Forex Trading vs Sports Betting

Sports betting shares many similarities with forex trading. Both involve making wagers on the outcome of future events, and both can be highly profitable in the hands of a sharp analytical mind. 

However, most people who attempt them fail to make money at both, either due to lack of impulse control or lack of understanding how the markets work.

Forex vs Sports Betting

FXBrokerSearch, a sister site of RealFantasyFootball.com, has compiled data on the best FX brokers online for its readers looking to make money outside of sports betting.

What is Forex Trading?

If you're reading this, you probably have at least a general idea of what sports betting entails, but you may or may not be familiar with the forex market. Forex (foreign exchange, or FX) is the market where foreign currencies are traded.

In fact, it's the biggest market in the world by far, with an average of $5.3 trillion in turnover per day. For comparison, the New York Stock Exchange (NYSE) averages 'only' about $50 billion/day.

Similarities Between Forex & Sports Betting

Just as sports bettors place bets on the outcomes of future sporting events, forex traders place bets – sometimes referred to as speculating – on the future value of currencies.

These are fiercely competitive markets, where consistent edges are hard to come by. On the flip side, if you're able to spot inefficiencies in either market, there is a lot of money to be made.

Arbitrage

If you're unable to find that elusive edge, there's another way to profit that can be used for both forex and sports betting markets: arbitrage. Arbitrage is the process of betting on the same event in different markets to take advantage of price discrepancies.

That's kind of an abstract statement, so let's look at an example from sports betting. Let's say the Cowboys are playing the Eagles, and it's expected to be a close game.

The moneyline will be similar across the various sportsbooks, but there will probably be some minor differences. For example, you might find that one book has the Cowboys at +101, and another has the Eagles at +101.

You can take advantage of the price difference by betting on both teams at the books where each respective price is most favorable, e.g. betting $500 on each team above would allow you to lock in a profit of $5, or 0.5%.

It may seem like a measly return on your investment, but the key thing to remember here is that it's guaranteed profit, which something difficult to come by in any market. Arbitrage opportunities can be found in both sports betting and forex markets if you're patient and observant.

Money Management

From the arbitrage example, you can see the power of having a large bankroll to take advantage of opportunities. Some sports books will take five figures worth of action on point spread/moneyline bets for the major sports.

It's important to have money available when opportunities like this come up in both sports betting and forex trading, and the best way to ensure that is to manage your bankroll responsibly.

A popular method for bankroll management in all sorts of markets is the Kelly Criterion - it informs gamblers, traders, and investors how much to wager on a particular bet, given the odds and the bettor's edge.

The catch here is that you have to have a reasonably accurate estimate of what your edge is in the first place. If you can deduce that information, you will be able to make the optimal bet size for your wager.

Forex and DFS?

Many of the traits shared by forex and sports betting also belong to daily fantasy sports (DFS). The 'currencies' of DFS are the individual players on your team.

If you have Aaron Rodgers on your team and he goes on a scoring rampage, it's similar to owning the Swiss Franc (CHF) against the Euro (EUR) this year when the Franc went up 30% versus the Euro.

The DFS analogy isn't a perfect comparison, as player results are reset after every game. You take your wins or losses and start with a fresh slate the next day. If you buy a currency and its value decreases by 10%, you still have that devalued currency the next day.

Nevertheless, the similarities between sports betting and forex largely hold true for DFS as well. If you've had success in sports betting or forex, you will find that the skills you've developed transfer well to DFS.

Compare forex trading to online poker next, or try out daily fantasy sports at RealFantasyFootball.com.

By Erik Olson

Risk Disclosure: fxBrokerSearch.com will not be held liable for any financial loss or damage caused by users acting upon any information contained within this website, not limited to and including: all numerical data, quotes, charts and buy/sell signals. Moreover, please be advised that Forex trading is one of the most volatile investment forms in the world and all trades should be placed with full consideration of the risks and costs.

fxBrokerSearch.com does not support nor encourage the execution of any investments. Trading with a margin is high risk endeavour and not suitable for everyone, therefore, each investor should carefully consider all relevant trading conditions, such as experience, risk and cost, before taking part in any type of trading, including Forex.

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This means advertised prices may not be accurate and could differ from the actual market conditions. For this reason it is not appropriate to rely on any data presented by fxBrokerSearch.com for the purposes of trading.

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