For many, the lure of quick riches is hard to resist. While it is certainly possible to make a good living from arbitrage betting, the odds are heavily stacked against you. If you are looking to make some extra cash, then why not look into arbitrage betting instead? The world of arbitrage betting is far more complex than your average betting shop, but just like any other new market, it is very predictable which products people are more likely to want to bet on. With that in mind, it’s easier to get started than you think. In fact, you can make a steady income from arbitrage betting with little effort. Let’s take a look.
The Basics Of Arbitrage Betting
Arbitrage betting is, at its very basics, the practice of making money from differences in price. Essentially, you are taking two separate markets, one selling at a higher price than the other and making a small amount on each trade. The beauty of arbitrage betting is that there is never any risk involved. You are only making money when the two prices are in agreement, so if either of the markets goes against your prediction then you will lose a small amount on each trade. In a nutshell, here’s how it works.
You start by looking at two markets, one selling at a higher price than the other. Let’s say that the EUR/USD pair is trading at 1.3020 and the USD/JPY is at 125.11. In this situation, you are making money because there is a significant price difference between the two pairs. The reason the first pair is trading at a higher price than the second is because there are more buyers of the former than the latter. The simple and elegant explanation for this is that there are more people willing to purchase Euros than there are people willing to purchase Japanese yen, putting downward pressure on the price of the former and upward pressure on the price of the latter. As a result, you have a situation where one pair is trading at a higher price than the other for no apparent reason. In most cases, this results in a significant profit because there is often significant demand for the cheap currency and limited supply. However, just because there is profit does not mean that it’s easy money. Let’s take a look at some of the difficulties you will encounter.
The Volatility Of Futures, Options, And Exchange Traded Funds
There are multiple volatile markets you need to keep an eye on when entering into arbitrage betting, and they are all within the currency space. That’s because there is a high degree of uncertainty surrounding all three. For example, let’s say you are looking at EUR/USD and you think it’s going to go against the trend. You then take a short position, or sell something, hoping that it goes lower. If it does go lower, you make a small profit on each trade. However, if it doesn’t and continues on its steady upward climb, then you will lose money because there is limited supply and high demand. In this case, the opposite is true for the long position. Essentially, you are saying that you think the trend will be upward, so you begin buying euros, hoping that they will go up in price. If they do go up, then you make money on each trade. However, if they don’t and continue on their downward march, then you will lose money because there is limited supply and high demand. There is a similar situation when it comes to speculating in the other direction. For example, if you think the USD/JPY is going to rise, then you take a long position, or buy Japanese yen, hoping that they will go up in price. If they do go up, then you make money on each trade. However, if they don’t and continue their steady descent, then you will lose money because there is limited supply and high demand. It’s important to keep in mind that all three of these markets are extremely volatile, which makes it extremely difficult to enter into arbitrage betting with any degree of sophistication. As a general rule, it’s a good idea to avoid all three and go for walk or dinner, instead.
One of the biggest issues you will encounter when arbitraging currencies is limited liquidity. When you bring up liquidity in relation to currencies, what exactly does that mean? Essentially, the more popular a certain currency becomes, the less liquid it becomes. For example, let’s say you are looking at the Japanese yen. At first glance, it may seem like there is a lot of liquidity because there are a lot of people willing to buy or sell yen. However, when you actually look at the markets for the Japanese yen, then you will see that there is actually very little liquidity. The reason is that there is very high turnover in the Japanese yen market, which makes it difficult to enter into high-quality positions. Essentially, you have a lot of people putting in orders to buy or sell yen and the market quickly absorbs those orders, resulting in limited liquidity. If you really want to arbitrage, then you will need to look for opportunities in less liquid markets because there are often less participants (either real or virtual) when it comes to more popular markets. For instance, if you want to speculate in the Japanese yen against the Euro, then you will have to look at a forex website that specializes in high-quality ECN accounts because most banks and trading platforms do not provide sufficient liquidity for such large positions.
One of the biggest problems with currencies is that, in most cases, they are not permitted to be held in dark funds. What exactly does that mean? Essentially, if you want to buy or sell a certain currency in an attempt to make money from small fluctuations, you will need to keep track of the purchases and sales because it’s not allowed to be held in a dark pool. Dark pools are private platforms, only available to high-quality participants, where you can keep track of your trades without necessarily exposing yourself to the public eye. Letting your guard down and being unable to follow your investments immediately causes you a great deal of anxiety. It’s no wonder why most professionals avoid taking any kind of positions in currencies because of the inherent volatility and uncertainty that comes with it. If you really want to make some quick money, then you can look at high-quality CFDs, which are more versatile than you’d think because of how they are constructed. With CFDs, you don’t necessarily need to keep track of every order because there will always be someone willing to purchase or sell what you are trading. The advantage of CFDs is that they allow you to enter short and long positions simultaneously. The longer your position, the more you will suffer from the fear of missing out, causing you to enter positions that are too large, which, in turn, causes you to lose money. Keep in mind that CFDs are, for all intents and purposes, a leveraged product with a high degree of risk.
Countless times, taxpayers get audited because they did not understand that financial products, such as CFDs, are subject to capital gains taxes. If you are looking to make a quick buck, then CFDs are certainly not the way to go because of all the extra paperwork you need to complete. If you want to keep your documents organized and easily accessible (which you should), then going with a virtual solution that provides useful reports is the way to go, as opposed to using a simple spreadsheet. CFDs are not the simplest of all the financial products to track, and even when you have an excellent spreadsheet with all the relevant figures, you will still have to manually enter all the trades into your spreadsheet for analysis. It would be best to avoid all financial products that are not CFDs or fully CFD-compliant because of how tricky taxing can be when it comes to all such products.