Newton would have used exchanges
Newton’s Third Law states that for every action there is an equal and opposite reaction. Sometimes people are perplexed at how you can correctly call price action on an exchange, but sometimes it’s quite easy; thanks to referancing Newton’s third law.
Every betting market must add up to 100%. It’s impossible for it to exceed that value in either direction for any prolonged period of time. So if something is coming in, in one direction, this means something else, either in isolation or in a group must be headed in the opposite direction. It has to happen as the corrective sets in to balance the book to 100%. If this didn’t happen you could literally print money by taking advantage of the ‘wonky’ book value or by arbing between the two values.
Some markets throw up inversly correlated markets by default, you can find loads in football matches. But in other sports the relationship is less obvious, but still exists.
So, keep your eyes open for inversly correlated markets or selections within markets. They can make for great trades.
Category: General, Trading strategies
