First of all, I’d like to say that I’ve been looking forward to writing this blog and answering the questions that came in, and after the superb reaction following EJ’s blog, I do feel a little like David Moyes walking into the Man United job! So, maybe don’t expect the same standard of insight as EJ gave, but I hope you find my views interesting enough.
What would you recommend as a starting strategy for a new trader with £500, bearing in mind injured players can be lucrative long term, but maybe not appealing for a new traders enjoyment as they get to grips with FI?**
To this question, I would give two answers.
When I first started, I found the index on a matched betting forum, which was a great place for identifying value and thinking of tactics to maximise it, so I was keen to give it a go as a risk-free shot at money. When I signed up, there was an offer of up to £500 refunded if you’re down after the first week and want to walk away…with an offer such as this, there is a solid argument for trying to get lucky and lump it all on one or two players and hope to see a 20-30% increase in one, or both, of them within a week (in the silly season of transfers, then that is quite achievable with a bit of good fortune).
Effectively it’s a risk-free punt as if it goes wrong, then you can be refunded and you’ve lost nothing. It’s akin to getting a free go on the roulette wheel…if it comes off you’ve won handsomely but if not, you’ve lost nothing for an attempt to win big early on. If you do win well, then you’ve got a healthy profit to walk away with, or, which I would recommend, reinvest back into the Index and let it grow even more for you.
I understand this might not be a popular view with traders already on the Index, as it’s a platform based on organic growth, rather than people attempting a ‘smash and grab’ style, which would increase volatility in the market (if this approach was taken by a lot of new traders) but, hand on heart, it is what I would do to try and quickly maximise my profits if someone else was taking on all my risk.
The longer term alternative I have on this, and exactly what I did, would be to spread it around maybe 5-10 players maximum, so you don’t spread yourself too thin, but still get your portfolio diversified enough.
Before I started on the index, I’d read about it months earlier, asked a few guys some questions on it, and looked at the market from afar without holding an account. I noted down what sort of players were moving up and down, and tried to figure out the reasons why. I also searched for Football Index content, which led me to the FIG Youtube videos, and then I watched a few of those videos (importantly the one outlining the rules, and then the first bank-builder series).
I hadn’t seen/heard a TV/radio advert and then opened an account/deposited, and then wondered what the hell was going on and who I should buy - as advertising was fairly minimum when I joined the index.
This is important to contextualise my thought process when I entered the market as a new user, as although I was a new user, I had still experienced the market as a note-taking onlooker.
I cerated some categories for players and bought one or two players for each of the following:
- Current big media draw (x2)
- World Cup (x1)
- Transfer target (x2)
- Youngster (x2)
- Under-rated player (x1)
- Injured (x1)
So across 9 players, I had covered 6 categories (some players were relevant to more than one category too which also helped achieve the target of diversification).
I would recommend a similar strategy for any new user now as I believe that a reasonably small, but diversified portfolio, covering different aspects of the football world is the key when starting. At this stage of your Index experience, you won’t be quick to know exactly what events create market reactions and how big those market reactions will be, so you don’t want to extend your portfolio too wide, as you need to channel your focus until you can judge the situations much better.
Also, as the index moves in trends, you’d cover a few bases, and be more likely to see some growth in at least one element of your portfolio rather than the current trend pass you by.
Ultimately, a mixture of the two above options could work very well. If you always have the intention of going with option B anyway as you want to be on the index in the long term, then note down a few players who you would want to form the early part of your portfolio. Once you have done that, then there is no harm in trying to quickly gain a bit of extra capital at the start, using option A, when your risk is completely nullified with the new offer. Once you’ve made some quick money, or been refunded your losses, then you can move to option B anyway and go about your business understanding market reactions whilst being a little diversified.
As someone who’s been open and transparent about selling too early, what have you learnt that could help newer traders identity when the right time to sell is?
Like every trader on the index, I have sold players far too early, and ultimately miss out on further profits. I say every trader has done this, as only one trader can ever sell at the very top, so we’ve obviously all been guilty of this. I think primarily, what you have to do, is KNOW EXACTLY WHY YOU’VE BOUGHT THE PLAYER in the first place and then execute that plan accordingly.
I take my experience with a very highly rated prospect as an example, and an embarrassing one at that. I bought him for £1.20, and believe me, if I stated which player he was, you’d be thinking… ‘I wish I could have bought such a bright talent like him at £1.20!’
