The Anatomy Of Luck
Are you the sort of person who is constantly lamenting your bad luck? Are you the guy that bought Lloyds shares just before they crashed? Or maybe you’re the person who dumped your worthless Amazon stock, only to see it shoot in value?
Are you the kind of trader who presses confirm on your 0-0 bet seconds before the ref give's a penalty?
In short are you a born loser?
One of life’s unlucky ones, no matter what you seem to do, bad luck just seems to follow you around, but others seem to glide through life with one lucky break after another?
Well I've got news for you buster, are you ready? Do you want to hear this? Are you sure?
OK, here we go, prepare yourself, sit down if you have to, I am going to spell it out in caps for you so you get it first time;
THERE IS NO SUCH THING AS GOOD OR BAD LUCK, THERE IS ONLY PROBABILITY.
There you go, now you know that, you can get on with your life, knowing that you are not in fact an unlucky person, because there is no such thing as a lucky or unlucky person.
Ah but wait! I hear you say; unlucky things do happen to me and I know someone who is always finding money, getting great jobs, meeting amazing women and so on.
Again, I say to you and this time I want you to say it along with me;
There is no such thing as good or bad luck, there is only probability.
Let’s dissect the anatomy of what we call luck after the dissection you’ll be able to see lady luck, laid bare, for the charlatan she is.
What Is Luck?
Well I've kind of ruined the punch line on this one; as I've already written above, there is no such thing as luck; there is only probability. But let’s go a little deeper than an isolated statement and try and put some meat on the bones of that assertion.
If Sarah is walking to work on a Monday morning feeling a bit skint and she find’s £20 is that lucky?
What about if Sarah is walking to work two days later and she find’s £10 what about then; is that lucky?
What if two days later on a Friday she finds £50 on the floor, could she then be considered lucky?
Well unless you answered, the probability of Sarah finding money on the street, near her house, 3 times in one week was dependent on the hidden, extraneous variables which I don’t yet know about; then you've given the wrong answer.
Let’s fill in some gaps, Sarah lives in Brooklyn New York, in her neighbourhood the local youth still enjoy playing dice on the street, an illegal form of gambling (They like playing with English money, because they find it funny). There is a game most days, but the big games are on Sunday, Tuesday and Thursday nights, when up to 100 people may come down and play dice.
Sarah knows this and she’s seen money dropped as players run off in panic when the police invariably raid their dice game. The police raids seem to happen about once a month, the games take place in an alley behind her house and in the summer when she leave’s her bedroom window open, she can often hear the dawn raid taking place on the game.
So on the Sunday at around 5.30 a.m. she hears a raid on the dice game, so about an hour later on her way to work, she makes sure she walk’s through the alleyway, even though it is the long way to the subway, she scans the floor of the alley and look’s under cars for any stray notes that might have been dropped on the street.
Unusually the police decide to really crack down on illegal dice games so instead of making their usual monthly raid, make two more raids that week and bust the other two games on the Tuesday and Thursday.
Add to that that it’s been raining all week and any notes that drop on the floor are likely to get a bit stuck there and not get blown away. Also because she has to set off for work so early, Sarah is down in that alleyway before anyone else has used it and she can take advantage of this by looking for money.
Now what do you say? Is she lucky?
You might say that she’s lucky that she lives there, but that’s not luck it’s coincidence, someone has to live there.
The above scenario illustrates that the probability of her finding money on those days were quite high, or at least higher than any other given day, but much more importantly than that, Sarah had to be aware that there was an increased likelihood of her finding money.
Otherwise at best she would have still detoured through the alley but without looking properly on the floor, or at worst taken the quicker route to the subway, leaving some other ‘lucky’ person to find the money.
The amazing Derren Brown, once did a show whereby he wanted to prove that luck to a large degree, is a self-fulfilling prophesy.
What he did was to set up a statue in a small park in the middle of a village, with the statue he put up a plaque which had a legend on it, claiming that anybody who rubbed this statue would have tremendous fortune bestowed upon them, from that day forth.
Sure enough, visitors came to the park and rubbed the ‘lucky’ statue; which of course wasn’t lucky at all.
The clever bit comes when he then visits the village in full view of everyone and claims that he wants to investigate the lucky statue and interview people to find out if there are any naturally lucky or unlucky people.
Derren focussed on one particular character, the village butcher who claimed to be an incredibly unlucky person, whilst his jammy sod of a brother in law, was one of the luckiest people alive, winning substantial sums on the National Lottery not just once, but twice!
Derren, being Derren, wanted to change this guy’s luck, so he set about trying to do nice things for this guy, we watched as the crew secretly filmed the butcher going about his business around town, but no matter what Derren did, he couldn't get this guy to ‘be lucky’. Even to the point where he puts £50 right in the middle of a pavement the butcher’s just about to walk down, but because he’s not looking for that kind of opportunity he simply step’s over the money!
At the end of the week Derren gather’s the villagers in the village hall and asks them if they’ve been luckier this week. Several of them report back that indeed they had been luckier. Their luck ranged from finding money (not the planted £50) to getting job offers.
The very powerful point that was illustrated by this experiment is that if you believe you are lucky at any given point then there is an increased likelihood that you are going to be lucky, if however you believe you’re an unlucky person then you’re not going to be looking for the kind of opportunities that you consider lucky and may even be subconsciously putting yourself in ‘unlucky’ situations.
