This article by the ScoreMetrics Lab gives you the basics on how to measure the performance and success of your sports investment systems.
The article is part of an ongoing series on educative sports trading topics and on treating the sports betting market as an investment opportunity:
”Investing is the act of allocating capital to assets with the goal and expectation of generating a profit. Good investing involves research, risk analysis, managing capital responsibly, and diversifying investments. Successful investors follow a long-term strategy or a system that matches their goals and tolerance for risk, and they follow that system non-emotionally.”
What should be considered a success in the market? How do you know whether or not you are doing well? We will try to answer these questions for you in this article.
Benchmarking against passive investments
So, you want to make money by trading in sports? Great! But how much should you expect to be making?
First of all, let’s establish that it is not easy to make it big in this field. To get where we are with our ScoreMetrics systems, we have had to do years of research and testing. But if you are willing to put in the time and effort, the payoffs can be pretty amazing.
In fact, our systems generated an ROI of 173% during baseball season and 168% during football season last year alone.
Those are big numbers, but what would be the baseline for success – the minimum target you should be aiming for when building sports trading systems?
The simple answer is that at the minimum, you should aim to beat passive investment opportunities – such as stock index funds. So, one easy way to measure if you are successful in sports trading is to compare your annual returns to that of the average annual return of the S&P 500 index, which has been roughly 8% (from 1957 through to 2018).
Generating a return that’s less than that 8% number means that you are using your time in actively managing a system while making less money than you would be making if you would have invested the same amount with a single click on a low-to-zero cost index fund.
Of course, when you are trading actively, you are also investing your time. And most likely you would like to make a lot more than that 8% annually. What’s a good target ROI then? Ask yourself how much time you are willing to invest, and what would be a suitable return for the tradeoff.
And if you want to cut some corners, make sure to check out our ScoreMetrics sports trading system offering and alert services.
How to measure your performance in practice
Documenting all of your trades is an important part of managing a sports trading system. Making it a habit of doing it immediately after conducting a trade makes it a lot easier for you to keep track of your performance.
A convenient way to do this is to have an Excel or Google spreadsheet for each of your sports trading systems. In this spreadsheet, you can document the date, the teams, the method of the trade (Team A +7 ATS, for example), the odds, unit size, and the return for each trade. You can then easily and automatically calculate the overall ROI% of your system.
Forgot to write down a few trades or didn’t think about documenting them when you first started a while ago? The good news is that online bookmakers will have your transaction history available so you can easily track back and add the missing trades to your spreadsheet.
Sports are back – time to take advantage
The sports betting market offers a unique opportunity for smart investors to diversify their portfolios and get access to a non-correlated market that is full of uninformed gamblers throwing away their money.
How does one find the right opportunities then?
At ScoreMetrics, we do this by exploring hundreds of hypotheses and conducting thorough research to find out if we have something in our hands that meets our rigorous criteria. We create rules, analyze every piece of relevant data we can find, and backtest our theories to make sure that they’re profitable over long periods of time.
Does all of this sound too complicated? It really isn’t once you understand the basics of trading in the sports betting market. And there’s no better way to gain that understanding than read our head trader John Todora’s new book – “Zero Correlation Investing – The Score Metrics Secret”. It’s currently on sale for a limited time, so go get yours now!
The ScoreMetrics Lab is the engine that runs the Sports Trading System operation, consisting of a team of researchers and writers who are constantly testing and retesting algorithms. They work hand in hand with our Head Trader and Creator of ScoreMetrics, John Todora to help find new breakthroughs and develop new systems.