What is Betfair Trading?
Betfair trading is a form of online trading that allows traders to both back (bet for) and lay (bet against) different outcomes of sporting events.
To better understand how Betfair works, it's useful to compare it to traditional bookmakers.
In a traditional bookmaker (Sportsbook), the bookmaker sets the odds for different outcomes of a sporting event. Bookies take all the risk on any market, but they make their money by setting the odds in their favour, known as an “over-round”
When all the odds of a particular market are combined it will give a percentage above 100, for example 116% means that the bookmaker's margin is 16%.
In theory, punters would have to spend £116 to guarantee a return of £100, leaving the sportsbook with £16 profit no matter what the outcome of the event is.
The betting exchange platform such as Betfair acts as an intermediary, allowing traders to back and lay positions on the outcome of the event. The exchange takes a small commission on each trade, which is how they make money.
Understanding how Betfair trading works is crucial for any would-be trader who wants to trade on the platform. Without a solid understanding of the mechanics of the exchange, it's easy to make costly mistakes and lose money.
Betfair trading works on the principle of supply and demand. Essentially, the odds for a particular event are determined by the number of people willing to back or lay a particular outcome.
Backing an outcome means that you believe that it will occur while laying an outcome means that you believe that it won't occur.
For example, if there's a tennis match between Rafael Nadal and Novak Djokovic, and more people are backing Nadal than laying him, the odds for Nadal will decrease. Conversely, if more people are laying Nadal than backing him, his odds will increase.
To trade on the exchange, traders need to understand the terminology used on the platform, including terms such as "backing," "laying," "odds," "positions," and "markets."
In addition, traders need to develop trading strategies that can give them an edge in the markets, this requires a good level of understanding of both risk & money management techniques.
Knowledge of market liquidity and how to analyse the markets for trends and patterns to make informed trading decisions.
Beftair Trading Jargon
- Back: To bet on an outcome to happen (e.g. "I backed Manchester City to win the game").
- Lay: To bet against an outcome to happen (e.g. "I lay bet Spurs to lose").
- Matched: This is where the price offered on the Betfair exchange has been taken by another punter.
- Un-Matched: This is where the price offered is available on the exchange to be matched.
- Green Up: To close a trade for a profit, also known as a green book.
- Red Up: To close a trade for a loss, also known as a red book.
- Scratch: To close a trade with the same amount of money as your opening position and at the same price.
- Liquidity: How much money is available in a particular market.
- Tick: The name was given to price increments the market price increases or decreases in.
- Liability: The amount you stand to lose if your lay bet is not matched.
- Cross-Market Trading: Taking advantage of related market discrepancies to secure low-risk profits.
How Do We Trade on Betfair?
Our main focus is the high liquidity football markets such as the Premier League, we have developed a robust in-play trading timeline that can be used on any football match.
One of the main reasons for trading in the Premier League markets is the market depth because in certain situations you will need to exit the market as quickly as possible, in low liquidity markets you could have money waiting to be matched.
The trading timeline is made up of several individual football trading strategies that become active at certain times during the game, depending on the live action and the score at a particular time.
These Betfair trading strategies have stood the test of time and we consistently evolved over the years as the markets became more efficient.
We take a low-risk approach to our trades, generally never risking more than 3% of our trading bank on any given game (£30 in every £1000 trading bank)
Our trading process is broken down into two positions.
Opening Position: (these can be either a back bet or a lay bet), it should be remembered that with any sports trading, you will place more money in the market than you're prepared to risk overall.
For Example, we place may initially place 5% of our trading bank into the market, but our overall risk on the trade is just 3% if we get our trading call wrong and have to exit the trade for a loss.
Closing Position: This will be the opposing bet or lay in the market to our opening position, if we have made the call correctly then our potential profit will be secured, if incorrect then our stop loss will be triggered and we make a loss on the market.
If you're familiar with bookmakers, they use a cash-out feature to allow you to close your position in a particular market. A traditional bookmaker will exploit punters by offering a poor return on any cash-out as the odds being offered are so far removed from the true odds that would be trading on a betting exchange such as Betfair.
Not having a Closing Position: In simple terms then that is just the same as placing bets into the market, when it comes to Betfair trading you should always know your closing position and exit price (especially if you need to take a loss on the market)
Betfair trading is not a complicated process and our football trading timeline is inter-connected which enables us to manage our risk effectively and enable us to secure a steady drip of profits over a long period.
Why Do New Sports Traders Get It So Wrong?
Successful trading is based on having good Betfair trading systems and strategies, many would novice traders start trading without any of the fundamentals needed to be successful.
Before placing any money into the market you need a trading strategy, whether that is on horse racing or tennis matches, you need a strategy that allows you to identify potential good opening positions in the market and when to exit the markets.
You need to learn how the markets work, how the price movements in the markets are triggered by the live action, and you need to know when to take a small profit or go for big profits.
New traders will have one trading strategy and use that strategy every time they trade, sport is unpredictable, so you need to evolve trading strategies into new ideas that will give you an edge in the market no matter how the game is being played out.
Making money on the betting exchanges is not easy and if you're unprepared, then all you're doing is seeding the markets with your hard earn money, for other experienced traders to relieve you of that money.
