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Using your sport knowledge to trade

Considered how useful your knowledge of sport could be whilst trading?
Considered how useful your knowledge of sport could be whilst trading?
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Have you considered how beneficial your knowledge of your chosen sport could be when betting? See how it could here...

Is being a sports brainbox useful for trading on the Exchange?

The short answer is yes, but it can also cause quite a few problems which I'll talk some more about in this article.

Obviously, it's always worth knowing the basic rules and structure of a sport before betting or trading it. You certainly don't want to be getting mixed up with games and sets when trading in-play tennis markets!

A little bit of sports knowledge can go a long way in this game but you should never assume you know it all. Regardless of the endless stats and transfers that you have memorised, the market will do whatever it feels like on that day.

Confirmation Bias & When Not To Use Sports Knowledge

Before we get carried away with sporting facts and figures, it's essential you know when to not use this knowledge.

By nature, humans are incredibly prone to different kinds of bias. In the world of risk, confirmation bias is toxic. Tie this with our natural programming to be overly emotional when money is involved, it becomes deadly.

What exactly is confirmation bias?

Other than being a big issue for new traders, confirmation bias is when somebody seeks out information to confirm a belief. As an example, an inexperienced trader may believe Manchester United are going to win the 2017/18 Premier League. This trade may fall victim of confirmation bias and go out of their way to find stats that support this belief.

Of course, the best way to do any kind of research is to have an open mind consider all outcomes. If you find this difficult when dealing with teams or players that you actively support, perhaps consider avoiding trading games that they are involved in. Any opportunity to remove emotion from trading should be jumped on.

There are many trading environments where sports knowledge is much less useful, although the basics are always worth knowing. Pre-race trading markets are a great example of this. There's almost no question that markets will shift when certain information is made public (a horse is injured, for example). However, in such short time-frame trading environments, background knowledge of the sport is less critical.

In particular, the last 5-10 minutes before the race begins is a complete different world to the hours and days beforehand. As such a large amount of money pours into the market in such a short space of time, there is naturally going to be supply and demand issues.

There may be plenty of layers in the market but one big back order can cause the market to stir as the layers struggle to push the price back up. This is simply a case of supply and demand and the value to the trader is in taking advantage of this. Knowing which training yard the jockey spent his youth is not going to help you survive in these microclimate markets.

Using Sports Knowledge To Your Advantage

The most basic way of putting sports knowledge to use in the markets is by value betting.

Value betting means that you are backing a particular outcome because you believe the odds are of good value. Ideally, you will have done your research and compiled your own odds for the event. If you compare your own odds with the odds available, the value odds are those that are higher than your own "true odds".

Obviously, the big danger here is that many people consider irrelevant factors when compiling their own odds.

I'll explain...

If I'm looking to bet on match odds for Burnley vs Arsenal in the Premier League, I would be foolish to assume Burnley's chance of beating Arsenal by simply looking at the results of Burnley's last few games. For all I know, Burnley could have had a string of 5-0 victories against less competent teams in a completely different tournament.

They are likely to play very differently against Arsenal than if they were playing an obscure cup game.

It's important to consider factors that can actually affect the performance of a team future games. Historic records do give an indication of recent performance, but they tell you nothing about upcoming performance.

Transfer news, injuries, managerial changes and the actual context of the match are much more likely to impact the result. Of course, there's plenty of other factors you may want to consider also.

You should also be well aware that a large portion of the market has already considered these factors too and priced them into the odds. Fortunately, this isn't always the case.

Whether it's in-play, pre-match, value betting or trading, a little bit of knowledge can go a long way.

Another area that it can serve some use is when trading the tennis. Certain players are incredibly easy to read, especially for experienced tennis traders. Whether you know a player always gets tired after a set amount of time or if they perform badly when serving on clay, it's incredibly useful to know.

Use it to your advantage.

Three Things That Really Matter

It's great to be able to name every winner of the US Open since 1983 or know that Andy Murray tends to throw away early sets when he's having a hard time.

But ultimately, there's only three things that matter. An open mind, value and patience.

When using any sports knowledge for trading, you need to keep an open mind and consider all possibilities. Don't fall victim of confirmation bias or let your childhood team get in the way of making a sensible decision.

It doesn't matter if you're scalping the horse markets or betting on the golf. Your ultimate goal is to grab as much value as you can get your hands on. You may lose some and you might even win some, but in the long run, value is your friend.

Nothing happens overnight. There's no rush to know everything about the sports you are trading, although the basics are quite important! Keeping your eyes open and let value do the work for you. Give it some time and you'll be golden.

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