The thing is, I had read on the forum that he was a bright talent and wanted another young player to form the ‘young prospects’ part of my portfolio. Within a week, the player had dropped to £1.13, as he had missed a game or two, and traders moved focus to other players. At this point, I panicked…my thought process as follows:
’This young kid has dropped. Bought him last week. Now he’s down. Don’t know much about him. What if he drops further? I best just cut my losses now. Everyone has bad trades that end as a loss. I guess this is mine. I’m gonna sell him. In fact, I want to get my money back from him now. I’ll instant sell him.’
Obviously this is a horrendous error with both hindsight and experience. Not only did I sell him at £1.13 for a 7p loss, but I instant sold him too as I panicked. This is down to one reason, and one reason only…I had little idea who he was (knew he was a young player but didn’t do my research) and therefore had even less idea of when I thought I should sell him. I entered into a trade and then every moment after that, I was uncertain of my position with him. Even if he had risen 10p in a week, I would probably have got out of the trade and taken profit because I didn’t know what I wanted from the trade. Fundamentally, you have to know why you’re buying the player in the first place, otherwise you have no way of knowing when they have reached the point where you think the end is coming. If they go down even slightly, you panic because they might be a dud, yet if they go up you don’t know when to sell as you don’t know when they’ve reached their potential.
‘I should have put more on’ vs ‘I can’t believe I backed that'
A lot of people when gambling often find it difficult to find the positives in it. I’ve had mates who’ve won £300 off a £2 acca who then later bemoaned not upping their stake to £5. They’ve just won a 150/1 acca, yet are annoyed they didn’t back it bigger. When they've lost, they can’t believe they’ve backed it at all.
The point I’m making with this, is that selling too early can often feel like this. You’ve bought a player for £2 and sold him at £3 (a great 50% rise which traders in other markets would be very happy with). That player then goes on to peak at £4.
‘Should have held him to £4…can’t believe I sold him…’
It’s almost the same as my mate who has been upset about not backing a big winner with more cash, completely forgetting that if he’d upped his stakes for the previous 20 losing accas, then he’d have had no money left to put on the winning bet. Yes, it’s obviously better if you held to £4 and sold then (and you would feel like a star trader no doubt) but life does not work that way and we often have to reflect with a more realistic outlook.
The flip side of holding the player to £4 is that you still might not sell at the right time, as timing the exit is the hardest part of the trade, and then continuing to hold him as he slides back down to £3 (I’ve had a similar experience)…you’ve now got him at the same price as you previously were happy to sell, but the hold is now tinged with regret/anger/feeling of missed opportunity etc.
Selling on a rise is worry free, you can lock in your profits through a ‘sell-to-market’ and don’t need to worry about trying to offload a falling asset, which is more expensive if you need to instant sell and pay the spread. If this is the case, I find myself constantly checking how that hold is getting on, which breeds anxiety. Selling on the rise relieves you of that anxiety and then you can take that money forward to enter another trade that you’re excited about entering into as opposed to worrying about what you already have.
Basically what I’m saying is…we all do it, on almost every trade…so accept it’s going to happen, and look at the positive aspects of it rather than dwelling on the negatives.
Have you learnt from your mistakes, or do you find that an addiction to success leads you down the same dark avenues repeatedly?
Whilst everybody wants to maximise the opportunity on the index, I think learning from mistakes and not repeating them is an essential part of your evolution as a trader, and ultimately what leads to success.
I’ve been guilty of holding players for too long thinking that with market growth they’ll just rise regardless of their performances or not really knowing why I was holding them, and then being unable to let someone heavily green in my portfolio go. I’m all too aware now that players just continuously rising with the market is definitely not the case, and players have different value at different points in the season. Therefore I am probably quite likely to cash in on players a little earlier than I previously would, and sometimes ‘sell early’, but I’m happier doing that, especially if I’ve identified a different target to put the next batch of money into.
I find one way to stop these mistakes is to categorise trades - e.g. young, high profile transfer, PB hold, MB hold, non-Pb to PB transfer, injured…I recently did this myself when I was stuck in a bit of a rut, and once I outlined these categories, if a player didn't fit into a couple of these categories, or at least be a shining light in one of them, then they were sold irrespective of how they were doing in my portfolio, as I wanted to have a specific plan in place for each player, so I knew roughly when I could sell or top up ahead of it being their time to shine.
I felt this clarity surrounding each hold would enable me to stop falling into similar patterns that I’d previously been in, and it has definitely been a positive and maturing thing to realise and correct those mistakes.
It’s one hour after the share split. What are you seeing? A mad scramble for perceived better value players with majority of the Index rising, or some big sell offs of the average player you now have 800 futures of? This is assuming a 4x share split.
