The most important feature of the market right now is this – prices for high quality players are almost always way below what they rationally should be.
The dividends on offer see to that after they were doubled. And it may take an entire season for prices to gradually catch up with them. It’s about as strong a reason for long term optimism as you’ll ever get.
Yet, the market right now is also characterised by a lot of frustrations.
Frustration with the Matching Engine in general, as lots of people struggle to adapt to a new way of doing things.
Frustration that all these changes, though good for the long term, are distracting people from the business of actually finding the best footballers to buy.
And frustration at the short termist nature of the market which is fueled by this ridiculously generous IPD promotion.
Offers - What's new?
The introduction of Offers did not go smoothly, to put it mildly.
It quickly became clear that it was far too easy to move a blue button price, just one individual could do it with only 300 shares.
This led to sharp drops on “Black Sunday” which are likely started by either the overreactions of bad/new traders or deliberate manipulations from trading groups. It’s probably a combination of both. FI are still investigating that and may make a statement.
Whatever the reason – it largely doesn’t matter to us as traders. It’s on us to avoid overreacting to such things and from time to time, if we are going to be involved in any market, we are going to see events like this and our mental toughness is going to get tested.
And it is a test – one that will absolutely bounce out many traders with poor mentalities for this game.
It’s not easy to deal with though, and I don’t think FI traders as a collective are quite ready for total freedom in the market.
Before the introduction of Offers, I speculated that FI might leave some kind of training wheels on, perhaps in the form of heavy market maker activity that kept Blue Button prices, and therefore portfolio values artifically high.
Without that, it was near inevitable we’d see see sizable drops.
When they didn’t, I was surprised. It was honest. But probably too honest. I often marvel at the behaviour of all the dumb money in this market but FI need that dumb money and they need to keep their dummies happy, at least for a transition period. They are still customers.
And dumb money is where most of our profits come from. They are the ones following into players late after they win or score a goal. Or buying our transfer trade far too close to the window. They are the cash cow that feeds FI. The dummies must be respected and appreciated.
A market with such brutal price swings is just too much for many people to cope with, and when it’s this volatile, it’s hard for everyone not just bad traders. The training wheels are very much back on the market now.
We saw our second heavy handed intervention this year from FI to stabilise the market. The first being the lockdown on sales after covid.
I actually find it quite reassuring that when it really comes down to it – this isn’t a totally free market.
FI can and will put the breaks on in turbulent times and sometimes that is needed, particularly in 2020 which has been a very exceptional year. In a lot of markets that would just not be possible but FI have a lot of control and are not going to let the market they have spent years building implode. Good.
So, we saw what makes up the Blue Button price change. It’s now the average of the cheapest 900 shares available for sale, rather than 300 before.
This stabilises the price somewhat. It also raises it, giving a boost to on-paper portfolio values which makes people feel better.
This isn’t really a deception – in fact the reality is that the Blue Button represents what the most pessimistic holders think – the majority of those holding will be waiting for a higher price and believe they can one day get it.
In fact, it would be more accurate to say that our on-paper portfolio value is less than it really worth in terms of yield, provided of course you actually have a decent portfolio.
We also have the change to the “Offer Zone Floor”. It’s the most significant intervention and it’s pretty drastic.
This basically means that if the Blue Button price for a player is £3 a trader can only offer them for sale at £2.99. They cannot immediately offer £2.90 and drop every holders portfolio value instantly.
Of course, if that price drops to £2.99 then the next trader can come along and offer £2.98. And the next £2.97 and so on.
So it is still possible for a Blue Button price to drop. But only very slowly and with the co-operation of many people.
This is both good and bad.
Good because right now stability is needed. There is a lot of change and people do need time to adapt to that.
But it’s also a very blunt tool. They’ve taken a hammer to this not a scalpal. It’s the right thing to do. But they are going to need to gradually lower the “Offer Zone Floor” over time and they have said they will.
So in our example above eventually FI will loosen this up and you’ll be able to offer £2.98 straight away. And the next trader £2.96. That likely gets increased further later. And prices will be able to drop more naturally if it’s warranted.
And we do need prices to drop when it’s deserved (unfortunate though that may be for holders). It’s healthy and you can’t open up value without it, nor can you have acceptable spreads.
So we’re almost back to a similar situation before Offers were introduced at all. These large gaps between red button and blue button price are going to start appearing again.
Once that blue button price is pushed up, which is very easy to do, it’s very hard for it to come back down.
So these training wheels help short term stability – but it’s going to take us back to that situation where very wide spreads exist and “zombie” players retain high blue button prices when people no longer think they deserve them. Which stores up problems for later as at some point they have to come back down.
FI are now doing what they should have done in the first place – putting in place measures that mean these price falls happen gradually rather than all at once and create panic. Better.
