Sports Arbitrage Trading (4) - Getting Started as a Trader

Much has been written about the no risk aspects of sports arbitrage trading, but when novice traders jump in without adequate preparation, losses are all but inevitable. Make no mistake, sports arbitrage trading is a skill. Anyone entering into sports arbitrage trading with the wrong mind set will, at best, only succeed in scraping the surface. Adopting a professional attitude is probably the most critical factor in being a successful sports arbitrage trader.

The following is a guide to the steps you’ll need to take before placing any trades. Keep in mind that you will be able to take action on most of these steps in parallel so as to speed up your progress.

Hardware

The first step in becoming a professional sports arbitrage trader is to equip yourself with the necessary hardware. If you’re reading this, you probably already have most of the hardware you need.

Your computer should at least be capable of running Windows XP. This basically means a minimum spec of a 1Ghz processor, with at least 1 gigabyte of RAM and 80GB of hard disc. You’ll also need a broadband internet connection. A pleasant working environment is also very important: a comfortable chair, a decent desk, proper lighting and as few interruptions as possible when you are trading.

Capital

£5,000

The next decision you will have to make is how much money you plan to invest. If your capital is limited or you only want to invest a relatively small percentage of it to get started, to see any returns from your investment, you should only begin with a minimum starting figure of £5,000. Any sum less than this will not provide a clear picture of what being a sports arbitrage trader can mean, with none of the profits that can be earned.

Many traders make the mistake of thinking that although they are starting small, they don’t need to invest in sports arbitrage software. Or they invest in the cheapest that they can find. This is a false economy and will seriously curtail earning ability. Efficient and powerful software is available, but it is relatively expensive.

A fledgling trader should be prepared to invest in a three month subscription for one of these top software programs, costing about £150 a month. Add to that another £50 a month incidental trading expenses, and it’s clear that your trading will need to cover £200 a month in expenses before going into profit.

Another area where an under-capitalized trader will feel the limitations is in his or her inability to turnover money. Assuming that payouts can take three days or even four, the most that a trader with £5000 of capital can turn over on a day’s trading is £1200. On the basis that the average profit over the day would be 2% that would make for a gross total of £24 a day. That works out at £720 a month before expenses or £520 net.

The more capital that an experienced trader has at his disposal the more money he will turn over and the more profits he will earn, as his overheads remain constant. In the example above, the overheads (£200) are almost 30% of the income (£720)

£15,000

A trader with £15,000 to invest will turn over close to £100,000, making a profit of about £2000. Since the overheads remain at £200, they now represent just 10% of the income. A trader with this size of a bankroll who allows his profits to accumulate for twelve months, on a decidedly not optimistic profit margin of 2 % monthly profit margin, will end the year with almost £40,000. Even if the trader decides that the time that they are investing justifies drawing some salary during the course of that first years trading, it doesn’t mean that the "snowball" will lose momentum altogether, it will just slow down a little.

£15,000 +

A trader with more than £15,000 trading capital will find that profits increase significantly as long as he is able to turn his funds over efficiently. This simply requires placing larger numbers of sports arbitrage trades.

Banking

Once the aspiring sports arbitrage trader has set his trading targets for the short and long term future, the next stage is to set up a bank account to handle the transactions. Don’t forget that if you will be working with capital of £15,000 for example, you will be turning over around £100,000 a month, or over a million a year. For this reason, it’s important to have a separate account for your trading rather than one which also handles your household credits and debits.

The best way to make deposits and withdrawals to online bookmakers is through debit cards, with online wallets such as Neteller and Money Booker a close second. If these options are not available to you then credit cards also provide a good option. The whole point is to minimize transaction fees that may knock a hole in your profits.

Once you have your bank accounts successfully set up, the next major challenge you will need to face in getting started as a sports arbitrage trader is to begin setting up your bookmaker accounts. This is by far the most time-consuming and tedious step; you will need at least 20 new accounts but 30-35 is the average.

With your bookmaker accounts set up, you should take some time to learn how their sites operate. Learn how to navigate the sites to get to the bets and learn how to get to the deposit slips. This process of familiarization is very important and it will make your first few trades far less stressful than if you were navigating sites you have never used before.

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