I think it all depends on whether the dividends are split in line with the shares or increased in some way…so I’ll look at both of the possibilities.
‘The dividends are split equally’
There’s a simple line of thought amongst the majority of traders with regards to the share split, which is that the big boys are going to soar in price when it happens. The most expensive players (from £12-£20) are currently unattainable for the vast majority, and especially new users who are trying out the platform with anything up to £500. If the split is by 4, then they suddenly become £3-£5 which is what people are currently paying for prospects and decent players at big teams, some of whom are currently experiencing enormous rises of their own, so the money is clearly there to buy in bulk at this price range.
For me, the theory of the big boys rocketing is reliant on those new users buying them. I say this as existing users have already built their positions in the premium players - I doubt many who are already relatively experienced users who want to buy these players haven't done so already.
Now the question is whether the newer users see the share split, see the new prices and then immediately dump their existing holds to transfer over to the premium players. To get into the mind of a new user, I’ll try and think back to when I started. I’d scoured the market for what I thought was the best value out there at the time (in hindsight I was often very wrong) and then once I’d made my choices, I wanted to see how they would do in the forthcoming weeks and months. I’m not so sure that I would have been entirely happy to effectively IS my portfolio to then switch to a new strategy as the worry/anxiety of having to do that would have been one of the key things in my mind. Added to that, I was often reading thoughts of respected traders advising ‘not to panic’ and ‘if you believe in your players and nothing has changed to them, then stand firm and good things will eventually come.’
I find loss aversion is quite a big thing when you first start out and are finding your feet in the market, and paying the spread on 4x the amount of shares you had the day before would be tough for many people to do. They’re watching their portfolios almost every 2 minutes to see if there’s been a rise/fall and I think that having to create the initial loss themselves may be a difficult hurdle for many to overcome.
On the flip side, some traders will definitely be unable to resist the premium players at their new lower price, but if the dividends have been split to 1.25p/MB and single game day 1p/PB win, then I’m not entirely sure that people will be trading to look for dividends. Dividend returns, or potential dividend returns should be the foundation for trading in and out of players, but as we’ve seen of late, it’s not always the case, and I don’t think the lure of a 1.25p MB win will be enough to make a lot of newer users IS their portfolios to be able to buy the bigger named players.
b) ‘The dividends are increased’
If the dividends are increased, by rounding up, then all hell is going to break loose at the top end of the index. And I mean in an enormous way…I would predict that it will comfortably be the biggest increase in the FOOTIE in it’s history. It could end up being a week of growth in one day at the top end.
Imagine 5p/MB is split to 1.25p/MB, then rounded up to 1.5p/MB…this doesn’t sound like much…but it’s in fact a 20% increase on the most predictable dividend there is. I don’t see the guys at FI towers rounding it up any less, as people tend to like things calculated in whole numbers or 0.5s at least.
Take a current premium MB player for example, trading roughly around £20…if he is deemed good value as things currently stand, then the main dividend he wins being increased by 20% means he’s going to still be good value at £24.
5p/MB win at £20 is 0.25%
6p/MB win at £24 is 0.25% (this is equivalent to 1.5p/MB win at £6 post-split)
The volume of money that it would take for that player to rise that much is incredible, and I don’t think that traders have that lying around down the back of the sofa, so they need to get it from somewhere else. That leads me to think there will be a bloodbath lower down the market to free up enough funds for people to get in on the rise at the top end. My prediction would be that a lot of the newly bought prospects would fall foul of this, and their values would tank heavily at the start, before then looking so cheap that they would start to make a small recovery, but only small in comparison to their drop.
I think the middle range, moderate dividend returners will probably be the least affected in the immediate aftermath (money sourced from zero dividend returners cashed in to buy the premium players) and then, like any other previous surge of Index investment, they’ll then start to look cheap a few hours or a day after the announcement, and a bit of money from the top end will then start to filter down (presumably those who've built a position in the top end ahead of the announcement selling some shares to market and finding a bit of value lower down).
The volume of chaos in the market would leave a lot of newer traders confused and wondering what was happening, so if this happens, there needs to be some warning to people.
There lies a great responsibility with the more experienced traders to help the newer traders out in this scenario and tell them what to expect and how to act quickly to avoid getting annihilated in the early part of the madness. Whilst it is every trader for themselves on the Index, and as market cap is closer to being reached (some way off yet), I could understand it being a little more hostile, but in a time of enormous growth, to sustain that growth and not turn people away from the platform, I think it would do immense good for the long-term if experienced traders helped newer traders out when something this big hits the market.
