One of the most interesting aspects of market analysis is directly related to the inefficiencies that exist in virtually all markets.
The vast majority of European bookmakers utilise derivative pricing for football matches ie their analysts do not price events based on a proprietary determination of price but rather they cluster around a mean price set by their competitors. There are a range of psychological reasons for this structure and we will focus on these in a future posting.
A prime example is provided by the behaviour of the layers around market opening for tomorrow's Serie A games. None of the key signpost markets in Asia and Italy priced up early as they were awaiting disclosures from Italian governmental bodies and the football authorities. Vertically integrated pressure within the European bookmaking organisations forced a presence in the market with even less market knowledge than is usually the case. There were two effects of this market structure. Firstly, the prices are more closely clustered than normal as all layers attempted to sit on the same fence. Secondly, some of the prices are way off target releasing oodles of value for professional analysts. The Italian markets are particularly inefficient on Sunday.
We have several major positions on this round of Serie A games based on the analysis of our Unified Trading Model (UTM) mixed in with some subtle Bayesian Reasoning. The utilisation of Bayesian Reasoning (a sort of big picture market overview) is vital at points of major upheaval. This latter type of analysis allows strong inferences to be developed from sparse data enabling situations to be comprehended prior to the frequentist competition. Correlation with causation is critical.
Which, in plain English, means that we are going to hammer the layers this weekend...
It also helps to emphasise the importance of maintaining an isolationist structure with regard to our trading operation. We develop trading positions prior to market opening and are able to disguise our trades in the earlier market phases by dealing with only one broker. Until this morning, only myself and my broker know my positions. Our Trading Team will be briefed this morning; Dietrological Platinum clients will be informed two hours prior to kick off; in the latter market phase we will place a combination of disguised trading and hedging positions around Europe and we release some information to Dietrological Gold clients.
Hierarchical isolationism is a key component of maintaining a competitive advantage.
