What a week.
There isn’t a trader out there who has seen anything like this week before. We knew there would be bumps as the Offers came in but on this scale? It’s certainly more than I expected.
It makes it really difficult to judge how well we are actually doing. Do we look at the % change in portfolio values in the last 7 days as a sign of success or failure?
I’d say definitely not. You might be able to read something into it but really, I don’t think it means a great deal.
For a start, if you have been picking up players on cheap bids, this would naturally make your on paper loss appear bigger – even though you have been doing exactly the right thing. So it’s entirely possible a trader making very savvy decisions has taken a big on paper hit.
If for example we were targetting a £2 player who was available on a £1 bid that may well be damn good business but this week the portfolio would have told you you have lost half on that trade. Which is obviously total rubbish.
And then, we can’t trust the prices at all anyway. One weakness in this new system that is being quickly exposed, and is now so obvious in hindsight it seems inevitable FI will change it – is the fact that 300 shares still moves a price.
This means that just one trader acting alone can instantly change the value of many people’s portfolios.
That’s bonkers in and of itself. But in a market where you will get baddies trying to exploit the panic that can create and plenty of new and vulnerable traders around? It’s a recipe for what we see now.
So it’s all very choppy out there and even for me who has lived and breathed this stuff for years… it makes me furrow my brow and stroke my beard thoughtfully. And those who know me will recognise that as a very elaborate gesture by my standards.
The fundamentals here remain solid. I have mentally accepted that the next few weeks at least are going to be rough. But I’m overall optimistic for one simple reason – there is real and genuine value here. Bags of it.
As I said to one chap on Twitter DM this morning – when you are selecting good players you may well be sat on an asset with reasonable expectations of something like a 25-150% yield in a single season.
I don’t know any market on this earth that would let those yields sit there without money coming in to buy those assets.
So the fundamentals are strong but this needs some bedding in and probably a technical change from FI to prevent this kind of day to day volatility.
Whether that is caused by manipulators or panic sales or more likely a combination of both – the structure of FI is currently too vulnerable to it and I would be amazed if FI don’t do something soon to address this.
I’m going to share some member questions and answers from my postbag as I am sure many people are wrestling with similar issues at the moment.
But first, a quick word about a new partner for the site that I genuinely think will improve Scouting – footballteamnews.com.
FTN is a paid service most often used by journalists, bookmakers and professional bettors.
They provide match previews and reports across all the big 5 leagues for every match as well as most ineligible leagues and all the big European competitions. That’s huge in scope and they employ a ton of experts to cover all those games.
FTN will be an additional source that I use when Scouting from here out – and it’s a really useful tool to have in the locker.
I’d appreciate if members could like this Tweet on the partnership as the more I can help FTN get some good advertising out of this deal the more likely it is to become a permanent fixture.
And if you could click this link to check out FTN yourself that helps too.
Statistics are one important element to Scouting but there is much more to great player selection than that. We also need details of the overall picture: how the team is shaping up, who is in and out of favour with the coach, who is injured or hitting poor form.
I’m sure I am not alone in remembering times where a player has looked good on paper but has gone on to spend the next games languishing on the bench.
FTN should really help with that and I’m looking forward to using it.
It is not a cheap service by any means but it is high quality and comprehensive. It tends to be used by companies or high net worth individuals – in fact full access costs £432 per month excluding VAT.
When focusing on just one league however it becomes more affordable for a bigger FI trader.
If you sign up for 1 league like the Bundesliga it is £120 a month but you then also get the EPL, CL and Europa League too. So per League, given the comprehensive coverage you get, that starts to get in range of a trader with a big portfolio.
They also cater to groups so depending on interest I may try to negotiate some kind of group buy discount and shared access for FIT members – but that is some way off and just an idea that I have not yet asked FTN about. If this is something that interests you please email me and I’ll be able to gauge interest.
In the mean time, members will be benefiting already as I’ll have another good source to help me with Scouting that would normally cost upwards of £5k+ per year. So there is a passive benefit there as part of your existing FIT membership for no additional cost for even more value.
So if you wouldn’t mind liking the above tweet and following the link to the FTN site, that’s really helpful.
I’m sure FTN will prove to be a rich source of great information for the season ahead and I am sure it will help make Scouting even better.
On Volatility and Decisions
Q: I’m feeling pretty pessimistic about the current state of the market at the minute.
Ports 18% down last 7 days. I’m ok with that. I expected a drop.
I’m more concerned about the fact that I’m 2% down today and some of the things that I’m seeing/hearing. Big hit today was Grealish. I know, I should’ve sold ages ago but for me he was a long term hold.
