Does “buy price” matter on Football Index?

A debate which raises it’s head fairly consistently amongst the Football Index community is how much we should base our decision-making about trades on the price we pay for our futures.

I am not a trading guru and this is not the definitive answer to this question. It is simply an attempt to illustrate why it is even a question.

A number of experienced traders believe that “buy price is irrelevant” and by association so is the current price of a player in relation to it. Personally I agree with this viewpoint.

But I can understand why some traders find this highly confusing. After all, that is the entire point of Football Index is it not? To buy and sell players and make a profit. Prices are therefore surely always relevant.

For example, we all we want to “Buy low, sell high”. If the buy price is irrelevant, why does this basic rule exist?

We’re also told to do things like “Buy the dip”. If price doesn’t matter, why bother paying attention to a dip?

Perhaps a better way of framing this question is not to say “Price doesn’t matter” and instead say “The number doesn’t matter”. Let’s take a step away from the actual figures and look at what prices signify on Football Index.

The current price of any player represents the market’s confidence in how that player is going to perform in the future. That is all. Let’s make sure we understand what performance means in this context. It doesn’t mean on-field match performance (although that can be a helpful factor). Rather, it means their performance in continuing to attract future market confidence.

We’ve seen this in Feb 2018 with Paul Pogba. He’s hasn’t been at peak form, neither has his team. Yet he soared rapidly in price in just a couple of days. Why? The main reason was a media story arc about his future, causing him to rack up very large media buzz scores. Traders spotted this and had high confidence that this would last for several days, allowing them to accrue a rapid return. They also had confidence others would recognise this trend. As soon as confidence disappeared that the returns would continue, traders sold up, others recognised this and thus Pogba’s price duly fell back. This is an extreme example, a large, rapid rise and fall. Often price growth is much steadier, indicating that confidence remains in the longer-term.

But the prices themselves are often a distraction, playing tricks with our minds and clouding our judgement by bringing our desires, our fears and our trading experiences into a decision we should be making without all that baggage.

A lot of this has to do with the hours we spend gazing at all those numbers on the screen in front of us. We’re constantly aware of whether we’re in the green or red, what the average price of our holdings is and how many dividends we’ve already collected.

None of that matters.

All that matters is whether that player is going to score well at PB or MB, earn dividends and attract more confidence to raise their price in the future, or less.

As an experiment, try visualising different numbers than the ones you see in your portfolio. Neymar isn’t £10.80. You don’t own 80 futures (or 800). He isn’t green or red.

Instead he’s £2 and you only own 1 future in him, which you bought yesterday. What do you do? Are you confident he is going to rise in the future? Would you buy 1 more future in him at this time?

What you should do next is precisely the same in this visualisation as it is in the reality of your portfolio. The pure decision should be predicated solely on that basis.

This is what traders mean when they say price is irrelevant. They are suggesting that all the £ figures you know about that player, buy price, current price, existing profit and your own financial targets stop us from making a purely future performance-based decision.

So yes, “buy low, sell high”. But £10.80 IS low for a player whose future performance is £15. Likewise £0.80 IS high for a player who will never perform better than £0.85.

And yes, “buy the dip”, but no price can help you measure that dip. Just because some fell £0.50 doesn’t mean they might not fall another £0.50, or rebound by £0.25. There are only degrees of confidence in future performance. Don’t let the fact you are in profit or loss with that player as a whole affect your next move.

I hope these thoughts help you make many more profits in the future.