some people make 200% or 300% whilst others are struggling to beat the market at all – this is why.
In poker, a player estimates how good he/she is by examining performance over thousands of hands (usually in terms of big blinds won or lost per 100 hands played). On FI, to evaluate our performance we need numbers like what I’ve produced here to know how right or wrong we generally are in our judgements.
Without that, how can we be confident in our decisions?
Based on these numbers, I know that my recent performance this season has been that:
When I think a player is good value, strong on FI and a fit for my Key Strategy I have made money 100% of the time, with an average profit a few months later of 73% assuming I go on holiday and do absolutely nothing. (Obviously I don’t and I spend hours each week refining what I’m doing and can hugely improve on that!)
When I am 50/50 on a player, and highlight some good positives but some significant negatives too (usually good players at high prices), I will have made some money 66% of the time but not that much with only 16% of them outperforming the market.
Where I made a clear statement that I believe a player is overvalued and being pumped too heavily on social media – 66% of those players were worth less a few months later and only 2 out of 58 of them outperformed the market – i.e most did not make a big profit even when they rose.
These numbers help show my own “baseline” (or my own “PB average” :)). It can change if my performance in either player analysis or reading the market dips or gets better in future. Luck will make it fluctuate too to an extent but over a longer run this will even out. So it is something that I will keep monitoring.
The main takeaway is this:
If you are confident in your ability to select players – why do anything else other than stack your portfolio only with your absolute best picks?
On average, going for the players that I find to be a tempting 50/50 bet decreases my performance and leads to some pretty average and disappointing results overall.
Going for players that are popular but that I judge to be overpriced and overhyped on social media seriously decreases portfolio performance in almost every instance.
In both the neutral or negative categories, there are small numbers of players who perform very well as you would expect, nobody gets everything right – but overall, avoiding these categories and trusting my judgement vastly improves portfolio performance.
Focusing only on my best selections, i.e a tight aggressive approach, I significantly increase my chances of achieving my best possible results by profiting strongly in almost every case. And I am not dragged back by many underperformers.
This is exactly the same philosophy that dominates low stakes online poker and it works on FI too – only bet big when you are playing your best possible cards and leave the 50/50 gambles alone.