This article is one in a series looking at Jack Schwager’s classic investment books. The goal is to study interviews with famous traders and apply their wisdom to daily fantasy sports.
Richard Dennis originally made a name for himself by turning a borrowed $1,600 into $200 million over the course of a decade trading commodities in Chicago. He then became even more famous for a bet made with another trader — the legendary William Eckhardt — and the bet was the start of the Turtle Traders.
Dennis believed the strategies that made him wealthy could be taught to anyone with above-average intelligence. In order to prove this to Eckhardt, he organized and trained a group of non-traders, giving them his own money to use in trades. Their results were outstanding.
Dennis made a fortune trading commodities. He also taught dozens of other people how to trade successfully. Let’s see what DFS wisdom we can garner from this interview with a market wizard.
Follow the Rules of DFS
If what you are doing is right, it will work even if people have a general idea about it. I always say that you could publish trading rules in the newspaper and no one would follow them. The key is consistency and discipline. Almost anybody can make up a list of rules that are 80 percent as good as what we taught our people. What they couldn’t do is give them the confidence to stick to those rules even when things are going bad.
This quote from Dennis is famous among system traders. In their world, the rules that define a trading system are usually very similar. The difference that separates good traders from bad ones is having the ability to follow those rules when the going gets tough.
This same concept applies in DFS. Take daily fantasy basketball: We all know that minutes on the court and having the ball are the biggest factors for fantasy production. We also know Vegas totals are a good indicator of potential for fantasy production. (See our recent “Vegas” episode of The DFS Roundtable for more on the subject.)
These ‘trading rules’ aren’t complicated, and they aren’t a big secret. But following them is not as easy as we might imagine.
I have found that I tend to stay focused on these core principles when I build them right into my own personal Player Model:
As you can see, the Vegas totals are factored right into my customized model, which is updated regularly with NBA Director Justin Phan’s minutes and usage projections, which power our Projected Plus/Minus metric. Having these concepts baked into my model consistently enables me to construct lineups with the potential to cash in any contest on any given slate.
Make Your Own Decisions . . . and Stick to Them
When we taught our people to trade, I had a hypothetical question: Suppose everything you know about the markets indicates a “buy.” Then you call the floor and they tell you that I’m selling. Do you: (a) buy, (b) go short, (c) do nothing? If they didn’t eventually understand that (a) was correct because they have to make their own market decisions, then they didn’t fit into the program.
With all of the DFS shows leading up to lineup lock each night, this concept actually has an even stronger application in the DFS community than it does for traders. On any given night, you might watch Inside the Lab (available via our Premium Content Portal) and find experts like Justin, FantasyLabs Co-Founder Peter Jennings (CSURAM88), and Bryan Mears discussing an upcoming slate:
When you watch the show, it’s possible that one of the experts won’t be as high on a player as you are. It can be easy to default to the expert in these cases, but Dennis insists that successful traders will stick to their own research. (Of course, this assumes that you have already done research prior to watching Inside the Lab. It’s always a good idea to do your own research.)
Focus on the Important Things
Trade small because that’s when you are as bad as you are ever going to be. Learn from your mistakes. Don’t be misled by the day-to-day fluctuations in your equity. Focus on whether what you are doing is right, not on the random nature of any single trade’s outcome.
Near the end of the interview, Dennis is asked to provide some wisdom for traders who are just getting started. He stresses that focusing on the size of your bankroll and your daily results will not help you improve. Instead, he suggests analyzing your process and determining if your decision-making is sound.
Using the Volatility Rating metric in the dashboard, we can instantly identify players who within a slate were more popular in contests with higher entry fees than lower entry fees. This is a quick way to identify the sharp plays, which is what we all want in our lineups.
If you find that many of the players you roster are not as popular in the more expensive tournaments, there is a good chance that you have a fundamental flaw in your research process. Identifying these types of flaws is the first step to correcting them, and Labs provides the tools to do that quickly.
As the father of the Turtle Traders, Dennis successfully taught principles like following simple rules, sticking to the research, and refining the process to dozens of traders. By applying these same principles using the Labs tools, you too can learn from Dennis and work toward becoming a DFS Market Wizard.