Profit exists everywhere
Somebody asked me the other day which markets have profit in them. Well the answer is that all have profit in them, it’s more a question of where it ends up. But all, have the potential for payoff. There are a couple of other key factors, which I will explain later.
Long before the market really gets going, each market can be split up and broken down in infinite detail. If you know how volatile it is then you can work out how much potential there is and what the maximum percentage return is. You can actually tell what approach somebody has in a market by the returns they get. This is because it doesn’t matter how much money you pump into a market, its largest potential return is always finite and determined by a couple of key factors. You can’t tell the market how much profit you want to make, it tells you and there is little you can do about that.
One you know the potential, which varies in each market, there are many mitigating factors that then kick in. Nobody is perfect so you can multiply the potential by your strike rate. You then have to add in commission and other foibles. There are also people who can take a disproportionate amount out of the market, typically very smart backers or layers. From there you can see that the percentage changes quite a bit. You also can’t be active all of the time and grab every opportunity, so factor that in for your final potential.
The actual percentage profit return is typically very small but the sports markets make up for that in another manner, the sheer multitude of events available. Every year there are 10,000’s of sports events that take place and each one has potential. Even if you only managed an average profit of a paltry £1 on each it would still add up. Bump that up to a bigger number and things look very interesting indeed. So, the conclusion you reach is that market contains profit and with some many events around each year you only need a little to make it stack up over the course of the year.
OK I haven’t talked about losses, but he curious thing about losses is that in a sports market your losses are limited. That’s a really important point in your quest to find a net +ve position. Profit exist everywhere, but where it ends up is really the big question. Losses, unfortunately, also exist. That’s where understanding and strategy kicks in.
So three key points, your maximum loss is limited, trading delivers a higher strike rate than traditional betting and potential profit exists in each market. These are basically the three key things I focus on when I look at a market, this is how I frame it before applying a strategy to it.
With profit everywhere, hopefully some of it will end up in your account. Your mission, should you choose to accept it, is to try and get some at the lowest risk!
Category: General, Trading strategies
