Sports betting and day trading are often seen as similar industries. In fact, many financial traders tend to have a thing for sports betting and vice versa.
This fact was seen evidently in 2020 during the global pandemic. At the time, many countries banned sports, making it almost impossible for sports betters to make money. Instead, they turned to the financial market, where some of them became successful.
In this article, we will look at the two industries and identify their key differences.
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Table of Contents
What is sports betting?
Sports betting is a large, global, and often highly regulated industry that enables people to place bets on all types of sports. For example, if Manchester United and Chelsea are playing, you can place a bet on the team that will win. If the team wins, you will make money. On the other hand, if the team loses, you will lose everything.
Sports betting is a big industry because of the number of sports that are played every day. They include hockey, soccer, and basketball, among others. With technology, betting companies can easily access these markets instantly.
Sports betting professionals use several strategies to predict the likely winner. They look at the historic performance of the two teams and come up with a thesis about the best team that will use.
Sports betting are popular because of the low initial capital that is needed and the potential payouts.
What is trading?
Trading, on the other hand, is the art and science of predicting the future direction of a financial asset. Some of the top assets that are popular among traders are:
- Stocks
- Exchange-traded funds (ETFs)
- Bonds
- Commodities
- Cryptocurrencies
among others.
Financial traders predict the future direction of an asset by conducting fundamental, price action, and technical analysis.
Fundamentally, they look at the news and events of the day. Similarly, on technical, they use indicators like the Relative Strength Index (RSI) and MACD to make these predictions. On price action, they look at the key patterns and predict how an asset price will move.
Similarities between trading and sports betting
Based on the above descriptions, we can identify key similarities between sports betting and day trading.
Probabilities
First, the two are based on probabilities. For example, there is a probability that your preferred team will win or not. Also, there is a probability that the asset you decide to trade will rise or fall.
Of course this is not based entirely on chance. Figuring out how many chances a stock (or team) will go up in value (or win) is the result of various analyses.
Constant improving
Second, the two industries are constantly improving mostly because of technology. The trading industry has improved in several ways recently. For example, many trading firms are now offering fractional shares to their traders. This simply means that you don’t need to buy a full Amazon stock at about $3,000. If you have $100, you can buy 0.03 shares of the company.
The trading industry has also welcomed new assets like cryptocurrencies and decentralized finance.
The sports betting industry has improved in many ways. For one, it has embraced virtual sporting events like Formula 1 and soccer. Also, some companies are now allowing betters to exit a loss-making bet before the game is over.
Start with a small amount (today)
Third, another similarity between the two is that over the years, the amount needed to start has reduced substantially. In trading, companies like Robinhood don’t have a minimum balance. Similarly, in sports betting, you can start to place bets with as little as $5.
Other similarities are that companies in the industry have made robust investments in technology to help their customers make better predictions.
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Statistical analysis
The other similarity is that experts in the two rely on statistical analysis to make decisions. For sports betting professionals, it is always important to conduct data analysis to predict the outcome of the game.
In this, you should look at things like a team’s trend, recent performance, and position in a table. As a result, if a team is in a strong winning trend, chances are that you will place a bet in its favor.
Similarly, in day trading, you should always look at historic trends/performances when making a decision. If a stock is in an uptrend, you will often be safe opening a trade in that direction.
Taxation
Further, there is a similarity between sports betting and day trading in terms of taxes. In most countries, traders and sports betting professionals are required to pay taxes on their winnings.
In the United States, day trading and sports betting profits are taxed as part of personal income. As such, since your accounts are linked to your social security number, you should ensure that you file these returns.
The only difference in this is that sports betting is often seen as a form of gambling and is therefore taxed more. In most countries, these taxes are automatically applied to your winnings.
Psychological similarities
The other similarity between day trading and sports betting is that there is a psychological aspect. This situation is often seen in numerous ways. First, they both can expose you to stress, especially when things are not going on well.
Second, they can also be influenced by emotions. For example, if trades or bets are not going well, you could find yourself in emotional distress. Similarly, after making losses, your emotions can push you to make mistakes.
