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Statistics in Football Can Make You See the Innovative Trend Following Light

Consider a story excerpt about “numbers” that might just help you to make more money:

A high school coach in Arkansas has developed a new football strategy: His team never punts. And he always employs the on-side kick. Coach Kevin Kelley developed these tactics from a study of football statistics; though the team often gives up the ball on downs, the increased number of possessions pays off in the long run. The coach has an .833 record since adopting this strategy, and his team has won the state championship three times. This season the team is 10-0.

Keeping the offense on the field on fourth down allows for more creative play-calling. Third-and-long does not have to be a passing down. The Little Rock school can run the ball, throw a screen pass or use any number of formations. Defenses do not know whether to use a nickel or dime defense. And Pulaski’s offense has less pressure on third down.

“We don’t really worry too much about it,” quarterback Spencer Keith said. “We just get as many yards as we can. We don’t have to go for the first down.”

If Pulaski converts on fourth down, it creates a momentum change similar to a turnover. Other high school coaches have told Kelley they would rather see his team punt. The Bruins even avoid punting when the defense has stopped them inside their own 10-yard line.

“You can just tell people are in the stands thinking, ‘You’re an idiot,’” Kelley said. Kelley supports this rationale with numbers analysis.

If Pulaski has a fourth-and-8 at its own 5-yard line, Kelley said his explosive offense likely will convert a first down at least 50 percent of the time. If it fails to convert, statistical data from the college level shows that an opponent acquiring the ball inside the 10-yard line scores a touchdown 90 percent of the time. If Pulaski punts away (i.e., a 40-yard punt with a 10-yard return) the other team will start with the ball on the 38-yard line and score a touchdown 77 percent of the time. The difference is only 13 percent.

An innovative and statistics-minded coach, Kelley had tinkered with eschewing the punting game since winning his first state championship in 2003. He became further emboldened after reading several studies, including “Do Firms Maximize? Evidence from Pro Football,” by University of California-Berkeley economics professor David Romer. Kelley also examined ZEUS, a computer program developed by Chuck Bower, who has a doctorate in astrophysics, and Frank Frigo, a game theory expert, to model and predict football outcomes.

THAT is exactly how trend following approaches making money in the markets. Question the typical ways of investing and put the odds on your side.

The way to a nice life.

Trading Numbers, Not Markets

An excerpt from my book The Complete TurtleTrader:

Richard Dennis’s friend Tom Willis had learned long ago from Dennis why price, the philosophical underpinning of Donchian’s rule, was the only true metric to trust. He said, “Everything known is reflected in the price. I could never hope to compete with Cargill [today the world’s second-largest private corporation, with $70 billion in revenues for 2005], who has soybean agents scouring the globe knowing everything there is to know about soybeans and funneling the information up to their trading headquarters.” Willis added [when talking about trend followers], “They don’t know anything about bonds. They don’t know anything about the currencies. I don’t either, but I’ve made a lot of money trading them. They’re just numbers. Corn is a little different than bonds, but not different enough that I’d have to trade them differently. Some of these guys I read about have a different system for each [market]. That’s absurd. We’re trading mob psychology. We’re not trading corn, soybeans, or S&P’s. We’re trading numbers.”

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