Made me realise that the ‘profit’ those of us that have been around for a while have made on long term holds can now be wiped out in seconds.
Are you still confident in a medium/long term trading strategy?
Another example, RLC who Im holding at quite a big loss. Price went up to £1.90 pre-match last night. One (admittedly really) bad performance and he’s 85p on the red button. Savage. Orsolini – Changed to fwd today. Up to £1.90. Now £1.40 on the red.
Do we just sell on any positive news and buy back the next day?
A: It’s wild out there and you are not alone in feeling like this.
My overall views on confidence/positivity are in the intro.
What jumps out to me about this question is the importance of not letting this crazy market indicate whether we have been making good decisions or not.
These market movements we’ve seen in a very exceptional week are not the “verdict” on our decision making. That’s going to come over weeks and months as the seasons really get underway.
We’d be stupid to think that these price movements this week have much to do with real quality or real value. And we can’t even trust the prices we see because that price on the button could be wafer thin. That Blue Button price is set by the most pessimistic seller out there – but behind it could stand lots of more confident holders.
I would be amazed if FI let that situation continue – in hindsight this was a fairly obvious structural weakness and it’s so obvious now that it’s very likely we will see further tweaks to fix it.
My advice in this crazy time is to pay much less attention to social media/chat groups and what the price movements on the market are apparently telling us.
Instead, focus on ourselves and our own game. Trusting our own assessment of what real value and quality is the only way we win. We can trust that far more than what we are seeing externally.
But of course, we’re far from perfect and we always need to learn and improve.
So, we’ll all take some losses at any time, and particularly this week. The important thing to recognise is whether we’ve been making good decisions or not.
You know what I’ll say about Grealish. I’ve highlighted this as an awful, awful bet for a long time for exactly this reason. He was always in danger of a total collapse because that price required a very specific event to happen to even start to justify it.
Yes, the transfer could have happened. But we know most transfer rumours fall over for a start. And even worse – the price was so high that even if the transfer did happen you’ve only got at best average value for the player.
The time to profit from Grealish was when he was in the £2 range yet the transfer window was so far away it could not actually get shut down. As the danger zone approaches where a decision will be reached either way – it is very, very poor trading to keep holding that at £5+. Even if it ended up working out in your favour – it was still a bad decision.
These are the self inflicted wounds we absolutely can avoid and should avoid. Sorry to be harsh on that one but when I’m consistently cautious on a player it’s not for no reason.
Other losses are much more forgivable, and we’re all going to have some trades that don’t go well. But when we take a loss we want it to be for a good reason. There are good losses and bad losses.
Your other example of Loftus-Cheek we can be much less harsh on ourselves with. Buying at a low bid this year when he was showing promise at around £1.91 I would call a good decision based on what was known at the time.
He’s got real FI potential. England potential. A great trend profile. He was showing some good numbers on his returning games and his historic numbers are very good too. So nothing wrong at all with making this bet.
Things did start souring though, particulary as we saw more and more new signings come in to increase competition. So there was probably an opportunity and enough good evidence to cut that off before it got really bad, even for a 20-30% loss.
If we really have lost confidence in the player we shouldn’t be too squeamish about taking that hit, especially if we can move to a player we do want who is available for a similar discount.
Even so, if you did not exit a bit earlier you can probably still count yourself unlucky that he delivered a very poor performance in this particular week when the market is that volatile. Had he played well in that one game we could be looking at a very different story. And you can’t control things like that.
However, a sell off of this magnitude knocking him down to £1.14 is likely to be over-pessimistic. If you listen to Lampard he will get another chance and things can change fast as we are very aware of right now.
As for the Orsolini example – this is great news for him now he is a forward. He was good in midfield, he’s now even better. If someone now wants to sell him to me for less than before when his chances of winning just increased – I will not feel bad for giving that person his questionable wish. I like to be a positive force in the market but if someone is putting that value out there it is fair game.
Is long term trading dead?
Q: I am a long term strategy trader, everything about it appeals to me, however I keep thinking order books have changed the playing field slightly.
Do you still feel Long Term to be the best and most profitable approach? I still believe it should be, but with so many impatient traders and the ability to exit holds now easier than ever I’m not sure what’s best now!
A: I see a lot of people peddling that line at the moment. And this volatile market would certainly appear to support that. But no – I think this is wrong and it will settle down over time.
It is perfectly possible to do some good short term trading at the moment of course, at risk of it going very well or very badly, and I occasionally do.
But most of the time I trade for months or at least weeks rather than days which probably counts as medium-long.
If long term is your game I would stick to that and don’t feel pressured to change tack by what is a very exceptional week.
