The market felt very positive at the start of February, it’s a mixed picture now.
There has been some really satisfying winners where diligent scouting is paying off.
And getting that right, particularly where the player is out of fashion and appears to come from nowhere is handsomely rewarded – Golovin a good example, Barrow another.
Depay too. Demirbay and Bailey got close, both unfortunate not to win.
And wins for reliable players like Theo Hernandez, Bruno, Brozovic, Neuer can keep dividends rolling in to provide a boost to the balance.
Yet, with widespread drops elsewhere this week it can feel like we’re running hard just to stand still.
What’s really happening underneath this, and what can we actually do about it?
Strategy Summary
I always recommend reading the full article for context, but some members like a Summary of the suggested actions which I’m happy to provide. If you want to read the full article, you could skip this section!
1. This time last week I suggested selling Premium players was a good idea, especially if we had more than 10-20% total portfolio value in that area. Turns out, it was. But selling them now after they have dropped? Not so good. Not unless we have really lost confidence in that player.
2. The focus should remain on the Core players with high performance strength, Europa/CL games to come, ideally with Euro 2020 involvement as a nice extra. The feature articles on form/fixtures are a good guide here, as is recent Scouting.
3. It’s good to have plenty of the reliable and solid types as the foundation of a portfolio particularly at this time of year. Players like Bruno, Theo, Mount (he counts as reliable these days!), Cancelo, Hakan, Marquinhos, Lewandowski, Muller, Neuer, Chiesa, Kane, Son, Mahrez, Guerreiro, Kramaric, Insigne etc.
4. But I would also want plenty of the potentially explosive players who look close to wins but may appear out of form or unpopular. When a player can win and shock traders that’s when really big price rises can come, as it did for Mount, Hudson-Odoi, Barrow, Golovin etc.
Pay attention to Scouting and the weekly feature articles for some of these. Examples from recent Scouting: Ousmané Dembelé. Gnabry. Griezmann. Coutinho. Dybala. Alonso. Kovacic. Azpilicueta. Sterling. Maddison. Kostic. Demirbay. Bailey. Diaby. Palacios. Sabitzer. Olmo. Nkunku. Many more available.
5. As always, we should “sell into the win” when warranted. But do not make the mistake of thinking we have to sell every time a player hits good news. This is ultimately self defeating even if it can net us a quick win. Good players who win can be held provided they remain well under their True Value and we shouldn’t feel pressured into selling when we don’t want to.
Market Analysis
The market is reacting strongly to winners. And that makes picking them out before the big score comes very rewarding.
But we’re still in that space, probably a hangover from the recent year, where a significant group of people remain convinced that you have to “sell into the win” with every player.
We don’t.
Selling into the win is a time honoured and highly effective tactic when a player is:
– good but has become overpriced or;
– actually bad and unlikely to win again or;
– a very occasional winner.
With lots of good players nowhere near their price ceilings, further wins are just dividend opportunities and more evidence that we were correct in our assessment of the player. We don’t have to sell them.
This form of aggressive undercutting on good players might net a short term profit or two but will essentially burn itself out and cannot be a sustainable successful strategy.
Who is it that clicks the Blue Button when a player is winning, or looking like winning?
Mostly, it’s bad traders. The better traders were probably holding already.
There can be exceptions – i.e if we’re monitoring a player perhaps due to a change of coach or similar, we’ve seen some encouraging signs, and then at halftime in the next game he’s showing really strong stuff – that might be the last bit of evidence we want to click buy. All good if the price is right, even if it has risen a little.
But the people who power most price rises and profits on FI are the followers. The guys who didn’t know that player was going to win and only just found out when the big score hit the board.
Generally, these are the people that are getting punished as once they see the player drop again they can then be pushed into selling too cheaply – they don’t have enough information to know that they can hold and ride out the drop or not because they don’t know the real quality of the player.
Often this is new traders, but there are lots of veterans who fall into this too.
The more these “followers” keep getting punished in this way, the more conservative they will become. They’ll lose the confidence to click buy even on a player that wins. They may even leave the platform in frustration.
Then we all lose.
We need these people. And to keep them involved, we need them to win at least sometimes. They’ll win sometimes by following the winners because lots of players win for a reason. The really good traders will make more by knowing which winners are the real deal, and which aren’t.
But the “followers” will probably earn enough to get by and have some fun, certainly for 2-3 seasons of growth until the market matures and gets really tough. Some of them will also adapt – improving and moving on from being a follower and becoming a competent trader themselves.
