Exploring Leverage in Betting: Part 1

Leverage is a term that is thrown around a lot when talking about Forex and CFD trading.  If you have any experience in these types of investments, you may already have an idea what I am talking about.  If not, the concept may be completely new to you.  It’s definitely something to discuss with reference to sports betting though in at least a couple of ways. 

What is leverage?  Leverage is when you are able to control more money than you actually possess.  In Forex and CFD trading, it is known as “trading on leverage.”  Basically, the trader is allowed to control a stake exceeding his or her account balance.  On leverage, they can trade “as if” they had large accounts, and profit faster.  Of course, the converse is also true.  On leverage, a trader can lose a ton of money fast, and blow their account overnight.

The concept of leverage comes into play with sports betting in a couple of different areas.

• Bonuses
• Leverage betting

When you sign up for an account at a betting site, you will probably be offered a match bonus.  You might see a promotion like, “Deposit $100, and get $40 free.”  The $40 bonus is not really free, however, because it is being provided to you as leverage only.  You are allowed to control it, and wager with it, but you cannot withdraw it until you meet a turnover requirement.  A rollover requirement might be something like 5x.  That means you have to risk five times the amount of your deposit plus the bonus before the bonus is your money.  In the meantime, you can win faster—and lose faster.  In other words, your risk is higher if you bet with the bonus like it is your own money.  Three percent of your total account (your deposit plus the bonus) actually equates to more than 3% of your actual account.  This can complicate money management.

The other way leverage comes into play with online betting is with leverage betting.  Some companies like Betfair allow you to do this.  It works just the same way it does with Forex and CFD trading.  You are allowed to stake more money than you actually possess.  When you win, you win big, but when you lose, you lose big too.

Whether we are talking about leverage betting directly offered as such or we are discussing betting with bonuses, we are ultimately talking about a double-edged sword.  Leverage is exciting to use, and it can be thrilling to control such a large stake.  You get a shot at building up your account fast.  But remember, there is a reason that betting sites offer leverage, and that is that most bettors lose!  So be very careful before you bet on leverage, and make sure you understand the consequences.  You could end up with a closed account in no time.  If you accept a bonus, make sure to do your math so you do not mess up your money management plan.

If you are interested to find out more about leverage betting my second installment will explore the types of betting leverage you could use to help you win bets with minimum risk.