I think if you have spent months setting up a great portfolio for the season I can’t imagine taking a chainsaw to it to follow the movements in this week’s market is going to end well at all.
As to whether long term trading is “the best” or not – there isn’t really an answer.
It really depends on the individual. Some people may have that knack for predicting short term movements and may do better to lean into that, particularly if they have a ropey assessment of actual quality for example.
What does worry me a bit about a common line often given by extreme examples of such traders is “quality doesn’t matter and dividends doesn’t matter”. This is garbage and I think it is people who don’t know how to assess real quality that lean on this very heavily.
You can’t possibly trade optimally if you don’t have at least some idea of the real value of what you are trading. How on earth do you know at what point you should buy and sell otherwise?
So I’d be very wary of the type who try to make short trading sound all too simple.
If however you are a competent savvy trader with a good understanding of the way the market moves AND a good understanding of real value I think successful short term trading as a general strategy is very viable.
A few things you have to be aware of. Short term traders can often show very large screenshots of on paper profits but often have to make many trades before hitting a successful one. And the commission it took them to get there is often huge. So take some of the profit screenshots you see on social media with a massive pinch of salt.
They are easy to manipulate and you have to wonder why people are bothering to share them at all – there aren’t many reasons that are all that wholesome. Usually it’s so they can tempt people into following their next trade.
And also, particularly this week, short term trading is very hit and miss. You are likely to hit both big wins and big losses which can be a very exciting way to make zero progress at all. So again, one big screenshot of a huge profit doesn’t tell the whole story of that traders results. And it’s easy to scrub bad trades from your portfolio if sharing the whole thing too.
Another factor is time. I value my time and believe it or not I probably spend around 5-10% or less of the time I spend thinking about FI actually trading. I’m busy with the site so practically speaking, sitting there trading as a full time job refreshing every news feed every 30 seconds would not be productive for me.
Some may treat trading as a full time job and it may well work out for them. Practically though, most of my members certainly seem to be generally productive members of society with actual jobs! So that 24/7 trading is not practical for many.
I would note however that there has never been any evidence in any form of trading that short term traders make more than long term traders – in fact whatever evidence there is suggests it is quite the opposite.
This is counter intuitive because the assumption people want to make is “if I spend more time on this I’ll make more money”. That feels sort of logical right? But it’s wrong. It’s the quality of decisions you make that determines success not the number of them.
So overall my answer is that there is no answer. Both short term and long term trading may be the better option for the individual and my only advice would be stick to what you are best at, have the time for, and are most comfortable with.
Whilst it may appear as though short term trading is winning this week, this is a very exceptional week as we know.
So tearing up a whole strategy to chase that? Really doesn’t sound a good idea to me particularly if you are inexperienced with short trading – it is not as easy as many would have you believe and it’s very easy to get burned particularly this week.
Betting the Mortgage
Q: I’ve always winced when seeing talk of house deposits and life savings on fi and some of the comments on social media on Sunday were really worrying.
A: I’ve long believed that FI will get harder over time. It has just been too easy to date. Order Books has really accelerated that process of growing up.
You are right – there is too much dumb money in this market. And too many people, even big social media accounts with big followings, who clearly just have no idea what they are doing yet tout themselves as experts because they invested heavily early on and so naturally have a big portfolio.
This is common to new markets and even when online poker was new which is a comparison I like. The very early period of growth is high as the value proposition is massive.
In early Online Poker players all thought they were amazing card sharks. But really, they were just profiting off an influx of very poor, very inexperienced poker players.
Over time, those poor players were wiped out and their money went to the better players. But over years, game after game, decision after decision, the money slowly but inevitably flowed to the really good players. The ones who didn’t assume they knew everything but put in significant effort to become competent.
We want to be the latter. And if we can do that, I think we have far more to gain than to fear. I don’t think we are even close to FI getting genuinely difficult to play – it may be 2 or 3 seasons away. At the moment the good player can make significantly more than the bad one – but the bad one is still making solid bank overall.
For it to get genuinely tough we’d have to reach a point where FI said “actually, we’re ending these huge dividend increases and you’ll have to work out how to profit purely naturally”.
We are a long way from that. Dividends have just been doubled and prices have a long, long way to grow before they catch up with the dividends. And we can reasonably expect a further increase next year too.
But yes – I think there will be some creative destruction so to speak and some of the incompetent risk takers are going to find that FI aren’t going to be bailing them out of every mistake from here on.
They’ll be upset. And many will leave. And this is why you don’t bet your mortgage ever and you only play with money you are comfortable with. If you are over exposed you cannot act rationally and when we see situations like Sunday night nobody can keep a cool head if the roof over it depends on what is happening on the screen.
