Applying technical analysis to the Betfair graph of Rafael Nadal to win the French Open 2011 during last week helped enter a trade when the odds retraced back to the support level at 2.40. Although the Spanish tennis player continued winning his matches, his odds resumed the uptrend reaching out again for the highest value at 3.50. The resistance level found there is a very good reason to trade out and bank profits, making it a 2-1 reward-risk trade since the stop loss was set right below the support level, close to 2.10.
Laying €1,000 at 2.44 was done a week ago without even knowing what is going on the Roland Garros tennis courts. Just by paying close attention to the odds’ graph though was easy to point out the odds’ retracement and risk about €150, as backing at 2.10, in case I was wrong, would lead to lose that amount of money on any possible winner of the tennis tournament. Yet there was no moment of hesitation to enter such a long-term betting market, since there is plenty of time and no pressure to trade efficiently throughout the French Open’s duration, comparing to much faster and volatile markets like horse racing. I would consider this kind of sports trading much like the position trading using the daily stock charts.
Anyway, while Rafael Nadal did win his next 3 games since I had entered the trade, I was happy to see the odds drift up to the resistance level already set in the past. Understanding why the odds continue climbing is like the fundamental analysis in stock trading. We need to watch his matches and recognize any weakness in his game, possibly the performance of other tennis players affects final result, likely opponents drawing with him could pose a threat to his tournament life and so on. I couldn’t care less though, as I am mostly interested in technical analysis and technical trading, much like I do in [intlink id=”1271″ type=”post”]horse racing markets[/intlink]. I have no knowledge of that sport and still was quite profitable trading the odds of the favorite horses in thousands of races. Here once again I haven’t studied any statistical tennis book, don’t watch the matches live on TV – apart from a few interesting ones just for fun – and I know nada about form and news. The only important thing to know if you are trading tennis betting markets is to read carefully the betting exchange rules, as you don’t want to be surprised by some kind of peculiar conditions, such as what happens if a player withdraws, is injured or other unforeseen events.
Sports trading, using only technical analysis on the Betfair graphs, means that our judgment is relied solely to crowd psychology. That psychology effect is apparent on any sports graph or financial chart in great extent and that is what traders take advantage of. Gamblers were panicked and forced Nadal’s odds to 3.50 after bad performance, then backers took over the market and saw the value of those odds pushing the odds back to 2.50. Now it was the time for layers to find value in those short odds, as the support level was a clearly defined resistance level some days before when gamblers believed there was value to back Nadal at that point. Since they were sure there was no value in backing at those odds, bettors and traders placed lay bets and they are still in control of the market, judging by the drifting of the odds.
The backers might not have the power to turn around the market, or a breakout of the resistance level requires drama on the tennis courts of the French Open 2011. What matters though is that resistance levels are excellent exit points. On the other hand, it is a great opportunity to reverse the trade and take advantage of a trend reversal. However going against the already established trend would need a lot of caution and keeping an eye closely to the market, while the tennis matches take place, so that traders exit quickly in case of bad performance and a breakout.