I generally think FI is well managed and whilst they make mistakes they are also creating something that has never been done before, it’s not easy.
I don’t think all the moaning we see about “changing the nature of our bets” really holds water. These same people will certainly not be complaining when FI “change the nature of their bet” by doubling dividends. It swings both ways and in order to develop as a platform FI will always make changes. And are entitled to do so by the game terms. Most changes end up being for the better, too.
So whining solves nothing except puts us in a victim mindset where nothing is our fault. It never helps and we are best served by focusing on our own game.
When considering prices, the red button will remain a better reflection of what people think the player is worth today. The Blue Button is going to get stuck again like it has been all year and isn’t to be taken too seriously.
Although even the red button at the moment will be heavily skewed at the moment by short term thinking, especially fueled by the IPD promotion.
IPD Promotion and "Sessions"
This is madness.
Particularly in a very high scoring gameweek as we have just seen, the dividends are raining.
It’s kinda brilliant.
However, this was always the fear about IPDs taken to an extreme. It sucks money away from the main purpose of the platform which is an alternative and more long term minded product than the traditional bookies.
I would imagine FI are now silently wishing they had not made this offer last until the new season, as what the market doesn’t really need at the moment is more volatility.
It may please some but it also shakes the confidence of many who don’t understand what is going on. And it creates these ludicrous situations like we saw with Son where he is flying high and then crashing immediately back down despite remaining a strong hold.
All very well if you are experienced and know to cash out on the high, possibly not even waiting for the actual dividend and just taking the cash. But for a rookie? That’s not helpful. And we all need new traders to get comfortable using FI. I have sympathy for new traders joining for this season because it’s hard for even a veteran to keep up at the moment.
So whilst it’s raining the dividends and it’s hard to complain, I will be glad when this promotion is done at the end of the month.
That should renew people’s focus on actually preparing good, sustainable portfolios which should benefit traders who hold good players. Unsurprisingly.
The “Sessions” where we can no longer trade overnight… I have no strong feelings about. I think I prefer it overall – it’s good for the majority of people who aren’t going to be spending all night on FI and will welcome not having to worry.
It’s bad for people who work odd hours, and for the handful of nerds who stay up until the early hours trying to grub up an advantage from seeing news first etc.
Overall I think it is needed right now but I’m relaxed as to whether it stays longer term or not. I’d personally keep it – I think it promotes healthier use of the platform and is better for addicts or people who worry too much – at least it gives them a break.
Trading Styles and Selling
Background discussion is good. But I like to keep this article focused on things we can actually do.
One change I am noticing in my trading in the Matching Engine world is a rise in the number of players I’m holding.
Usually, I’ll hang out around 40 players these days. It’s a solid number that is plenty aggressive so I get paid when my picks do well but also has a decent amount of diversity.
But I’m finding myself up closer to 60 right now and there are two reasons for that.
Firstly, the Matching Engine changes the way we buy players. I used to just spot a good player and then buy however much I wanted, perhaps 2.5% of portfolio value or similar. Simple.
But now, that doesn’t quite make sense. I am more likely to have 4-5 bids in for different players because I want the best prices possible. And if I pick just one target, I may sit there waiting all week for that bid to be matched. With 4-5 low bids on players I’ve got a higher chance of getting a bid I want matched.
But probably not all of the shares I want. So it’s taking longer to build up my shares in players to the level I want. This naturally spreads my money more thinly around a wider selection of players.
Also, I generally expect to have my net cast a bit wider in early season anyway because there is a lot of change to teams, new players at new clubs, and generally more uncertainty.
We’ve still only got 2-3 games to go on in most cases and although we have a fair idea of where things are going, we’ll want to see at least 6 games on a player in most cases before we can start calling it anything like consistent.
It gets easier where what we are seeing matches the players history and we can make calls earlier in those cases.
So, as we go through the next few weeks, through Scouting I expect to identify the players that I liked in pre-season that are not performing as hoped and make a graceful exit before too much damage is done. And that money will be stacked in the players that are performing as I hoped or better.
My short term goal for the next month is to condense those 60 players into the best possible 40 I can come up with. I may not get all the way there because some players are still stubbornly difficult to sell for an acceptable price, but that’s the objective.
Speaking of selling, here is a Question from a member that helps illustrate my current thinking on this tricky topic.
Question: I have about 9K in FI now and I want go start recycling my own money in there. I want to start Selling players for say 20% loss as I know I can get another player who I prefer for a 20% discount . Plus I get all the IPD too.
Is this a smart strategy in your opinion?
Answer: As a principle I’d say yes but as ever with “Should I sell?” it always depends on the player and there is no hard and fast rule.
