If you are familiar with sports trading and like to trade sports events like tennis tournaments or horse races, you’ll have no trouble getting accustomed with the whereabouts of stock trading. Especially if your trading is based on chart analysis and you have been using software that utilizes a ladder, you will quickly make the transition from sports to stock trading.
Of course that doesn’t mean you’ll be profitable, that’s another (sad) story. But everything will feel home once you load your broker’s trading platform.
Are you a stock trader? Find more about sports trading
Chances are that you are actually a sports trader who is interested in making the big move to Wall Street. I don’t expect stock traders to read this article, but in case you are, you might wonder what sports trading is. After you read that, I’m sure you’ll begin spotting some of the similarities between sports trading and stock trading. In fact, even sports traders should take a look at that post!
Now that stock traders have been educated about sports trading and possibly went on reading how they could have traded the French Open tennis tournament, it’s time to help you as a sports trader to decide whether stock trading suits you.
It’s either going up or down
Stock trading, much like sports trading, is all about predicting the ups and downs of prices. At sports trading we predicted the movements of the betting odds. At stock trading we are betting whether a stock price will go up or down. That’s about it, although that’s very simply put. There are a bunch of stuff you should read about. For example, getting paid dividends would be a new thing for most sports traders, given there isn’t a corresponding situation at sports trading that I can think of. Yet, in the end it all comes down to how often your predictions are correct and how much money you win or lose in every trade. Just like at sports trading.
The winning probability and the win/loss ratio will define if you are a profitable trader. At stock trading that last ratio is called risk-to-reward. The best strategy is of course cutting your losses early and letting winners run. Ehm, you did use stop loss at sports trading, didn’t you?
Different strategy for different speed of trading
First and foremost, you need to decide what kind of a trader you are. Do you like ultra-fast trading such as scalping horse racing markets at sports trading, or are you the type of trader that enjoys a long term trade like presidential elections, Oscar winners and picking football champions in September? My opinion is that the time frame your trading mind is set on at sports will most likely be the most suitable one at stock trading as well. Thus, I would expect day trading stocks to be fascinating for horse racing scalpers, whereas swing trading would most appeal to people who trade weekend football matches on Friday.
Position trading and investing long term would definitely suit those who trade occasionally the Formula 1 championship for instance. Although that doesn’t mean scalpers won’t enjoy position trading from time to time. Just like at sports trading when scalpers decide to commit a small percentage of their bankroll to long term markets.
Is Wall Street for you?
Next comes the stock exchange you will be trading on. That would largely depend on your lifestyle, where you live and your working hours. If you live in Europe and want to trade US stocks, say goodbye to your evenings. If Asian markets seem like a goldmine to you, prepare yourself to sleep during the day.
On the other hand, stocks are traded around the clock as the sun moves from east to the west and stock exchanges are continually opening and closing, so there will always be an open exchange to risk your money (for more 24-hour action, make sure to check out forex). But you’d better specialize in one exchange before testing your strategy to another one; not to mention becoming an expert at a certain industry, knowing its stocks inside out. Just like at sports trading you mostly trade a specific sport or team/player. I’d bet you likely trade short odds, given favorite horses or teams usually have the necessary liquidity and volatility.
We need money, people!
You’ll quickly find out that liquidity and volatility are also very crucial in stock trading. Don’t forget that both fall under the online trading category. Therefore money and price fluctuation are needed at both sports and stock trading in order to make money. In addition online trading is a game of psychology, no matter the instrument you are trading. When you thought that the betting odds would go up, someone else bet that they would go down. Whoever was right, took the other’s money. When a stock trader buys shares, the seller thinks they have found a sucker to sell their shares. Eventually, traders need to find suckers who would take the other side of their trades, either long or short. And if you are losing money at trading, you can guess who the sucker is. I am sure you’ve heard the saying used at poker:
The answer to the original question of this post about the move from sports to stock trading is definitely yes. Converting into a stock trader being a sports trader can be done. Some will find the transition natural, others will have difficulties adapting to the huge world of stock trading. Whatever you do though and despite how many similarities you’ll point out between the two forms of online investing, I’d suggest spending a lot of time educating yourself and paper trading before risking your first dime. Even then you are most likely going to lose money, no matter how successful you have been at sports trading. Take my word for it.