Formula 1 trading is no different from trading any other market. If you think a F1 driver will not do well in the race, you lay the odds; that is you bet against him. If you think otherwise, you back the driver, hoping their odds shorten, so that you trade out with a profit. The odds are like stock prices as I explained in my stocks-sports trading comparison.
Yet, Formula 1 trading is more similar to futures trading, given there is a specific timetable for the Formula 1 events and expiration date of your trades. And that is when the race is complete. Until then though, you can speculate odds movements and trade according to your predictions.
Trading requires volatility and liquidity. You will find both of them close to racing time and during the race. So, with one hour left before Formula 1 kicks off this season in Australia, let’s see how to prepare yourself by analyzing the odds charts.
Technical analysis on Formula 1 odds charts
I am a technical trader, meaning I make decisions based on lines and charts. I could not care less for news, rumors or statistics. Obviously, if you combine them with technical analysis, you run a better chance to make good predictions. But, let’s stick to technical analysis of the F1 charts for this post.
These are the decimal odds of the three F1 drivers starting the race at front today to win the Australian Grand Prix, as they posted the best 3 times on qualifying round on Saturday.
- Support levels: I would back Hamilton, if his odds drop below 2.00, signaling a breakdown. The same applies should Rosberg’s or Ricciardo’s odds fall below 4.00 and 8.00 respectively.
- Resistance levels: Of course, things cannot go as planned for all three drivers! Thus, I would be laying (i.e. betting against) if odds drift above 3.00, 6.00 or 12.00 at the respective charts. This trading strategy is known as breakout strategy.
Remember, you do not need the picked drivers to win (or lose). You can trade out well before the completion of the race, just as you trade out when trading futures. That is why Formula 1 trading differs from betting.
Write down your Formula 1 trading plan
Setting a stop loss in Formula 1 trading is just as important as in any other form of online trading. Upon entering the market, use established support and resistance levels when setting your stop loss. The volatility can skyrocket, especially if cars are damaged. Should I remind you of the innumerous unforeseen events that can happen during a Formula 1 race?
You can also draw trend lines, by connecting the tops and bottoms. I have done so in the Rosberg’s and Ricciardo’s charts. Again, these lines can work as a guide to your trading. If odds are trading below the green downward trend line, you should follow the downtrend, unless you have reason to believe a reversal will occur.
Finally, waiting for the breakout’s confirmation before initiating your trade is less risky. Yet, you may miss a profitable trade by trading in that way. It is always better though to miss a trade, than chasing a trade. Your risk/reward ratio will seriously hurt and you run the risk of buying the top (or selling the bottom) as well.
If Formula 1 trading is new to you, why don’t you read more about sports trading? You will realize you can trade on weekends, when stock market is closed. I guess it sounds more fun to trade motorsports than companies’ tickers!