There are some myths about sports arbitrage
which you should be clear about before deciding
whether or not to spend your time & effort
starting your own sports arbitrage trading
project.
It takes certain skills & resources to be a
successful sports arbitrage trader and not
everyone is suited to it. Websites and companies
which try to make it seem that anyone can be a
successful sports arbitrage trader are, at best,
hiding the truth.
Any sports arbitrage trader or wannabe sports
arbitrage trader will need to have access to the
following:
Sports arbitrage trading involves working
with numbers; there is no escaping this. Of
course, there is software to help out with
virtually every calculation you need to make
but if you cannot do simple addition and
subtraction quickly and accurately in your
head then sports arbitrage trading may not
be for you.
Myth No. 2: Sports arbitrage
trading is 100% risk-free
Whilst the arbitrage trades you construct
will be risk-free, the practicalities
involved in actually placing the bets does
introduce some risk. The good news is that
you can work to eliminate almost all of this
risk by taking certain precautions and
paying attention to specific issues.
You can compare this to crossing the road
- as long as you take the necessary
precautions you should be safe; those who
cross without looking are much more likely
to get hit by a car.
Risks that appear in sports arbitrage:
- Bookmaker Rules Differences
In certain types of event, bookmaker
operate different settlement rules for
bets. Placing bets without taking these
differences into account can lead to
windfall gains or losses. The sports in
which this is an issue for sports
arbitrage traders are:
Baseball (the rule
related to how bookmakers treat pitcher
changes)
Ice Hockey (the rule
related to whether or not the bookmaker
includes overtime)
Tennis (the rule
related to retirement of a player before
the match is complete)
There are various ways to resolve this
issue & avoid the risk which it creates.
The most obvious but least attractive is
simply to avoid trading these sports.
Another solution is to maintain a
database of bookmaker rules (perhaps in
a spreadsheet) & to refer to this when
trading. Over time you will probably
start remembering the rules for many of
the bookmakers you use frequently.
A third solution is to use the
facilities of the
Sports
Arbitrage World TraderZone. In here,
a database of bookmaker rules is
maintained and used to categorise sports
arbitrage trades automatically. You
simply choose whether or not you wish to
receive trades with mixed rules and the
software does the rest.
Every so often, bookmakers make
mistakes. Usually this will be the
result of a simple typing mistake. For
example, an input clerk may post a price
of 20.00 instead of 2.00
These errors can cause problems for
sports arbitrage traders because
profitable trades are created by prices
which differ greatly from the market
average. Worse still, every bookmaker
operates something called the ‘Palpable
Error Rule’ in his terms & conditions.
This rule simply means that if the
bookmaker makes a pricing error which is
obviously a pricing error, then he has
the right to cancel the bet. In this
case, you would receive a refund of the
money you have bet; however, the other
bet(s) you placed in the sports
arbitrage trade would now be uncovered
at at risk.
As you gain experience, it will start to
become increasingly obvious to you when
the bookmaker has made a mistake. As
this happens, you’ll be able to
differentiate between a great price and
an obvious error and you’ll simply avoid
placing bets on the latter. However,
this can lead to a lot of wasted time,
especially if you use a run-of-the-mill
sports arbitrage service or software
which will invariably generate large
numbers of ’sports arbitrage trades’
based on the inclusion of error prices.
The
Sports
Arbitrage World TraderZone provides
a far better solution to help you avoid
such errors. Within its Preferences, it
contains a setting which allows you to
decide when a bet should be considered
an error.
This is calculated by looking how far
away the price is from the
market-average price for that particular
bet. For example, a price which is 50%
higher than the market average is almost
certainly en error. So the TraderZone
marks this price as a possible error and
lists all trades which involve this
price in a separate window within your
trading environment.
So you can investigate these trades at
your convenience without being
distracted from the large numbers of
legitimate trades you’ll see in the rest
of the system.