To be good at this we need to be able to stay objective and patient sometimes – and that is the reason for the Golden Rule of any form of trading or betting – never play with money you need to pay the bills.
As bad decisions from bad traders get punished – that money won’t all leave the market of course. It will flow to good traders who will reinvest it. And I believe that a NASDAQ backed product that looks more like a real market (once it settles) is going to attract lots of bigger fish too.
Relatively speaking I think FI is very young. I think we may see a volatile few weeks but moods change very rapidly as we all know. I don’t think the gloom will persist longer than a month or so – the value available is too strong for that.
Volatile Prices and a Core Portfolio
Q: There is a tonne of great value out there and I can see easy wins but at the same time I’m not willing to dump some of my holds at what I deem to be bargain basement prices. I’m maxed out on what I’m depositing in FI so I need to recycle futures to play.
The approach I’m going with right now is to place offers on my players at a price I’m happy to shift them at. For example… I’ve Aouchiche listed at £3.05 in anticipation of some hype tomorrow evening. Hopefully that happens, he sells, find the next player, rinse and repeat. I’ve pretty much the entire port for sale at various price points.
However, this is a very short term approach to FI and while I think with the massive swings in price we’re seeing it might just work, im not convinced it’s a great approach when it comes to building a core portfolio.
It also raises the question of when to dump holds where there is little short/medium term opportunity on the horizon and they wont see that bump in price to hit the offer I’ve placed. While taking a big hit on someone was previously to be avoided with so much value out there I’m asking myself if the ends now justify the means?
A: Interesting stuff and I’m sure lots of readers relate to similar conundrums.
Thinking about “Core” holds in Key Strategy, which make up around half a portfolio organised along those lines.
The basic plan in that element of the strategy is we are buying good players that have performance strength and match a lot of the key events in the season to come. They are amongst the strongest players, and they play more matches, the matches they play are more lucrative, and they get TOTM bonuses on top. What’s not to like?
Simple enough in strategy – but the hard part is knowing who those players are which is constantly changing. But that’s what Scouting is for.
So, as the season progresses those players should demonstrate strength with wins, and big events like the CL or Euro 2021 drawing near will also funnel traders towards them.
But that takes time. And this is a very short term and distracted market this week. Some players fitting that description may even be taking a hammering as people chase something that currently looks more attractive.
So, if we have one of our Core players who we were planning on keeping for a while and he hits some good luck event like a win in his first match… and he rockets because of this volatile market, getting to a price that now makes him fair value or poor value would we cash out?
Probably yes – if looking to trade optimally. Winning is hard. Just because he won this week doesn’t mean he will win again the next. So cashing that out and moving that money to a different Core player who also performed well but didn’t happen to win? Not a bad shout. It’s all about having our money in the most optimal areas.
I try not to get wedded to players. Someone like Gnabry is as “Core” as it gets to me – he’s super solid. But if he starts with a hatrick in the opener and suddenly is £5.50? Is he worth it? Well technically yes. But would I really believe such a sharp rise is sustainable in this climate? Probably not. So I’d probably cash that in and look to come back to him when the hype wears off.
We could also have a Core player that is struggling, probably Brandt is a good example this week. He was sort of borderline Core/Challenger in my series because he’s got a bit to prove at Dortmund but he’s also very cheap for his potential and ticks so many of the right boxes. But after this sharp drop am I going to sell just because others have decided they are down on him?
Of course not. The pre-season numbers for him are good and things would have to go very, very wrong for Brandt to stay at that price. I literally don’t care what other people think on this. As long as his numbers are holding up in Scouting I’m good.
So there are decisions to make depending on the fluctuations but I’d never lose focus on my Key Strategy. I may make a few short term moves if they make sense but I’ll always gravitate back to the Key Strategy because I believe the logic is fundamentally sound – and the dividend increase makes it even more so.
That doesn’t mean we passively just hold everything though.
There are some tough decisions to make and I would encourage decisive action when you have really lost confidence in a player and there is no real prospect of that turning around anytime soon.
Let’s say I’m sitting on a player that has no real chance of a performance win anytime soon and might not hit a reason he can rise like a transfer rumour until January at best. I have to take a 30% hit to get rid of him which is severe.
But I’d almost always take that. Why?
Because in this market I can almost certainly find a 30% discount on a player I do have confidence in. So if I’m taking a hit but also getting a discount on the other end… I’d consider that a good deal if switching from a lame horse to a stronger one.
So I think the optimal strategy is a combination of sticking to our guns when warranted but also not screwing around when we have really lost confidence in the player.
If we have serious doubts and the evidence suggests our player is going to struggle – rip off that plaster and get money into areas we are confident in.