Trading the drifting Denman
With a tough week already, it looked like Saturday was going to be a white out as well. Fortunately Newbury survived with a quality card and that gave me a reason to sit behind my desk. I’ve typically done OK at the Hennessy gold cup, so wanted a fair crack at it. When you have been going for a few years you can’t but resist looking at previous years and having that as an unofficial target. Tough when the most of the racing has been cancelled.
The predominant factor in the early market was the drift on Denman.
Denman was asked to carry 2st and with uncertain ground, it was probably this that set of the drift. I don’t follow horse form so I can’t confirm that, but I suspect that the ground could have been reason that the drift set in? With that weight in such a competitive field, I’d also be surprised if the market didn’t think Denman was a little short at his early price. Either way there was a drift.
So how would you trade this? Most people would extrapolate the current trend and lay first, but that would have been a disaster here as Denman went off at an SP of 5.9. It’s typically a common issue that you see in many markets, that people put too much weight on something that has just happened and project it into the future. Often the past has little relationship to the future.
If I toss a coin and it comes up heads ten times in a row I may suspect the coin is biased. But unless I have firm evidence of that, I have to assume the next toss is 50/50. Most people would put undue weight on heads in this scenario. I didn’t choose heads and because of that got the result I wanted from this race. But I bet you there were a lot of people that laid at 7.60!
Category: Horse Racing, Trading strategies
