It has undoubtedly been one of the most crazy weeks on Football Index. Last night's drops were a painful viewing, but hopefully FIC members stayed calm and did not panic sell players.
Last night's crash
Market Manipulation, a few whales cashing our or just panic-fuelled competitive sell offers between various traders? We may never know exactly what happened last night, but one thing seems certain - a lot of people made poor trading decisions and sold out too early. I feel for anyone who did, but by focusing on value and following the strategy on FIC, you will know that the drops last night created some serious opportunities.
The community, fun of trading on Football Index and excitement in football that can be gained from trading on Football Index are huge bonuses and make the platform so attractive. But, ultimately we want to make a profit. Last night would have been a great time to buy, but I imagine many traders were unable to with their funds tied up in existing holds.
Nevertheless, a few great lessons can be learned from what we saw yesterday.
Focus on value and not market prices
The current buy prices are dictated by the lowest sell offers. We do not have the depth of the market yet and as discussed in yesterday's post, the introduction of the depth of the market will make the market more transparent and probably more stable as we will better understand how much demand there is for any given player.
You can choose to buy and sell at whatever price you think a player is worth and often you do not actually need to make a decision. Attempt to avoid paying too much attention to what other traders value a player at.
Everyone's circumstances are completely different
It can be difficult, but often you should not be too influenced by other traders needing to sell players.
I am going to use a really odd metaphor here that I have just made up but I think it sort of works:
Imagine you have a neighbour who loves beer and they have a few crates in their house. However, one day that same neighbour decides to give up alcohol so they offer you their crates of beer at 30% below the price they paid.
This would be a reasonable thing for them to do. You would probably take the offer and buy the beers off them. In such a situation you wouldn't go to your fridge, pick up a beer and start offering it to others for a lower price than you had bought it. The only time you should really take notice of other trader's sell offers is when you are keen to take advatange of what you believe to be a favourable price.
Conformity, fear, panic and a number of psychological biases can drive decision making. But, it is best to decide for yourself on the value of players. As we have seen in spreadsheets throughout blog posts in recent months, the dividend yields are very attractive. When player's prices fall, they become much more attractive.
Where do we go from here?
I doubt we will see such a sharp decline in many players again until some players become overpriced, which will eventually happen. We only have a few weeks left of the current transitional period before the depth of the market is added. This will make the market more transparent.
I also think that the addition of a higher bid ceiling should help players hit higher prices quicker and provides traders the opportunity to trade live in games which was difficult with just a '10p above market price' bidding range.
The market is currently very thin and so due to us not knowing how many shares are being offered, it is easy for just one or two traders to cause panic by offering players much below their previous market price and this can have a ripple effect on the market.
Throughout the 2020-2021 market we are likely to see more money come into the platform and so the market may become more stable with less volatility. Nevertheless, the visually appearing volatility creates huge opportunities at times and we may have some more considerable drops up until there is more money in the market.
In the future, it is going to become more important to sell when there is strong sentiment because as we have seen, the market can shift at any minute and bargains can be taken advantage of. Therefore, I will be posting more regularly in the future if it does ever appear like certain areas of the market are overheating.
As many of the top end have now recovered, there may be some opportunities in the few players yet to recover in the lower end of the market. A number of valuable players in the lower end did not drop very much in price, but many saw their instant sell prices decline and so they could be bought at favourable bid prices. More players to be highlighted soon...
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