So, whilst I don’t expect traders to be community spirited at all, I do think many will come to realise that if we over use “sell into the win” we are only making life harder for ourselves in the long run.
In terms of what to do here, I would sell into wins where it is warranted, as per my 3 bullet points above. But I don’t feel pressured to sell good players that are well under their price ceiling. Maybe they have to win multiple times before they see price rises that really stick – but there is nothing wrong with a bit of patience with these Core picks.
If anything, I’d be abusing this desire to sell cheaply to increase my holdings in some players.
Again, True Value and Scouting is our best guide – the daily and weekly swings only really tell us what a few people are doing, not the real value or even the majority view. The platform currently gives us a very twisted view of what is really going on and I’ll discuss below the next big thing I think FI need to fix before we see a stable market.
But staying with the market for now, some of these drops are actually expected, and even healthy. Others, not so much.
Price Drops for Premiums and Perceived Underperformers/Strugglers
Entering the first phase of a recovery a bit heavier on premiums than usual was a good idea. But this time last week I suggested that reducing heavy holds in premiums was a good call. A few days later they started dropping and it was possible to dodge a lot of these falls.
But yesterday’s good decision is today’s bad one. Once that drop has happened already, I wouldn’t be selling good players cheaply just because they are falling. I’d trim some Bruno at £8 for example on his way up but not at £7 after a drop.
It’s often just those few days difference that marks out a good trader from a bad one – the bad trader can’t correct the mistake by following the move that worked yesterday. Timing matters.
We may be coming full circle on this in just a week where if we now want more Premium players and feel we don’t have enough of them, we can pick some up. I still wouldn’t be putting more than 10-20% of total portfolio value in premiums at this stage, though.
This drop at the premium end is expected, and even positive. Freeing money up at the premium end allows other good players in the £1-2 range to catch up. Once that happens, the premiums will have their day again, if they deserve it. It’s not something longer term premium holders need to stress over, provided they are convinced that premium player justifies the price.
We also saw some strong rises and falls for a host of well known players in that £1-2 range. This is a very mixed bag – with the overall impression being that many traders have little idea of whether the player is quality or not. They are mainly just being pushed around by big scores, lack of big scores, or short term news.
There are some really good value players dropping that have great prospects. Aouar. Sterling. Maddison. Odegaard. Bamba. Pavard. Cunha. Tielemans. Zinchenko. Hudson-Odoi. Lewandowski. Saka. Gravenberch. If holding, I wouldn’t care at all if I was confident in this sort of player as per Scouting.
What does it change about my assessment if one or possibly more other people have made a different judgement? Absolutely nothing. If I’m confident I’d be more likely to buy more than worry if I should sell too.
Some players like Alexander-Arnold, Mbappé… yes they rose sharply and were risks so there is logic there. Chilwell has real problems so that one is understandable. Felix has been looking poor, so yeah, he was overpriced anyway. Eden Hazard may not be done but with yet another injury you can see why people get justifiably frustrated.
But overall, it’s a list of price falls that has little rhyme or reason to it. If we are going to be good traders we have to be comfortable and confident in judging value for ourselves and not be swayed too much by what the market is doing week to week.
It’s not like we are short of examples recently where just one big win for a good but unpopular player can result in a 25% to 100%+ profit. We’ll always do better trusting research based on match data and rational market analysis than we will by following the volatile price movements week to week.
Continued Focus on Quality and Value is best
Scouting in recent weeks is just chock full of obvious value in the Core player area, as well as the longer term youth. The form/fixture article last week highlighted a lot of this too. That is where I would have the bulk of my portfolio value, and I will stress again the importance of the Europa/CL runs from here.
European competition is an obvious big event but in this market, until things start literally hitting people in the face, it often doesn’t become apparent how important factors like this are until the very last minute.
Not only can they win on the nights in question, it clears the way to very lucrative Gold Nights from the quarter finals onwards, plus stitches up Team of the Month and Match Day Extra for players involved in these games.
I want a good selection of these players onside before the games, and I do not want to be chasing big scores around after the fact.
It ain’t all bad.
With money having left the premium end plus some other players particularly if they hit an obvious misfortune justified or not, it all goes somewhere.
The positive sign in the market in what appears to be a glum week is that the spreads in the top 200 are still pretty reasonable particularly where the player has performed well recently.
Bids are going in and getting matched and quietly lots of traders are building positions in players.