So for example, like the butcher, you’re not going to look on the ground in hope of finding money if you believe you’re the kind of person that doesn't find money on the street.
We can summarise this by saying; the more you put yourself in, or remove yourself from certain situations, this will raise or lower the probability of relatively good or bad things happening to you.
I say relatively there because what may be good or bad for one person is not necessarily good or bad for another.
So in other words, if you know there is a high probability for a good thing to happen at a particular place in space and time, then it’s prudent to be around that thing and maybe it’ll happen to you. By the same token, it’s best to try and avoid situations whereby there is a possibility for bad to happen.
So if Kate Moss is giving out free kisses in Covent Garden and you live close by and are free, get yourself down there. If however there’s a 70% chance of rain later, don’t go out in a T-shirt and shorts.
So how does that relate to Betfair? Let’s explore.
Surfing The Wave Of Probability
As I mentioned above, there is no luck, only probability. Something is either likely or unlikely to happen and everything in between, the beauty about being a Betfair trader is that you are dealing with probability all the time.
As we saw in our imagined and real example scenarios, if you’re aware of an increase of the probability that a particular event is going to take place, then you can tailor your actions to fit in with that increase in probability, so for Sarah, tailoring her actions meant walking a certain way to work and looking intently on the floor, after hearing evidence that would suggest there maybe money lying on the ground.
So if we were to write a luck formula it may look something like:
L = P + AC
Where L is luck P is probability and A is action and C is coincidence (we can’t ignore coincidence) we have luck equals probability plus action times coincidence.
So when trading on Betfair we need to keep in mind what the probability of a certain outcome may be. How likely is it that Real Madrid will score four or more goals against a newly promoted Spanish side?
How likely is it that Sunderland will come back from a 2-0 deficit with 15 minutes to go?
Of course if we have no idea about the probability of a projected outcome then we are just gambling not trading, because trading is about making informed decisions, gambling is about putting money on something then hoping it’ll happen.
Recently I have been in a few under 2.5 goal markets and I have traded out just before a goal, which is great as it means I've exited the market just before it goes bad, the equivalent of selling your Tesco shares an hour before they come crashing down.
This has nothing to do with luck; it’s because I have studied a hell of a lot of football games, with the under 2.5 goals market in mind, so therefore I start to get a feel for when there might be a goal coming to ruin the party. Now of course there is no way I can always be right using probability, because as the term suggests, probability gives you an outcome which is probable under the circumstances but there are no guarantees, all it means is, I’ll be right more times than I am wrong.
The Sum Of Coincidence
It is very important, if you’re going to make it as a sports trader that you ditch all your superstitious beliefs as they are more likely to hinder than to help. So hopefully, if you were that sort of person who believed in luck, you’re not now, or at the very least, believe that you can manipulate your ‘luck’ to your own ends. However I just wanted to talk about coincidence as people who tend to believe heavily in luck also find coincidence hard to deal with and that can also hinder your progress as a sports trader.
We live on a tiny planet, situated in a speck of a solar system, in a vast galaxy in an infinite universe, a universe that has been around for circa 14.5 billion years. In all that time there have been a lot of incidences, from the big bang to you dropping your keys on the floor this morning, this is a universe of a constant flow of things happening, strings of incidences that started at the big bang and will go on (as far as we’re concerned) forever.
Occasionally two or more incidences occur at the same time, which, when viewed from a certain perspective seem to compliment each other, we tend to call these things coincidence.
The reason I want you to see coincidence for what it is, is because that’s the road to becoming a pragmatic trader and the road that will get you to a place where ultimately, as I like to say, you can Trade Like a Vulcan, making decisions based on market knowledge and not superstition.
Let me give you an example of how blindness to coincidence can affect your trading, a friend of mine who likes to dabble in a few diverse markets was doing quite well on the tennis markets until he suffered a couple of heavy losses in a row.
Now he refuses to even look at a tennis trade, the fact that I pointed out that he suffered those losses because of crazy point-to-point betting is, as far as he's concerned, a moot point and he now says tennis is bad for him and he simply won’t enter into any tennis trades any more.
His view is that he was doing well on Betfair, up until that point and the tennis losses set him on a bad run.
The fact is, if he had had two heavy losses in two different sports, it wouldn't have resonated with him as much as it did. He would still have been upset at the losses, but he wouldn't have attributed them to something so intangible as luck.
As humans we are naturally predisposed to look for, and find patterns everywhere, so if we lose twice trading on tennis, we’ll blame tennis, claiming that it’s bad luck or some such nonsense, instead of simply chalking it up to coincidence.
Note: Clearly if you are continually losing on a particular type of trade then it’s probably prudent to at least change how you trade on that market, if not stopping it all together.
So to increase your ‘luck’ on Betfair you have to do two things; one you have to gain knowledge of the markets you trade, immerse yourself in the statistics of that market and that will lead you to make intuitive decisions that to others will seem lucky, but to you will just be probability playing out in the way you expected.
Secondly, be aware of coincidence, as this will keep you in tune with probabilistic outcome and sharpen your mind to that of a trader who deals in probabilities and not mysteries.
Start changing your luck right now and check out my article on 4 Ways To Gain An Edge Over The Competition
The Zen Trader