FIT GUIDES: UNDERSTANDING VALUE

How do we know what a player is really worth on FI?

This is crucial to know for every trade. 

A player can be as good as you like, but you can pay too much for good players.

If you don’t know what a player is worth, you can hold them too long at too high a price, which can be the silent killer of a good total return. 

We all know we need to buy low and sell high. But defining what high and low is is very difficult, and you will find many different opinions.

There are some undeniable truths though, and I’ll talk about true value of FI players below. 

I’ll also talk about other ways of judging value, such as comparative value. This can be useful but is often misused to justify some very questionable decisions!

It’s one of the longer guides because it’s a complicated topic – but it is essential to understand the issues in order to trade effectively.

True Value

Let’s start with what I call true value because it’s a key concept to understand and also has a solid definition. 

You will find some traders out there who deny it exists or play down it’s importance. Ignore them.

They do this in order to try to justify buying players for higher prices than they are really worth.

Whilst we should lean into these some of the hype and the trends (even when they are a irrational) and exploit them, we shouldn’t stray too far away from true value. 

Eventually, holding and buying players who are well beyond their true value will come back to bite us and we see it time after time on the FI market.

So what is true value?

The true value of a player is in their realistic estimated dividend returns and nothing else.

This, and only this, gives a player real value on FI. When you cut out all the noise and speculation and other things that drag prices around this is what you are left with.

The contractual promise of FI to pay dividends is the only reason we are not just buying worthless entries in a database.

Being aware of this is important. And as I say often, staying within touching distance of rational, true value for players and not going in too hard on speculation will frequently pay off over a season.

It pays off when you get events like dividend increases. And it pays off when the hype buyers move away from whatever they’ve decided is no longer in fashion (i.e in the last month or two at time of writing it’s been traders holding over priced youth too long who were heavily punished for this). 

That doesn’t mean we can’t lean into the trends and profit from the over exuberance – we absolutely should. 

Just be aware when you are doing it and avoid holding players whose price is massively out ahead of their true value for too long.

 

Estimating True Value

To estimate true value, we need a rough idea of how many dividends a player may realistically win in a reasonable period ahead (the rest of the season, or the next 12 months feel right to me).

Generally, you want to be able to realistically estimate returning at minimum at least 10% of the players buy price in dividends in a year as a rule of thumb. Less than that, the player is probably over valued or overheating in price.

To do this, we can look at simple metrics like previous dividend returns and it can be useful. But they tend to be over used. Historic performance, especially from months ago, is not a particularly strong indictator of future performance. 

Looking at historic media dividends is useful, and in any case we generally will have a better feel for who wins regular media by it’s very nature – they are in the press often!

Judging potential performance returns is much harder and takes a lot of time commitment which is why I can now make a living doing it. My approach is to review the recent real match statistics (focusing on the last 5-6 matches) and assess their current form, judging the likelihood of a big score coming in the next 5-6 matches. 

Note that I say real match statistics – I use historic performance scores sparingly, these have a heavy dose of luck involved and what is actually happening on the pitch is my primary source. 

I believe that many traders over rely on historic performance scores and it can lead people to some poor decisions.

For example, whether a player won dividends two months ago is not very relevant to me if their more recent performances look weak, especially if a tactical change is responsible and it is more than just poor form.

So, if I think a player is currently performing at a level where they might challenge for a win 7-10 times in a season, that is strong and in my members area Scouting ratings they will get a 4 out of 5 stars as a mark of a very good performance player (hundreds of players are rated and I assess every match across the big 5 leagues every week to keep it current).

I can therefore reasonably work out a range of how much a player might realistically win over a season, although there is luck involved too – all we can do is find the likely consistent big scorers – we can’t control everything.

But this assessment must be re-evaluated weekly. Things change quickly. I might look at the same 4 out of 5 stars player a few weeks later and say “Actually, there has been a tactical change here and he’s better/worse” and adjust accordingly. 

This is why when I see people trying to calculate a players “estimated career dividends” I don’t take it too seriously. This is often used to justify very high prices.

Fact is, the further out we try to estimate, the less accurate we are going to be. I spend a LOT of time scouting players each week and I can tell you who is most likely to win over the coming 3-4 games with a good degree of accuracy. I can tell you about the next 3-4 months with reasonable accuracy. Beyond that? It starts to get a bit pie in the sky. 

