More than two years ago in December of 2015 I wrote an essay as a freelancer. The topic was “Bitcoins – currency or venture?” At the time, Bitcoin had a price of $400. I wrote about the advantages like efficiency and anonymity but also about all the risks. I realized it could be a widespread future currency but by no means I could have imagined how far it would go.
Bitcoin has been very well aware in financial and even general news over the past six months. If you bought one single Bitcoin on February 13th in 2017 and sold it on December 16th the same year, you would have made a profit of $18,339 as the price jumped from $996 to $19,343. You would have bought Bitcoin at a low price and sold it at the highest possible price. Your action would have been a prime example of the “buy low, sell high” strategy.
Technically, “buy low, sell high” is an adage out of the financial industry, specifically connected to stock investing. It is a strategy of taking advantage of the market’s perception to overreact to downside and upside trends. The goal is to take something when the price is down and ditch it when the price is high. This strategy can also be applied to sports handicapping. Each game presents different markets for different betting options, e.g. moneyline, spread or totals. To cut a possible long story short: the market sets the price on the moneyline, the spread and the total. When the season starts, each team has a certain market price or spread value. Depending on results and other circumstances such as injuries, the spread value increases or decreases and market perception shifts into either direction. As a bettor, our general goal is to identify discrepancies between the market prices and the results of our own handicapping process to find these buy low or sell high spots. We want to “buy” undervalued teams and “sell” overvalued ones, which means playing or fading them.
That sounds very easy, doesn’t it? Not so fast, my friend!
Difficulties of buy low / sell high on sports handicapping
One of the biggest aspects of investing, whether it is sports handicapping or stock investing, is psychology. We bet with emotions. Most of the people understand the pure logic behind buying something at a low price and selling it at a high price, but that’s not what our biases tell us to do. In sports handicapping we tend to fade a team that is losing and whose price (spread) is falling. When a team is playing well and winning comfortably, we want to get a piece of the cake. We don’t want to miss out on the hot team and don’t want to have anything to do with the cold team. It doesn’t “feel” right to go against a “good” team or to take a “bad” team.
“Buy low, sell high” is also extremely difficult to execute. In hindsight it is always easy to tell which price has been low or high, meaning which team was under- or overvalued at the time. But at the moment, it is highly challenging to identify buy low and sell high opportunities. Very often you will find situations in which teams trend upside or downside but they keep trending into either direction. What looks like a high spread the one week may look like a low spread a few weeks later. So bettors who tried to approach the “buy low, sell high” strategy get punished.
The key is to identify whether the shift of market perception is driven by the fundamentals of the game or solely by emotions. How to identify it? Disappointing answer: there is no recipe for it. If you want to get an advantage from that strategy consistently, meaning you win more than you lose, a lot of things need to come together. You got to put in the work. Sports betting is a job and it is hard work. Some handicappers need to spend more hours than others to be successful in the long run. You need to study teams and players to understand matchups. You need to actually watch the games to understand how games have played out and what exactly leads to certain results. You also need to build up some experience to establish situational awareness and identify patterns. If you do your homework, you will be able to identify “buy low, sell high” spots properly more often than not. It’s basically a tool that should be on your betting arsenal.
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