"Epiphany"

[wayneindevon]

An epiphany (from the ancient Greek ἐπιφάνεια, epiphaneia, "manifestation, striking appearance") is the sudden realization or comprehension of the (larger) essence or meaning of something.

Think i have just had one of these chappies!!!
Let me explain
I have been "playing" with Betfair trading for about 18 months, I have lost loads of banks and have struggled to make any profits. In the last year or so i have been reading blogs, investigating charting, WOM , moving averages ,candlesticks, some chap called finobachi, trying to make sense of a line named after a champagne, backing, laying, dutching, staking plans you get the picture.
INFORMATION OVERLOAD!!!!
So i went back to basics.......Betfair is a BOOKIE in one way or another. Bookies have to balance thier books and make a profit. Now all you experienced Traders please excuse me if i am stating the obvious, but sometimes us newbies need to have things explained in simple terms. Here in simple terms is how a book works
Bookies take bets on an outcome of an event. the skill of the bookie is to balance his book so that whatever the outcome he makes a profit. That means that the money he has taken in bets is always greater than the money he would have to payout on all winning bets. here is an example..

Horse odds stakes taken liability
1 1.5 £1000 £1500
2 2 £500 £1000
3 5 £300 £1500

So total amount of stakes= £1800
Max payout =£1500
PROFIT £300-£500 Depending on which horse wins
WHY IS THIS RELEVANT TO SOMEONE WHO IS TRADING AND NOT GAMBLING? i hear you ask. I will try to explain.....
A bookie always tries to have an "overound" on his book. This is his margin. A book ALWAYS has to be over 100%. If you look on the top left corner of the Market status and API box on the toy it shows the book %. because this is Betfair it is always close to 100% but sometimes goes below. If the book was constantly below 100% then you could back all selections for various amounts and always make a profit.
Example..
Horse 1 10.0 bet £100
Horse 2 7 bet £100
total stakes £200
horse 1 wins =£1000
horse 2 wins =£ 700 minus stakes=guaranteed profits.

To get the book % is simple. Take the odds divide by 100 and add together.
in the above example
100/10=10%
100/7 =14%
10+14=24% no where near 100% so profits for punters guaranteed, Happy Days !!!
HOW DOES THIS HELP????
If the odds are the % of a book that must always be greater than 100% Then unlike a stockmarket, which has no higher and lower limits for prices to reach, a book can never fall below 100% for very long so the market HAS to adjust.
Example

If Horse 1 odds are 2 then thats 50% of the book
(100/2=50)
If the odds lengthen to 3 then that becomes 33% of the book a loss of 12% meaning that if the book was originally 101% it would now be 89% so the market will have to adjust......THIS IS WHY PRICES MOVE....it also means that unlike a stock market all prices CANT move in the same direction. This is what we are trading.

So now i have the basics of how it all works the real EPIPHANY came with the "TOY". When i first set up the toy i had all the whistles and toys. 6 charts all at the same time, candelabras, champagne lines , averages, WOM, betfair charts, breeding, horoscope,weather........To Much Information.

Human beings can only take in and process so much information at any one time. but what we can process very quickly is..............COLOUR
Red =danger
Green=safe
orange=hot
blue=cold you get the picture
So i came to find the EDIT COLOURS screen
I have adjusted all the colours on my screen so that my brain can process it quickly. Its hard to explain but if you play around with the colours eventually you will find a colour scheme that makes sense to you very quickly.
So with my new understanding of why the markets move and my screen adjusted so i can understand the information better i am finally making small profits. 3 days in and 18% return on my bank and only traded about 12 markets.
To sum up find a screen setup that you understand
markets move for a reason
keep it simple

ps sorry about the rambling and sorry if this is all old news to all, but had 5 cups of coffee so far and in hypo mode needed to share my discovery.
Comments appreciated

[luckynumberslevin]

Actually colour itself is a very complicated subject, in fact to know everything about the subject of colour would take decades out of your life.

[flok]

i like very much your approach to odds, and also the way you manage it with colours (i'm graphic designer, so i know what i talk about )

of course i agree with luckynumberslevin, the psichological approach to colours is much deeper.
but if we see it in a specific context like the one of trading it surely works and it's an intelligent and fast solution to "read" the market.

keep up the good work!

[Thomson]

If it works for you Wayne that’s good. Only thing is your not comparing like for like imo.
Bookie v Exchange not the same. Watch the market on the machine, all is well and the over-round is kept constant at 102/3%. Now pop along to a race track and watch a rails bookie at work, example one runner.
Price 6/4 2.50 = 40% of the market
Bookie moves this runner in. Price 11/10, 2.10= 47.6% of the market.

The machine will react to this movement, it has to so as to maintain the O-R, but you will notice the only price to move on the bookies board was the one runner.
The reason for this is simple. The bookie has 20% O/R available. Therefore he can manipulate the board price to test the market strength. He can encourage the herd to follow his lead whether it is true or false. No reaction and the runner will return to it's original market position. On course you could test this by asking for 2 points higher on the 2nd fav for your £20. The answer will be short.

The example is extreme 6/4 to 11/10 is a lot. However the bookie only has 3 prices between these two. The exchange has 19 pts between these positions, a small movement at the track can make the machine jump quite a bit.

Find the genuine movers and you will profit. Trade the momentum makes money too...