Which financial indicators suit sports trading?

You've all seen them. Take any third party sports trading software and you will find a myriad of indicators. From candelsticks to moving averages, to the odd sounding Bollinger Bands and stochastic oscillator. The novice with no idea of how to trade sports markets will open up a trading ladder and see the prices jump from one place to another and wonder what to do next. They will then open up a chart and see the time series snaking up and down. Again, they will wonder what it has to do with profiting from sports trading.

Finally, the novice will open up the indicators list on the chart and wonder which of the many indicators will divine untold riches. Everyday, I see these novices in the online forums. They have heard that some people get rich from sports trading and they want the short-cut route to joining them.

Sports betting is usually done on the day of the event. In that respect it is like financial day trading. Yes, there are sports markets that open before the start date. For example, horse racing markets usually open the night before but volume is thin and volatile. The classic flat races, The Grand National or The Gold Cup markets will open far in advance. However, in the main, the window for trading a sports market is pretty small. Sports trading in the temporal aspect is very different to financial trading. In financial day trading there is always tomorrow. A stock, a currency pair, option or futures contract will still be around tomorrow even when you stop trading today. In sports trading you get one day in which to profit from the event.

When trading sports markets things happen that much more quickly. Financial indicators are usually used on a day by day basis rather than second by second. Also, financial assets are priced to the penny. Sports betting markets are priced by odds and the jumps between the odds are not continuous. An indicator such as a moving average is just that, an average, used to smooth out a time series. Such indicators don't work so well when they are working with discrete prices such as the range 2.98, 3.0, 3.05 and 3.10. Range indicators such as Bollinger bands are easily broken through and may offer a false signal.

Sports trading is as different to financial trading as it is the same. The buying and selling, supply and demand is the same in any market. However, the underlying structure of the markets is very different. The similarities between sports and financial markets are only superficial and because of that I have thrown out all financial indicators and developed my own sports trading indicators. As I have said before, third party trading software can force the unwary to be trapped into a trading regime dictated by the software they use. I started trading using 3rd-party software but now I code my own trading software. Doing that has freed my mind to appreciate the differences between sports and financial trading markets.

6 comments:

  1. Hi James! Are you still writing for SmartSigger? You weren't in the last edition.

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    1. Hello Diego,

      Unfortunately, SmartSigger can no longer afford me.

      However, any articles I write will be published here.

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  2. I'd like to ask you about the Risk Simulator. In the december issue you've said that the code of the program could be found at the SS directory, but is not there. Would you like to publish it in here?

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    1. Hello Diego,

      Thanks for your message and pointing out the lack of code.

      Any code that I wrote is the property of Race Advisor / SmartSigger and I am unable to replicate it on my site.

      If you go to the SmartSigger forum directory and point out to Michael that he has neglected to include the code then he will put it in the Downloads section under the magazine.

      I hope that helps.

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  3. Hello James.... I read a few articles and let me tell you that all I´ve read is very different that we can achieve over the net....

    I have a question that you problably know better than me. How can we trade in-play horse racing??? Which indicators can we see that gives us confidence to trade???

    I know that in-play horse racing is very volatile, specially near end. And I think is there we have big opportunities to do a good trade, when some horses go up and the 1st,2nd and sometimes 3rd horse fights for win...
    I´m thinking to get those horses that goes up and catch them in the way.

    I have the odds recorded from a various races and when I draw the trendline (Excel) I always choose polynomial with 6 degrees that is the most near I can get to match the odds. I then do the maths (linest function) to find the coeficients and try to predict the next movement....

    I have doubts that what I´m trying to do is correct, because the graph is draw with the odds over time. I think this would be more accurate that if I draw the graph with odds over money matched, or measure the volatility or some other indicator. That´s why I need some guidance from you, if it´s possible.....

    Best regards, Eduardo

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    1. An intersting question, Eduardo.

      I don't trade the horses in-play simply because of the dificulties that you are having.

      I think a lot of in-play traders on the horses are only trading the start of the race due to the volatility nearer the end. In-play traders look to see if the start follows what they predict from the form. If it does then they hold a little longer looking for a profitable exit else they dump the bet.

      I would only trade in-play if I was at the event; race course, tennis match or football stadium. I would need a team of people to bring that off but I don't have the time nor the resources to do such a thing.

      As far as trend lines are concerned, a 6 degree polynomial trend line is fitting the curve too tightly. You always want to be generalising a system to predict the future and not model the past with 100% accuracy. You want enough of a prediction to give an edge

      It all depends on what you are trying to model. If you feel that you want to talk about it online then feel free to do so here.

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