Many are unaware or not confident enough to go for players who are close to big scores without that recent win under their belt – which leaves some good players at very surprisingly low prices. But this is also why we can get really explosive winners at the moment without having to punt wildly on fringe players.
So, we’ve got lots of big wins to target and that’s exciting. They are very likely to keep coming.
Yet we still have a platform with problems and portfolios with a current sell price well below what they are worth in terms of expected dividend returns.
Whilst things are more positive than they were after the removal of IPD and the addition of Match Day Extra, we’ve still got these flawed pricing mechanisms and poor quality information driving the sentiment.
And as long as that is true we are going to see these wild swings in mood week to week. I’ve been talking about this for months now and it really is the next big thing FI need to resolve.
It is however easier to complain about than to fix.
Blue Button Blues
Market sentiment, basically how people are feeling about the platform in general, is sadly governed primarily by the numbers in the red boxes day to day:
Yes, FI is actually still this immature. Whilst it is five years old, it’s only been a real market for less than a year. The training wheels were definitely on for all of the previous years and this has created a lot of bad habits and questionable traditions.
On any given day, if there are big penny drops particularly at the premium end or big penny rises in players then FI is considered to be either dead or rocketing. And can quickly jump from one to the other if you watch social media and chat groups.
These penny rises are the biggest driver of sentiment because it is the default way FI sort the pricing information, and it’s drilled into the minds of traders because that’s just how it’s always been done.
We have to think about what these numbers actually are. They are based on the Blue Button price which is wild as it can be controlled by just one reasonably large trader before we’ve even got into the shenanigans that large trading groups often play with the prices.
The Red Button is vulnerable to the same issues, it just takes one person willing to sell cheaply and that price can be shattered.
With an amateur user base, a price fall like that can spread rapidly and drag the overall mood down with it. There are not enough smart money people who really understand value thinking “Hahaha. Sell for that if you want, I’ll take it”. They exist, but there are not enough of them to service all of the people falling over themselves to sell things for less than they are worth.
And with Blue and Red buttons so volatile and easy to push down, portfolio values can be very alarming, well below what players are likely really worth, particularly if you use the Mid Price.
How are people supposed to know if they are doing well or not right now? The only way is to know what players are really worth and very few people do. The Blue/Red button prices don’t tell us what players are really worth. Trusting those is like trusting the opinion of a schizophrenic. They’ll only tell you something else tomorrow.
The Average Offer Price was supposed to help with that. It was an attempt to reassure people that there were more traders sticking to their guns than selling cheap. But it started life as something of a joke because FI made it too easy to falsely inflate it. This was a forseeable own goal.
By now, it has no credibility at all. Which is a bit of a shame because Average Offer Prices are often much closer to True Value than the Red/Blue Button prices by now.
Average Offer Price does suffer anyway from being essentially a made up number. You can’t really sell for it, so it can never be the headline number you put on the platform and expect it to drive sentiment.
You could widen the hideous sounding “VWAP” i.e the number of shares that are averaged out to make up the Blue/Red Button price. That would make it a bit harder for one manipulator or panic seller to cause mayhem, yet distorts the Blue Button price further as you often pay significantly less than the sticker price even now. Widening the VWAP is not a great solution.
This is a real headache and realistically, we have to be aware that the trader base is not currently big enough or competent enough to deal with this alone.
Most people just don’t have the information or temperament required to ignore the price fluctuations even if they know they don’t make any sense. And FI can’t expect them to. They have to provide a platform that resists boom and bust because this is not a game for professionals. Average football fans have to be able to use it with no prior knowledge of trading and have some idea of what is going on.
That means FI might need to have more stabilisers and protections than a totally free market. And a bit more third party help, certainly in the first few seasons of a Matching Engine.
Market makers, competent enough to support prices that deserve supporting, are essential yet very difficult to come by clearly or they would be in there already. We need them, though, and FI can’t let up on this.
Reducing the pool of viable players is a big step towards improving liquidity and the removal of IPD helped that enormously. Tweaks to tighten this further like making Match Day Extra pay 2 winners per week a meaningful 3p dividend rather than 6 winners a 1p dividend that nobody cares about anyway would help, but is not enough alone.
You could put on more stabilisers – which some people hate – to essentially prevent people from selling too low and causing waves. That comes with it’s own problems as you can end up with “zombie” players who are stuck well above a price they deserve.
More stabilisers could be very effective, but FI would need someone very competent setting those stabilisers to ensure that players who deserve it get stabilised and the trash is allowed to drop as it should.