Do you have an exit strategy? Indexit?
I’m going to take this question as meaning an exit strategy on the whole of the index, not just as a rule for each trade (otherwise that strategy is sell at peak!). I find it’s a tricky one as this is the first market I’ve ever traded in, so I’m not the best at forecasting how much further the index has to grow. For me, it is a revolutionary product that will potentially change the face of the gambling industry on its own, so it has some way to go to fulfil its potential.
In the near future, possibly once I know what is happening with the share split, I’ll be looking to start the process of de-risking and taking some money back so I’m effectively playing solely with profits, so if the worst was to happen (which I don’t think it will) then I wouldn’t have lost any of my own initial investment. The golden rule is that of ‘don’t risk more money than you can afford to lose’, and I need to start that process of de-risking fairly promptly, so not to break that rule, but it’s very difficult to make withdrawals when the market is booming like it has been of late as you feel that this is the best place to have your money working for you at the moment.
How will your strategy and portfolio change when FI branches out to more countries - specifically where the other top leagues are?
Much like the answer regarding the potential outcomes of the share-split, it all depends on how these territory expansions are reflected in the dividend earning mechanics.
If there is no change to the reward system, and the dividend earning potential of each player remains as it is, then I don’t think my strategy will change a whole lot, if at all. You could say that doing more research on the upcoming talents from each new territory would be beneficial as those traders are more likely to favour youngsters from their own league, but I guess that is where it would stop, as I think the wealth of knowledge on the Index, alongside some extremely informative research tools, allows us to view the current performers in the foreign leagues very well as it is. I know there are still plenty of hidden gems around that many traders don’t know of (hence why they’re ‘hidden’) but value in these will be quickly hoovered up by traders from those territories.
If there was a change in the reward system however - e.g. each PB league had its own PB winner each day, or each country had its own MB rankings, then I think I would play it a little safer than some others would, and once again, not change too many things. I’d just observe and see how those changes affect the dividend earning potential of each player. Rather than gamble on ‘player x’ being the top MB earner in the German media, and potentially lose out when it turns out it is in fact ‘player y,’ I would rather wait a little longer and pay a slightly added premium for something I know I am getting.
What I mean by this - there’s a scenario where ‘player x’ and ‘player y’ are both £4 and you don’t really know how the new dividend metric will affect their dividend earning potential…you could try and jump the gun and invest a fair amount in ‘player x’ being the best dividend earner at £4…if it turns out it is ‘player y’, then you’ve not done very well. I think I would rather wait to know who has the best dividend earning potential and pay even £6 for ‘player y’ knowing I will get returns. Yes, I’d have lost £2 of capital appreciation, but at least I know I’m on to a winner longer term.
Effectively, I’d rather pay a lot for something than pay something for nothing.
But in the case of different rules for different territories coming into play, then I think it is still quite a long way off.
I love your appetite in buying injured players, a strategy I have adopted myself in recent times. How did this strategy come about for you? And state your most successful trade.
It’s always been something that I thought of from the very first day that I was on the Index. It just seemed such an obvious point that a player will naturally rise in price once they become a fixture of the team again, so why not get in early and play the waiting game. I’d class myself as a fairly patient trader, so I was happy to sit on players for what I thought would be as close to a sure-thing as you could get on the Index.
So from thinking about it early on in my Index journey, it was a strategy that I greatly increased my investment/time/research on when I was unhappy with how Football Index were handling things in October 2018. I had built a portfolio with a certain strategy in mind, and profit was ticking along nicely until the G&A announcement. This hit my portfolio particularly hard, and I was very much at a cross-roads of what to do. My confidence was greatly shaken, as I have a lot of money/time/energy invested in my portfolio, and I didn’t like how the rules could suddenly change at any point. It may sound a little dramatic, but I felt like they had disrespected the users in a way by implementing rules which benefited some over others without any prior warning.
During this time, I decided I needed a place to put the money that felt a little safer than usual, a place almost immune from these harsh market trends. I still believed in the growth of the platform on the whole as it’s such a different sort of product to anything else, so even with my confidence shaken, the underlying notion of the platform’s massive potential still kept the funds around. Having read a quote from a stocks trader that 20% was a great return over the course of a year, I thought that if I could just put my money into an injured player, look maybe 4 months later and they've gone up 20% then I’d still be making a decent return compared to other fields. Added benefits are that it’s a stress-free way to trade, some traders hold top premium players for dividend returns that tick along over the course of the year and for me this is similar without the risk of a premium player actually getting injured, and also if you're confident that you've got a safe returner, then it allows you to make some more speculative trades too without fear of your profits sinking.
