Long term trades-a low risk trading strategy

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Long term trades-a low risk trading strategyLong Term Trades A Low Risk Trading Strategy

by on May 13, 2010

One method that offers profit opportunities at very low risk are long term trades. Most people think of trading as a short term activity, however, a back or lay bet can be open for as long as a market is active. Some markets may be active for a short period of time such as 3 minutes in an in-play horse race or over 6 months in a football league winner market. The definition of a Long term trade is an open position which usually lasts for over 6 months before you trade out. In this period of time, you are waiting for the price to come in or drift out so that you are able to trade out for a profit.

Low risk speculation

Very liquid markets

Predictable volatility

No need to screen watch for hours on end

Long Term Trading Opportunities in Football

There are many opportunities for long term trades in football. Along with numerous markets to explore, there are also different techniques you can employ to execute your trade. Here are some quick examples along with an analysis of the risks and how to manage them:

Top Goal Scorer Markets

The top goal scorer market is an example of a long term market that can yield some great results. This market is fairly straight forward market and is basically where you are able to bet on the top goal scorer of a football league. The great thing about this market is that you do not need to pick the top goal scorer in order to make a profit. As long as your selection is scores goals and is within around the top 5 goal scorers in the league at some point in the season, you should be able to trade out for a profit.

To illustrate how it is possible to use this market with our long term trading strategy, please see the screenshot below of the Wayne Rooney price / volume over time graph:

From the screenshot above, we can clearly see that had you placed a back or lay bet at any point near 12.5 when the market opened there would have been an opportunity to trade out for a significant profit (illustrated by the blue line). Notice also that 12.5 was available when the market opened and also a short time after.

As further evidence, I decided to include the Didier Drogba price / volume graph as well. We can clearly see that the same type of price movement is present and had you place a back or lay bet at anywhere between 9.5 to 12.5 in the first few days when the market opened you would have had plenty of time to trade out for a substantial profit.

Overview of Risks

This market can be tricky and there are some risks. One major risk is injury. If your selection is injured and cannot play for the season or a part of the season, its obvious that the chances of them becoming a top goal scorer will be seriously hampered. If this happens mid-season and you are already in a profitable position it is advisable to trade out to limit the risk and come out ahead.

Another risk is the transfer market. Although this is less likely to happen, it is always good to keep an eye out for the latest transfer news regarding your player. If he is unhappy at the club or if there is a change of management, a transfer may occur which will ruin the chances of them becoming top goal scorer.

TIP: Do Not Place Your Initial Bet Blindly

Although this method is low risk, it is important to choose your trade carefully as its obviously possible to lose money if you make the wrong choice (although this can be somewhat minimised by trading out early). My initial screenshots show Wayne Rooney and Drogba but why did I choose them? There is actually an easy way to choose the top goal scorer choose the striker from the team that the bookmakers think will win the league .

There are two reasons for this. Firstly, bookmakers spend a long time pricing the market according to their research and statistical data so why not make use of their hard work? And secondly, the team that will win the league has to score goals and most of these goals will come from that particular teams striker. This is not exactly rocket science but its amazing how many people do not know which striker to choose.

Domestic Cup Competitions and the Champions League

If you are thinking of trying this strategy on domestic cup competitions and the Champions League, my advice is: Dont Do It unless you are absolutely sure you are getting a good price. The reason for my aversion to cup competitions and the champions league is because of the unpredictable nature of them and the fact that your team can be knocked out of the competition which means you lose ALL of your stake. Here are some things you will have to worry about:

Injured players

Suspended players in an important match (red or yellow cards)

Tough draw

Managers resting players in a less important domestic cup match

These risks are less important in other markets such as the League Winner market (this will be explained later) because losing a match does not mean you will lose the league whereas in a cup competition losing a match virtually means getting knocked out of the entire competition.

The League Winner

If you want to test out this long term trading strategy, the league winner market may be the best place to start. This market is probably one of the least risky markets to use the long term trading strategy. The reason for this is because the market is open for a long time and there are usually lots of opportunities for your chosen team to reach the top of the football table (assuming you have picked a top team).

To illustrate this, take a look at the graph below which shows the price / volume over time of Rangers winning the league. As you can see, whether or not you placed a back or lay bet at the starting price of 1.8 there would have been plenty of opportunities to trade out for a substantial profit.

A look at other leagues shows a similiar story. Placing a back or lay bet on Man Utd at the starting price of 2.3 would have given you opportunities to trade out at a profit. If you had placed a back bet, you could have traded out at 2 and if you made a lay bet, you could have traded out at a larger profit at 9.

There are many other football leagues that this can be applied to. Dont be afraid to take a look at the Spanish and Italian leagues as they are often more competitive and can throw up some nice opportunities (screenshots of Spanish and Italian league price / volume graphs have been included below in case you are thinking about trading them):

TIP: Finding Value

Previously, we looked at the graph of Manchester Utd winning the league. You will have noticed that if you placed a back bet at 2.3, you would have only made a small profit trading out at 2. However, lets think about this in real terms for a moment. Is 2.3 a good price for Manchester Utd to win the league? Most people would argue that 2.3 does not really represent good value for a number of reasons and this is reflected in the price trend over the following days. In fact, had you waited a few weeks, you could have backed Man Utd at a more attractive price of 5.5.

The fundamental principle you should remember in trading is getting value. If you have value (i. e. a better price than everyone else) then you will have more chance of trading out as your profit margin will be higher than other people therefore you are able to trade out faster and ahead of other people.

A Gold Mine Still Uncovered

Please remember that these are just a small selection of markets that you can use with the long term trade strategy. There are many other football markets you can use and some of them are even more lucrative than the ones shown in the examples here.