The Advantages of Using a Single Major Currency
Using a single major currency when arbitrage trading is advised for one major reason – if you try to place an arbitrage trade with two different currencies, then you are just making things harder for yourself. In a game where speed is of the essence, every effort you can take to streamline the process is vital. By allowing multiple currencies to creep into your bookmaker accounts, you can really handicap your performance.
If you live in a country where GBP, EUR or USD is your primary currency – then just use that currency. Lucky you, this is simple for you. But for the rest of us who live in Australia, New Zealand, Canada, Switzerland etc where our currencies are not one of the main three, we need to pick one of those three to trade in.
Of course, exchanging all of your trading capital into another currency carries risk with it – over the course of trading the currency could lose value and you could lose significant amounts of money just from that. But equally, it could gain value, and you could make much more money. This risk is annoying, but is something which you generally can’t do anything about, can’t predict, and can’t avoid. Even if you try to trade in your local currency (say AUD), then inevitably you will find yourself NEEDING to expand into the bookmakers which don’t use AUD (MOST of them!) – and then you find yourself exposed to currency fluctuation risks anyway!
The difference between trying to trade in your local currency plus one or two of the major currencies when you need to vs using just one currency, is that by using one currency all of your accounting is simple and each arb trade you place is straight forward. If you use multiple currencies, then you need to calculate the exchange rate on each trade, and you are constantly re-calculating the value of your capital (since a portion of it is always changing!). Or, if you try to simplify things and assume the value of your foreign currency is static, then you run the risk of placing arb trades which regularly result in actual losses (by converting the stronger currency to a weaker currency.)
Again, because currency can go up or down and most of us have no idea which way it is going to go, it is arguable that statistically you are just as likely to profit as you are to lose. But this is true for both approaches (local currency+major currency and major currency only), but multiple currencies still leaves you dealing with different accounts with different currencies. So when your arb calculator says to place $200 in one bookie, and $200 in the second one – you still need to convert that $200 into its actual amount in the second currency. If you are in a rush, and accidentally place $200 AUD and £200 GBP – your simple arb is suddenly a HUGE mistake. Dealing with multiple currencies is just not worth it!
Some Facts For Consideration…
SureBetBookies database covers over 150 different bookmakers. Within that database there are
- 97 bookmakers which accept USD
- 82 bookmakers which accept EUR
- 75 bookmakers which accept GBP
- and only 47 bookmakers which accept AUD
- or 33 which accept CAD
These numbers are of active bookmakers (hence why the USD number is so much lower than the total number of bookmakers – many bookmakers have merged over the past few years) and are useful to give you an idea of the ratio and relationship of each of the major currencies vs the less common currencies.Author :Aegist
Date posted:August 23, 2010Post Category :
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