Other than a current trade which I won’t mention by name as I don’t want to sound biased, I think Benjamin Mendy would be my best injury trade, as he rose from 27.5% without having to kick a ball. Traders would class that dividend return as phenomenal over the course of a season, so 27.5% in the space of 2 months could be seen as quite a lucrative return.
What are your long terms aspirations from FI? And where do you think the index will go in the next year?
My long term aspirations are very simple - to secure a better standard of living for my family, and any money made on the platform could help to achieve that.
With regards to where I think Football Index will go in the next year - I think it will almost double in size over the course of 2019. It may sound like a bold claim, but in my view starting a new venture and attracting initial users is the hardest part of it all. Once more and more people start to use the platform, and revenues increase to escalate the level of advertising and word-of-mouth spreads far and wide, I think the rate of growth will rapidly increase. I saw someone tweet earlier this month that more users has a snowball effect, and I agree completely. When I started I think the FOOTIE was below 15,000 - at the time of writing it has recently gone past 55,000…an enormous rate of growth, all in under a year.
Order books will be a key part of the platform going forward, and if these are successfully implemented, with a strong emphasis on making sure users know what they are doing with them, then it will be a great addition. It’s very important that there are easy to follow guides for users who have never used them before, as it would be highly detrimental to make it too complicated and turn users away to start losing money at the bookies again. The transparency on liquidity will also provide users with more confidence (as we all know how much we hate not knowing what position in the queue we actually are) and I think that as plenty of people have used Betfair in the past, then a similar sort of look would allow that transition to be a little more seamless.
What is the ‘driver’ behind your FI interest? If you could ‘iron’ out anything about FI, what would it be? Do you find yourself stick in extra ‘wedge’ when a player goes off on a stretcher?
First of all, very clever!
What is the ‘driver’ behind your FI interest?
The ‘driver’ behind my interest in FI was that it was an interesting way to make money and expand my knowledge of football. Having previously done a bit of matched betting, I knew that fellow matched bettors had come across it, and their previous record of spotting value was really good, so I thought I’d try it. Matched betting only has a limited shelf life too, as if you win and take a lot of value from a bookmaker, they just suspend accounts etc, so I needed somewhere that felt a little more long term, but ultimately with the same goal of being able to spot value and take advantage.
If you could ‘iron’ out anything about FI, what would it be?
Prior to Mike’s TalkSPORT appearances in the studio, I would have ‘ironed’ out the messages in the advertising, as I felt the TV/radio campaigns didn't quite do the platform as much justice as they could have done (although I recognise it is a complex model to explain in 30 seconds). But Mike has done an excellent job so far on a show with a massive reach, so he must take a lot of credit. He took a lot of criticism when it didn't go so well in October, so if he's to be criticised when things go wrong, he should also be given plenty of credit when they go well, and with each appearance on TalkSPORT he’s more confident and delivering his content very well.
Other than that, it’s very simple - the IOS app. It’s been mentioned time and time again, so I apologise that I haven’t added anything new in this answer.
The crashing is very annoying, as we all know, but it’s the fact that the Android app now shows historical dividend returns on each player whereas the IOS app doesn’t. For the whole Football Index experience to feel a bit more reliable and the company to be more respectable (as a place where people are investing huge amounts of their money), then there needs to be parity between different apps. The marketing messages were criticised for not being entirely consistent, and thankfully this has been corrected. I’d like to put the inconsistency between the different apps on a similar level, and hope they become identical in the near future.
Do you find yourself stick in extra ‘wedge’ when a player goes off on a stretcher?
As mentioned above, I’m actually going to be de-risking at some point in the near future (I’m still trying to think of the best way to execute that plan without disrupting my portfolio too much), so if I see an injured player, I don’t put in an extra wedge in at all.
It’s a case of player sales, and then I assign a portion of the funds raised from recent player sales into the injured players and then, if it’s a reasonably long injury (5 weeks+), accumulate slowly over the next few days and weeks.
One thing I have learnt for the future is that there is definitely no need to invest heavily on an injured player at the start - a slow topping up will provide the same outcome, yet you're not tying up more funds in a fairly stagnant hold for a long time.
I hope you enjoyed reading this - good or bad, I look forward to your feedback/alternative views on the points that have been raised.
Hope you all enjoyed that! A shame GG couldn't join the podcast but this post was excellent!
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