Imagine the confidence people would gain from knowing that prices for good players cannot be savagely undercut or manipulated by trading groups?
I think this is the best option FI really have, unless they secretly have a market maker about to be unveiled. Even though it won’t be universally popular – almost any meaningful change isn’t. Those stabilisers could be withdrawn over time very gradually as people grow in confidence and the trader base climbs once again.
That combination of stabilisers to prevent outrageous panic sells (and curb the over buying of risky/poor players, I am afraid) plus market makers could be hugely powerful.
But both rely on competence – do FI and any third party market maker have that ability to correctly assess the value of players within a reasonable margin of error? Questionable. And there is no point attempting to apply stabilisers or provide a market maker if they are supporting the wrong things.
I’d be strongly in favour of these kinds of measures to protect new and even bad traders over the next 2-3 seasons. Confident traders might consider this a restriction on their freedom but the truth is – there are not enough good traders to make a market yet.
Traders collectively will get better though. Some bad traders will get bounced out in these rough times, many will have been already. And the tougher conditions are definitely forcing people to re-evaluate wild strategies that seemed to work in the past.
People will get more used to navigating the world of the Matching Engine. It’s new – we can’t expect people to be brilliant at it straight away. But with a bit of stability people will get the hang of it. For example, they’ll figure out eventually that trying to pull “sell into the win” on every trade is self defeating. Though it will probably take a period where winners don’t rise at all to teach some this lesson.
When the Matching Engine works, it’s actually a really fun system that is better than the old system in terms of the opportunities and sustainable platform it gives us, though that is hard to believe after all of the problems following it’s introduction.
Final Thought
In terms of strategy, this feels like a “steady as she goes” kind of week.
There has been plenty of excitement though. It’s proven very possible to find explosive winners that have delivered thrilling profits in some cases. There will be more of those to come in the weeks ahead.
Yet, we have that background frustration of seeing drops for other good players just because they were benched for a game or got a low score, or sometimes just for no apparent reason whatsoever.
We’re probably used to that by now and like I say, until FI present pricing information better and take some more steps to support the market via Market Makers and probably put in place additional stabilisers too… we’re often going to feel up one week and then down the next.
It doesn’t really change the job we have to do, though.
There is a very clear path to great success which is as simple sounding as building a well balanced portfolio full of high quality players well under their True Value. Ideally with a big bent towards those great fixture/form combinations with Europa and CL involvement in the weeks ahead.
The difficult part is knowing who is really high quality and who is really great value, but I’ll be doing my best to help with that as ever.
I suggest that the focus should remain on the Core players with high performance strength, Europa/CL games to come, ideally with Euro 2020 involvement as a nice extra.
It’s good to have plenty of the reliable and solid types as the foundation of a portfolio particularly at this time of year. Players like Bruno, Theo, Mount (he counts as reliable these days!), Cancelo, Hakan, Marquinhos, Lewandowski, Muller, Neuer, Chiesa, Kane, Son, Mahrez, Guerreiro, Kramaric, Insigne etc.
But I really would not want to be without the potentially explosive players who look close to wins but may appear out of form or unpopular. When a player can win and shock traders that’s when big price rises can come, as it did for Mount, Hudson-Odoi, Barrow, Golovin etc.
This is not particularly high risk trading! We just have to get over the common aversion to striking out on our own. If we’ve got good reasons to believe in a player then we shouldn’t need to see a price rise or a big score before we go for it. It’s likely too late then, or at least not optimal.
Ousmané Dembelé. Gnabry. Griezmann. Coutinho. Dybala. Alonso. Kovacic. Azpilicueta. Sterling. Maddison. Kostic. Demirbay. Bailey. Diaby. Palacios. Sabitzer. Olmo. Nkunku.
Scouting and recent articles have so many examples of players who are performing strongly, likely to win, and yet have rock bottom prices.
Even someone like Pjanic is a very tempting proposition given he is 42p yet very capable of a Gold Day winning score sometime soon. This would not be possible if people weren’t too afraid of veterans. But he’s only 30 and unlikely to go anywhere anytime soon. This is a low risk trade with a chance of a big reward.
I’ll be keeping a look out for these.
And there should also be time this week in the featured article to look at some of the younger talent which I think has often gone surprisingly unnoticed this year as people cluster into safer picks.
Trincao was an example in scouting yesterday, so I’ll look for more of these at clubs big and small, including a check in on some players in ineligible leagues like Portugal and Holland.