The ability of the TraderZone to
allow interactions between traders also
means that you can flag a trade as a
possible error and this information will
be passed on to all of the traders in
your group. This way you have the
benefit of computerised error-checking
as well as the experience of all of the
traders in your group.
Humans make mistakes and so will you in
your career as a sports arbitrage trader.
The most common errors are currency
conversion errors, placing the wrong bet
and/or missing your bet altogether.
All of these errors can be avoided most
of the time, of course, but when they happen
it is worth looking at your processes and
seeing if something can be improved in order
to avoid the same mistake in future.
In general, the most common reasons for
making these types of mistakes is a lack of
proper organisation or poorly thought-out
trading processes These can certainly be
improved by careful analysis and changes to
the way you do things. The most important
element here is that you take responsibility
for the mistake and then take measures to
avoid its repetition.
Again, are tools in the Sports
Arbitrage World TraderZone which provide
enormous assistance in avoidance of such
errors.
- The Calculator automatically takes
into account the account currency of the
bookmakers involved in the bets you are
placing. It updates currency rates
automatically from the web and uses
these rates in its calculations. Thus
you can always be assured that you’re
betting the correct amounts.
- If you miss a bet because the price
moves or the bookmaker removes it before
you’re able to capture it, the
TraderZone’s next-best-price window
automatically displays a list of options
for you to cover your exposure. In many
cases, this won’t even result in a loss
but just a smaller profit than you had
anticipated
Myth No. 3: Sports arbitrage
trading will make you millions
This myth goes hand-in-hand with the
myth of perpetual compounding of profits
and it is often used by hard-sell
companies interested only in parting you
from your cash. The basic idea is this:
with sports arbitrage, you can easily
make 3% profit on a single trade.
Therefore, if you continue to reinvest
that profit, along with your original
capital, into future trades, the
‘miracle of compounding’ will take over
and make you rich.
Unfortunately, it does not work this
way. Although you can certainly reinvest
your profits in future trades, you
cannot invest ALL of your capital in
every trade you make. Further, you
cannot invest ALL of your capital every
day.
Bookmakers set limits on how much they
will accept on individual bets from
individual customers. These limits are
usually in the range £200 - £1000 and
may rarely be higher. The point is, that
once your trading capital exceeds this
you obviously cannot bet your entire
capital on a single sports arbitrage
trade. You can make very good use of
excess capital by investing in greater
numbers of trades simultaneously and
this is what professionals do; sometimes
executing as many as 50 trades each day.
Once you have bet your money in one or
several trades, those funds are blocked
until the result of the event is known
and the bookmakers pay out on your
winning bets. This usually takes between
1 - 48 hours depending on the events you
bet on and the timing of when you place
them. So, you may find that after having
bet all of your capital on a series of
sports arbitrage trades, you are unable
to trade further until some bets settle.
After the bets settle, however, you may
find that you now have lots of money in
some accounts and little or no money in
others. This is simply the result of
money being transferred as a result of
winning and losing bets. In order to
rebalance your accounts you may need to
withdraw from the full accounts and then
deposit into those which are empty. This
process can take up to 3 days in some
cases. although if you use online
wallets such as Neteller & Moneybookers,
it should take just minutes or hours.
Hopefully, you can now see clearly that
the idea of compounding all of your
trading capital everyday is unrealistic.
If you are an active sports arbitrage
trader, it’s far more realistic to work
on the basis of being able to turnover
your entire trading capital, on average,
once every week. Also consider that your
average sports arbitrage profit will be
approximately 2% - 3% and you arrive at
a realistic projection of profits: 8% -
12% per month [Amount of capital x 4
turnovers per month] x (2% or 3%).
So, don’t get fooled into thinking that
you can make millions with sports
arbitrage. Aim for and expect a return
of 8% - 12% per month and understand
that stake limits mean that the most
capital you will be able to deploy
effectively, under optimal conditions,
is about £250,000.
The
best way for any new trader to pick up
essential skills is to place 100
arbitrage trades with very small
