Betting Strategies Series: Trading

As a betting exchange Betfair offers hundreds of opportunities to trade prices on many different betting markets every day, but traders must be disciplined and be willing to absorb a loss when the market goes against them. Appealing phrases such “locked in profits, green books, guaranteed pay-out whatever the outcome, and free bets”  - it all sounds too good to be true, and we all know what it can mean if it sounds too good…. so in today’s post I’m going to investigate further.

I’m going to start by saying something which may seem to you paradoxical in some ways – but I believe you can become a good scalp trader simply because you cannot really predict which way the price of a horse will go.

It is very ambitious of me to try to explain how to trade in a short article but hopefully I can get the ball rolling for you. If I can get some discussion going on this topic we can see where it leads. I hasten to add at this point that I am by no means an expert, and I do not trade regularly at all. But I have had some reasonable success previously and I now feel comfortable passing on some strategies that have worked for me. Given that honest admission, you can decide whether or not you wish to take any notice of me, and I will not be offended if you decide against.

If everyone shows me there’s more than a passing interest in trading, I may add some more articles and videos of strategies over the next few weeks.  But for today, I’ll discuss a type of trade known as ’scalping’.

Scalping as a method is generally exercised on markets where the price is relatively stable (so it tends to be about the favourite, especially when it comes to horse racing) and the trader is seeking to take advantage of a price move of just one or two ticks. At the other end of the spectrum, “swing trading”, which I may discuss in the future, attempts to profit from a large price move in a more volatile market.

So here is a brief explanation of how trading works for the complete novice:

In essence, trading is not dissimilar from buying and selling shares and commodities on the Stock Market. You are looking to back something (sell) at a high price and lay it (buy) at a low price (or lay at a low price first then back it at a high price), thus locking in an automatic profit or a free bet.

So for example, let’s say you back a horse (Imperial Commander) at 4.40 with £100 and the price shortens to 4.00 at which point you lay, again with £100.

Should the horse win, you would earn £340 from your back bet, but you pay out £300 for the lay. In other words, you profit £40 if the horse wins and nothing if it loses. It has become a risk free bet.

The majority of traders however, will rarely settle for the ‘free bet’ option and they will ‘green up’ the book instead. After the price move, the trader will lay with £110 instead of £100

In this scenario the trader will now win £10 no matter which horse wins – this is known as a green book because the profit/loss figure shown on your Betfair screen will be a green (profit) amount against every single runner. Not one horse is a loser in this kind of book. A green book is a thing of beauty I’m sure you’ll agree, but it’s not quite so simple. In the event the price moves against you, you have to get out for a loss and endure a red book, which doesn’t look so pretty!

That’s the basics. Of course the difficult bit (and isn’t there always a difficult bit?), is trying to take advantage of these price movements. How then, do we decide when we should be backing, and when we should be laying?

When Betfair was fairly new and I dabbled with trading a few years back, I would check all the graphs and then take a position (based on past movements) hoping the price would move my way. Disaster – I lost a lot of money doing it that way because it was almost entirely guesswork on my part.

You will be pleased to hear, you don’t have to guess the markets to be a good scalp trader. Everyone does it differently, and perhaps some people are experts at price prediction, but for me the ‘trade secret’ (forgive the pun) is to take a position by leaving a back or lay order a little bit away from the current price.

But here’s the essential part: You need to look for a spot where there is very little money waiting already (so you will be at the front of the queue). To give you an example, let’s say we are watching the favourite, and the horse is currently trading at 2.98.

You might spot that there is only £51 in the queue waiting to back the horse at 3.15 so I put in an order at that price for £100.

At this point, it’s just a matter of playing the waiting game. I’m hoping the price rises to 3.10 at which point I get ready to click the pink box and lay. If it doesn’t rise – I can simply cancel the order and no damage is done – that’s one of the advantages of this type of trading.

If it does rise and I see money getting eaten away at 3.10 then I will lay. Then, when the price hits 3.15, my £100 order will start to get taken and this will complete the trade. The beauty is that because I got in early, my order will be right up near the front of the queue (you will remember that there was only £51 ahead of me) so I get matched very quickly.

Of course there is the possibility that the price will move back down as soon as I’ve layed (and never hit 3.15) but if this happens, you have to get out for a loss pretty quickly – I never said this would be easy-peasy, and never make the mistake of letting the bet stand and hope for the best. Take it from me – it’s a pretty efficient way of wasting your money!

The great thing about this kind of trading is that you don’t have to try predict which way the price will go. If for example, the price stayed at 2.98 and never moved upwards, I could simply cancel my back order and move on to the next market with no damage done.

I could probably write all day about this but I wanted this post today to demonstrate you can execute some decent trades with a relatively small bank. People invariably think you have to have thousands in your account to trade properly but this does not have to be the case. You can trade with any amount really – but remember, keep stakes to an absolute minimum when starting out as you will definitely make mistakes and probably blow away a few banks along the way. It takes time and patience to learn how to trade and if you find you struggle to make profit with small amounts, even after a few weeks practice, you sure as heck won’t do it with a large amount.

As I said at the top of this article, I am not an expert, and if you regularly practice this strategy for making profits from horse racing I would love to hear from you. If you could give one single piece of advice to a trading newbie, what would it be? Do you use any particular tools or resources to help you in your trading exploits? If you don’t mind sharing, please list them and leave a comment for the benefit of other readers.

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Tagged as: Betfair Trading, Betting Strategies