Third, they also have a bias aspect. Some of the most common biases you can go through are overconfidence, anchoring, loss aversion bias, recency, and confirmation bias, among others.
For example, recency bias is a cognitive bias that favors recent events and is popular among day traders and sports betting professionals. In the two, you can rely mostly on the most recent news or events to make decisions.
Fourth, the other psychological similarity is that discipline is an important part of the two. To succeed, you need to be highly disciplined, especially when it comes to risk management.
Differences between sports betting and trading
While there are many similarities between spread betting and trading, there are also many differences between the two.
Leverage
First, for trading, many brokers provide leverage that can help you maximize your profits. This is not the case with sports betting (We don’t know about any sports betting companies offers leverage).
Leverage is important because it helps ensure that you will make more money if your trade goes right.
Stop Loss
Second, a trader can stop a loss-making trade at any time. For example, if you bought a company’s shares at $25, you can stop it at $24 if you can’t take the loss. However, in sports betting, it is often impossible to exit a bet that you have already placed.
Availability
Third, the financial market is usually live 24 hours seven days a week. Stocks are only live from Monday to Friday for a limited amount of hours. Currencies are live for 24 hours a day five days a week while cryptocurrencies are usually live every day.
Sports betting, on the other hand, happens only when there are live matches being played. On some days, there is none.
Skills and knowledge
The two fields are vastly different in terms of the knowledge that is required. In sports betting, you simply need to understand how to predict games. The analysis approach is usually relatively simpler than in day trading.
In trading, you first need to understand what the different types of assets are. This includes assets like stocks, forex, crypto and commodities. You also need to know how these assets work.
Also, it is mandatory to know things like fundamental and technical analysis and risk management. In most cases, it can take a few months or years to master these skills.
Time commitment
Further, there are differences in terms of time commitment. Day trading requires more time than sports betting.
As mentioned above, there are more things to learn when analyzing stocks and other assets compared to sports betting. Most full-time day traders spend tens of hours every day in the market.
Hybrid: Intersection between trading and sports betting
A key aspect about the two is the risk/reward. In this case, sports betting and day trading are both high-risk and high-reward activities.
This means that when you risk more, you will always open yourself to more rewards. For example, if you place a $5 sports bet, you can make $50. Similarly, if you place a $50 bet, you can make $500.
The risk between trading and sports betting is different. In sports betting, this risk is based on odds while in trading, it is based on volatility and price action.
What you can pass from sports betting to day trading
Since day trading and sports betting have their similarities, it means that there are lessons that you can take from the two. Some of the top lessons you can draw from sports betting to day trading are:
- Patience – Most successful sports bettors know the benefit of patience since you need to wait for a game to end. In trading, patience is an important aspect in so many ways. In some cases, it takes a few days before a certain setup to work out.
- Analysis – The other lesson is the need for analysis. To become a successful sports betting professional, you must have good analytical skills. You also need these skills to become a successful trader.
- Understanding odds – Sports betting is a game of odds, which also apply in day trading.
- Emotional control – The other lesson that you can learn is on emotional control. All successful sports betting professionals must always manage their emotions well, a trait that is necessary in day trading.
FAQs
Why is day trading seen as more socially accepted?
Day trading is more socially accepted than sports betting because the latter is seen as a form of gambling. Day trading, on the other hand, is more accepted because stocks and other assets are well-known to most people. Also, it is associated with the financial services industry, which is widely practiced in Wall Street.
Is day trading a sort of betting?
While most day traders don’t accept this, the reality is that day trading is a form of betting since it relies on odds. As mentioned above, day trading, like sports betting, has three outcomes like losing, winning, and status quo.
Is sports betting seen as an investment?
No. Sports betting is not seen as a form of investment. An investment is a situation where you purchase an asset with hopes of making a profit. In sports betting, there is no asset involved.
Final thoughts
Sports betting is the simple strategy of predicting the team that will win a match. The service is provided by many betting firms around the world. Trading, on the other hand, is the process of predicting the future direction of a financial asset.
External Useful Resources
- The state of play in the US sports betting market – Sport Pro Media
