Wednesday, October 14, 2009

Remember the giddy delights of day trading on Wall Street? Welcome to a safer, more profitable alternative: dog trading!

Quite a while back, I was introduced to a steel-hearted amateur day trader who claimed he was making north of $90,000 a month buying stocks online and dumping them the moment they reached either a win or a loss target.

If he's still at it, I doubt his current profits add up to more than $1,000,000 a year, as they did back then.

And my guess is that like most people left with money to gamble, he is sitting tight and waiting for the financial sector to quit leaking red ink all over his quixotic portfolio.

Meanwhile, my "dog" project (which I can claim as my own since it does not remotely resemble what my friend Pete suggested, and he has in any event either abandoned sports betting or opted to keep me in the dark!) remains a work in progress.

It's work because the task of building a full-season MLB database, then doing the same for college football, is time-consuming and tedious drudgery.

But I can't complain, because every time I plug in a new set of verifiable outcomes, I can see astonishing progress in the application of target betting rules to wins that always pay better than even money, and losses that are, in a sense, controllable.

Obviously, we can't know the final outcome of a given game in advance. But because we are not backing favorites, we are never tempted to "risk more to win more" and recoveries are greatly aided by returns that can at times exceed 2 to 1.

The chart below looks suspiciously like those reportedly distributed to his victims by the world's first $50 billion conman, Bernie Madoff.

(And it still seems strange to me that sane people would believe his reports while the market was bouncing up and down like a 300lb linebacker on a trampoline!).

The more frantic graph below it tracks flat-betting $100 on the exact same set of "dog" selections.

Both suggest (but do not prove, remember!) that avoiding favorites altogether when you venture bets in a sports book is a much smarter choice than stampeding with the herd in the direction of "certain" winners.

Big-hearted and perhaps foolhardy as I may be, I am not about to go public here with details of my bet selection process.

But anyone with access to a complete database of 2009 season results and a couple of active grey cells should be able to figure it out in an hour or so!

I am putting all this time and effort into building complete and accurate sports databases because the spreadsheet platform offers virtually unlimited opportunities to ask pertinent questions and get answers that mean something.

The "all" claim in the chart captions above is not yet accurate, because I have learned that even with 1,316 games keyed in, I am barely halfway through the 2009 MLB season.

So far, querying the "databaseball" file has come up with several surprises, none of them hard to take.

What I see already is a real prospect of creating the "Pari-mutuel Fund" I mentioned in an earlier post, keying minimum bet values to the bankroll as it fattens from a combination of wins and investments.

Again, this is not the place for details, but try to guess what would happen to the sky-reaching green line above if the $100 minimum bet now in place were to be stepped up in $25 increments on a time line or as the bankroll grew.

I could run that test in about five minutes, but I am more than happy with the results seen here and don't want them to seem even more like an extract from a Bernie Madoff portfolio!

Comments I have received so far have been underwhelmingly positive, and that is to be expected.

Even to me, this line of research sometimes seems too good to be true.

If this were possible, said one comment, someone would have thought of it before. And since I have never claimed to be a mathematical genius (unlike some of my longtime critics!), I'd say that's a fair bet.

But would a well-funded sports book investor using a long-term strategy like this be foolish enough to publish it? I doubt it!

Another tentative comment refrained from doubting the accuracy of my projections, but suggested that "bookies won't allow it" if I am right.

How could they stop it, I wonder?

Target betting against casino table games faces an uphill struggle less because of "the numbers" than as a logistical consequence of house interference and the resultant need to stay almost constantly on the move.

Those issues are not relevant to my "dog trading" plan.

Bets will get high from time to time, but their average value in the model to date is a few cents less than $150 and the return on overall action (the "hold" as they call it in a casino pit) is an astounding 12.6%.

Risk is far less than for blackjack or baccarat (-$2,425 so far).

And the bonus element (pay-outs exceeding even money) make such long-established target betting elements as a wide spread, a win progression and limiting losses in a downturn not just unnecessary but counter-productive.

Sports bookies pay little or no attention to bet values or patterns, as long as any "local" limits are not exceeded.

And on the rare occasion a bet that's likely to raise eyebrows is required, it can easily be spread across two ore more books.

The model from which my current numbers are drawn sets the maximum bet at 5x the minimum ($100 for now), and that's a fraction of the cap applied in sports books in Nevada and online.

I should remind everyone that the results seen above are not "real" because they assume that each bet was placed consecutively rather than in blocks.

But statistically, that is not a relevant factor.

When I am done with the MLB database (in about a month, if I'm lucky!) I will break out the "dog" bets into multiple lines as I did before, and demonstrate that the combined profit will confirm what you see above.

Then I will pull together college football odds and outcomes, confident that what I have discovered so far is not purely a baseball phenomenon.

The current NHL, NBA and NFL seasons will provide me with fresh data day by day, and by the time the boys of summer are back in action in 2010, I will have a lot more data to work with.

Maybe before then, I will dig back in the archives for odds and scores from 2008-2009.

Then again, maybe not. My typing fingers (all three of them) are numb from the work I have done so far.

But as I said, I'm not complaining. Or only a little...

An important reminder: The only person likely to make money out of this blog is you, Dear Reader. There's nothing to buy, ever, and your soul is safe (from me, at least). Test my ideas and use them or don't. It's up to you.