We don’t know what changes will be made that can have an impact on a players output, so it’s dangerous to buy a player at a price that you know is currently too high on the assumption that they will be “winning dividends for years to come and can only get better”. We don’t know that.

How to exploit hype the right way

Now, all that said. Whilst it’s important to understand true (or rational) value, we don’t have to be slaves to it.

The reality is it’s not a completely rational market and exploiting the trends is important in order to get optimal profits.

Whether you are the shark at the top of the food chain or the chump pumping someone else’s profits is basically a matter of timing.

The smart traders are seeing trends coming and buying the hype player cheap before people are talking about them widely and are selling them when that hype is peaking.

The chump (love that word) buys when the hype is peaking and holds them at the high price well beyond rational value. They become the true believer, thinking that they are holding the next Neymar. They almost always aren’t. 

In the short term, they might feel like they are winning as the price can keep going up amidst the hype. But more often, the price will crash back down and they will likely be trapped in by a large spread. The failure rate of the “next big thing” is huge and the odds are that the player will fail to become Messi (how many really do!?).

The smart trader, having taken profits, will not be holding players at these high prices where they risk a price drop once people realise the player is overpriced (this can be quite quickly, or it can take relentless weeks of successive weak performance scores before people realise). 

Instead, they will be targetting a cheaper, similar player who also matches the trend who has similar characteristics and a chance of getting noticed and bought heavily. 

Crucially, they are following the trend not the specific player already being hyped! You will see people saying “you can’t ignore this trend buy [x player]!”. But never mistake exploiting a trend for buying an overpriced player who has risen sharply already. That’s chump behaviour. 

So, when a trend is live, or I see it coming up in a month or so, I’ll position accordingly, with the aim of being there already when others switch onto it. 

If a trend appears seemingly from nowhere, or I just don’t see it coming, the last thing to do is jump on the already rising targets. 

Instead, I’ll look for similar players who fit the trend profile who may get noticed and bought heavily. 

This both increases the chances of bigger profits and reduces the risk of losing money as other people take their profits on an overhyped player.

Comparative Value

Another (and often more practical) way of judging value is comparative – find other similar players and see what the market is willing to pay for them. 

So for example, it’s 5 games into the season. Player A has already won a dividend and put up 2 big performance scores. After seeing him win, traders bought him up to £2. 

Player B hasn’t, but having examined the stats and other factors, I actually believe he is of similar quality, he just hasn’t had the rub of the green or hit form yet. He’s £1 now. 

Therefore, I can reasonably say that if I am right and he does win soon, because he is quite similar, the market may well buy him up to £2 as well, so that can be a target price.

In the members area, I calculate “Guide Prices” which is essentially an estimate of what traders are willing to pay for good quality players that match the trends. It’s a helpful marker in the sand when it comes to judging value that I update monthly.

However, overuse of comparative value also leads people into some traps.

Let’s look at a common scenario where this happens. Player C hits a hot streak of form and puts in 2-3 good performance scores in a row, probably winning at least one dividend. He’s got a solid trend fit too.

He duly rises in price and maybe starts floating a bit above a rational or true value, but not too much. 

Then, a week later, his hot streak continues and he wins yet again. 

It’s pandemonium. A word against him cannot be said on social media without an internet bar brawl. He’s the next global star of world football! He’s going to dominate FI for years to come!

Occasionally this might be true. I’ll look at the stats to judge that properly but more often than not it’s just a hot streak.

But by now people will usually be buying him to an insane price way above any kind of true value.

But this isn’t the end. When people are done pumping the price of Player C, then comes the overuse of comparative value:

“Player C is £6! Well, Player D is almost the same and is only £2! (if you squint a bit and overlook some very ropey stats). Player D should be worth at least £4!”

This is clearly nonsense. We are just comparing one overpriced player to another weaker version of him. And yet it happens often.

We can use comparative value usefully as described above, but we need to make sure we are genuinely comparing like with like, not just lazily assuming a player is the same as another because of a few headline stats. 

And, make sure the higher priced player you are comparing to is not significantly overvalued themselves.

The next part of the Guide can be accessed via the sliding images below!

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