I have two main bits of advice on selling right now.
First of all, I’d preach decisive action when needed. It’s so easy to slip into a mindset where we sit and wait forever for a player to recover. Particularly now, when so much value is available, we don’t want to leave it hanging because it won’t be there forever.
Particularly where we are very confident they are a slam dunk performance God in waiting or they are a good youngster that has so far evaded hype – we need to sign them up.
That puts an urgency on selling existing holds to finance that. So, when we have really lost faith in a player, and we don’t think they will bounce back in any kind of acceptable time frame (3 months+?) we may want to consider taking that hit.
So if there was a prospect I liked in the pre-season preview, but on starting he’s looking poor and we’ve seen 2-3 games I’ll definitely be getting twitchy. If that continues into 4-6 where he isn’t looking good he’ll almost definitely be gone. Because there will be plenty of players who are doing better than expected I can move to.
In your example, 20% may be painful. But the way I think of it is that if I am taking that hit yet also getting my target player for 20% below the Blue Button and way under what I think they are really worth? That feels like a good trade and I’ll probably make it.
And as you say, if our target player also has some IPD due… that might cushion any blow of making the trade for us at the moment. But that’s not an excuse to buy bad players who are rising rapidly because they are likely to crash. In fact even good players are at the moment as we have seen with Son.
Here is the difficulty though. It’s easy to get muddled up between “bad player I need to drop” and “good player who is out of fashion”.
Forget what social media is saying, it doesn’t matter. If the red button price is low and nobody is buying, it matters because it will make selling more expensive. But the most important thing is our own assessment of the player.
If they have a reason why they can bounce back, be that performance strength, or good performances for a smaller club leading to big club speculation by January, or some Europa league games – whatever it may be – we don’t want to let unpopularity alone bounce us into selling a good player too cheaply.
We know, and have seen many times recently, how quickly a toxic asset becomes the most in demand player around. It only takes one person to bid and that spread closes right up and you could achieve a much higher sell price.
So there is a careful balance to be struck between decisive action to offload players who were mistakes or have genuinely soured, but never letting social media pressure about what is fashionable or not push us into bad decisions.
My overall mood is characterised by long term confidence but with some short term frustration.
The value available is more obvious than I have ever seen it. And that’s saying a lot on this platform.
But 2020 has been a rough year because of corona. And FI’s move to use the market lockdown earlier in the year as the opportunity to make the inevitable transition to the Matching Engine.
Ideally you’d make a big change when the market is strong. But they’ve tried to use the crisis as an opportunity. It’s certainly bold.
I think it will prove to be the right decision in the end but introducing lots of change on top of uncertainty was always going to be a rough ride.
It should turn around.
The market has stabilised somewhat after the changes brought in last week.
The IPD promotion disappearing will bring a bit of sensibility back.
And the more games we see the more the real quality will steal the show. This takes time to come through – even the best players are not going to score big every single weekend.
But through Scouting the odds are absolutely on our side and this will pay off in predicting winners as we have over the weekend with Gnabry and Kramaric already. Son was not unpredictable either. Nor De Bruyne for that matter.
In fact 3 of those were covered positively in the pre-season preview and the one who wasn’t, Son, was last covered positively in Scouting in June.
But of course there can only be a handful of winners each day.
I probably covered 100+ players positively in pre-season and they can’t all win in one weekend. But over the months more and more of them will – it’s just probability.
Some will flop perhaps due to being dropped by the coach or hitting awful form, maybe 25-30% of them and our job is to identify when that is going to happen as soon as we can so we can cut those off, and load up on the most promising ones.
That’s really the only thing we can control. In the short term we can do some trading around these insane IPDs if we are so inclined but it’s not essential.
And it is not always as easy as it can seem – you do need to know what you are doing and be aware that lots of people are just trying to turn a quick buck. So if you are going to flip – you have to be the most cutthroat of the lot and even consider not actually waiting for the dividend in order to bank the best possible price.
The way I do it is by signing up likely heavy goalscorers well ahead of the match day. Players that are good for a weekend punt but also haven’t risen sharply recently and that can be held longer if I really have to.
On the day dummies will tend to buy them in the morning, and if they score, more people will pile in. That’s when I cash out – screw the dividend and screw playing fastest finger first with the mob. There is no real unique advantage in that. If you are going to play with the sharks you have to be the meanest one out there.
This isn’t my main game though – I tend to trade over months or weeks.
Once the promotion ends in September though, and platform changes have settled in too, I’d expect a resumption of the usual, sustainable level of madness rather than the wild ride of recent weeks.
There is a bumper edition of Scouting to go through from the weekend if you haven’t already. And I’m now going to get started on reviewing the games from last night too which will be added early this afternoon.