Betfair Trading can take years to fully master due to the complex nature of the sport, how individual sports evolve, and then how Betfair markets react to the latest trends in sports.
Risks and Rewards of Betfair Trading
Betfair trading, like any other form of trading, comes with its own set of risks. The process of getting started is an easy one, open a Betfair Account, fund your account, and you're good to go.
If you have already started trading on the Betfair exchange, how long was it before you were placing bets on the markets?
Any trader needs to understand and manage these risks to ensure success in the long run. Here are some of the major risks associated with Betfair trading:
- Market Volatility: The Betfair market is highly volatile and can change rapidly, which can lead to significant losses if not managed properly. Traders need to keep a close eye on the market to ensure that they are aware of any changes that may affect their trading strategies.
- Lack of Liquidity: The liquidity of a market refers to the amount of money available for trading at any given time. If the market is illiquid, it can be difficult to enter or exit a trade at the desired price, which can result in losses.
- Price Movements: Price movements in the Betfair market can be unpredictable, which can lead to significant losses if traders do not have a solid trading plan in place.
To manage these risks, it is important to have clear trading strategies in place. You should have a set of rules that they follow when trading, which should include entry and exit points, risk management strategies, and a plan for dealing with unexpected market movements.
One of the most important risk management strategies for Betfair trading is to use stop-loss orders. A stop-loss order is an instruction to exit a trade if the price reaches a certain level, which can help to limit losses.
The more you can suppress your risk, the more profits you will make long-term, this comes from building good market knowledge and well-researched sports trading strategies that you can trust.
In addition to managing risk, successful Betfair traders can reap significant rewards. Some of the potential rewards of Betfair trading include:
- Profit Potential: The Betfair market provides traders with the opportunity to make significant profits if they can predict market movements accurately and execute their trades effectively.
- Flexibility: Betfair trading is highly flexible, and traders can choose from a wide range of different markets and trading strategies to suit their preferences.
- Accessibility: Betfair trading can be done from anywhere in the world, as long as there is an internet connection. This makes it a highly accessible form of trading for anyone with an interest in the market.
Do You Need Betfair Trading Software?
Although you can place all your trades on the Betfair exchange, many professional traders choose to use software such as Bet Angel and Geeks Toy to automate their trading process.
Technically you can close out any open trading position directly on the Betfair website with a click of a button using the exchange cash-out function.
Trading Software Advantages
- Increased efficiency: This can help you place bets quickly and efficiently. With the use of features like one-click betting, ladder interfaces, and automation tools, placing and managing bets is much faster, especially if you need to exit fast on your trading positions
- Access to advanced trading features: Use of advanced trading features such as charting tools, market analysis tools, and the ability to place bets based on specific conditions. These features can be very useful for getting better value of the market
- Reduced emotion-based trading: Automation can help reduce the impact of emotions when it comes to Betfair trading. Since the software follows pre-programmed rules, it can help you stick to the trading strategy and avoid making impulsive decisions based on fear or greed.
Trading Software Disadvantages:
- Cost: If free to use the betting exchanges, the software can be expensive, especially if you want access to all the advanced features. Additionally, some software requires ongoing subscription fees, which can add up over time.
- Learning curve: Learning how to use the software effectively can take time and effort. Remember the process can be simple, overcomplicating the process could lead to mistakes and losses.
- Technical issues: Like all software, it's subject to technical issues and glitches. If the software malfunctions during a trade, particularly through automation could result in significant losses.
- Over-reliance: You may become too reliant on the software, which can lead to complacency and a lack of independent decision-making.
Different Types of Betfair Trading Strategies
Many different types of Betfair trading strategies can be used, and they can be broadly categorized into two types: pre-event and in-play.
Pre-Event Trading (Or Pre Race in horse racing)
This involves opening a position in the markets an event starts, and then closing them out before the event starts. The aim is to take advantage of a movement before the event starts.
Scalping
Scalping is a technique that involves placing and closing out multiple trades with one or two tick movements. The goal is to make a small profit on each trade or take a small loss if the market moves against you, to build profits over time.
A good example would be scalping the draw price on a football market if the price was stable between the available back and lay prices on offer.
Swing Trading
At some point a market will hit support (low) or resistance (high) to any further movements, this technique gives a low-risk trading opportunity that the price will move away from these market levels to secure profits.
Trend Trading
If you can identify the direction of the market trend, then the aim is to take advantage of the trend by opening a trading position.
Pairs Trading (Horse Racing)
This is where you get two short-priced horses usually below 3.0 that dominate in the markets, one price will move out and the other price is likely to move in. This technique can be linked to swing trading as well.
In-play Trading
Once the sporting event has started the markets are turned in-play and the prices will react to live action, most markets stay open until the conclusion of the event, except football where the markets suspend on key events such as goals, penalties, or sending off.
Back to Lay (Dobbing)
Also known as double or bust, back to lay is a trading strategy used in horse racing where back bets are placed on a horse at certain odds (Usually pre-race). Then closing lay bets are placed at half the odds the horse was backed at for double the amount of money.
Certain horse races are more effective than others and this technique lends itself to the students of the form book.
