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Creating a profitable Betfair trading strategy – 1/3

Creating a trading plan for any Betfair trading strategy you wish to choose is essential. It will define what you do and why and give you a basis on which you can operate in the market.

So let’s create a Betfair trading strategy and trading plan to go with it!

For this particular series of posts, we will focus on a horse racing trading strategy and will aim to be more generic and avoid using the specifics of trading software. We are also not going to define the amount of money that we will to make. We just want to create a structure that will allow us to trade effectively.

Also bear in mind there are many ways to do this. You could be aiming for small profits and small losses, or maybe big profits and losses. But getting it all in proportion is something we have answered on other posts. There are many ways to lock in a profit, but you need the structure to do it. That is what we are focusing on.

The first step: some organisation

If you’re going to trade effectively, you need to create a trading plan. Now what a trading plan does is that it gives you a definable boundaries.

So what should consist of your trading plan?:

  • It will define your entry point
  • It will define your exit points
  • It will keep your emotions in check

The primary reason for doing this is so that you have something that you can replicate. If you can perform a set of actions and you can replicate those actions, then you have a chance of influencing the outcome. If you are just guessing and not working to a plan, you can’t hope to be succesful in the long term.

If you enter a market and just sort of click around at random with varying stakes you will never get any consistency. Sometimes you’ll win and sometimes you’ll lose. In the long term, you’ll probably end up losing because of commission and other reasons.

Therefore, you need something definable that you can replicate. A great thing about doing a trading plan is it keeps your emotions in check. It allows you to go – well if this is then that. However, when you first start doing a trading plan you’re going to be slow and you’re going to be behind the market.

To start with, if I’m honest, you will probably be pretty useless, but it’s critically important to have something that you can replicate and work on. Then over time you’ll get better and better at it.

The second step: practice, practice, practice

It’s a bit like riding a bike! When you first sat on a bike, you wobbled all over the place and didn’t go very far, but as time moves on then you get the opportunity to progress and get better and better.

Gif not of me unfortunately!!

I have an analogy to this, I’ve often said that when I’m out riding my mountain bike, it’s a bit like how I trade. I’m always on the edge of what I can do, but I know if I push it too hard, I’m going to crash…

The same occurs when you’re actively trading. There’s a bit of a balance to be had that.

You must find your strengths

Keeping the bike analogy for a while, if you want to beat the guy next to you, you’re going to have to push things a little bit harder. You will have to go a little bit faster and be a little bit fitter. A trading plan will allow you to keep your emotions in check. It will also allow you to define and replicate what you’re doing to help develop and improve your trading.

When you first do it, you’re going to be slow and it may feel like you’re not quite reaching what you want – like every learner you’re going to fall off your bike. However, with a bit of practice, you can actually push a little bit harder, be a little bit quicker and find where your edges are as a trader.

Whether this is how fast you’re willing to go, how aggressive you want to be or how soon you want to get in the market, this is where having a trading plan is probably one of the most important aspects when you first trading. You need to be able to replicate something and progress it.

So other key steps that you need to go through and you need to think about when you’re doing your trading plan, is the strategy you’re going to use.

How to get that strategy

Now, are you going to back, are you going to lay or you going to do pre-play or in play?

The first aspect you need to focus on is what specific thing are you going to do? I’ve traded the markets over a very long period of time and I’ve traded hundreds of them which gives me a heads up.

I can turn up to a market and just go, ‘oh yeah, I recognise the way the market is behaving – away we go!’

But typically that’s not the best way to do it, because what you’re seeing years and years worth of practice. I can recognise opportunities as they present themselves, but when you are starting out it’s unlikely that you would be able to do that.

So you need to pick a strategy and when you first start trading, you need to say this is the strategy that I’m going to use and the one that I’m going to practice and refine. Then when you master that, you can move on and deploy more strategies.

That’s exactly how I started, I started with a really basic, simple strategy and from that has spawned hundreds of strategies off the back end of that and with lots of variations.

This comes with experience – learned experience allows you to define it.

Ultimately, everybody starts from the same point. It’s just one simple strategy, one that is practised very well. You then branch it, evolve it and adopt other strategies and then take these to help learn when you need to deploy those.

So what market?

Now what is the next important step? Deployment – which market are going to do it in?

Just because you have a strategy doesn’t mean that it’s going to be deployed across every single market.

What you need to do is define markets that you will and won’t use the strategy in. If you apply a generic strategy in a generic market, you’re going to get generic results. You will probably lose money, so define one strategy and then learn how that works within individual markets. You may find that there are certain markets that it works particularly well in and therefore you should head down that route.

It’s a good way of cutting losses as well. If you use that strategy to market and you keep losing money in that particular market, then just bin those markets, don’t bin the strategy.

When do you enter the market?

You need a defined criteria for entry. So you need to come up with a strategy that you can calculate, so if this happens or this is the situation, then this is the point which I get involved in the market.

Of course, when you’re in the market you need to define what are you looking for, how you would define a successful trade and where is the limit of that successful trade on the upside.

If you define the upside, you’ve automatically defined the downside or you could do it the other way around.How much money am I losing with this strategy? What do I need to do to make it profitable? Whichever way you look at it, these two are interchangeable. So that needs to be part of whatever trading plan you have.

Now how am I going to define success?

Am I looking for 5%, 6%, 5%, you know, £100?

There has to be some definition of where and why you’re doing this strategy, because you need to understand what you need to do to make your trading long term expectancy positive.

Remember: you need to know before you’ve even done the trade roughly what your up and down side is going to be and where you’re going to aim that. Both of those will define your strike rates as well.

What’s the flip side?

The next question is when are you going to get out? When do you realise that everything’s gone horribly wrong and you’re going to have to live on only bread and water for a week?

It’s important to understand each of these characteristics and this will all be part of your trading plan.

Getting started

So let’s look at a simple strategy. We are going to be look at finding a steamer, something that’s being heavily backed within a particular market.

In the next article in this series, we are going to find our entry point.

The post Creating a profitable Betfair trading strategy – 1/3 appeared first on Betfair trading blog | Expert advice from Professional Betfair trade.

The Betfair error that gifted punters £45m

This week in 2011, we were treated to an EPIC day of spectacular proportions and this post relives that moment for those that were not around to bear witness to it. While betting exchanges and the Betfair exchange, in particular, have brought many opportunities. Sometimes they throw a bit of a curveball.

Now and again you see odd moments on Betfair trading markets but in 2011 we hit a whole new ball game. Throughout my Betfair trading career, I’ve seen some odd things. But Boxing Day 2011 was on a whole new level.

Leopardstown Christmas festival

It’s a busy week between Christmas and the New year and once out of the Kempton King George meeting, we move into a quieter period. But the Leopardstown Christmas Festival still brings us some quality and is worthy of a look, as the week wears on. I’m generally less convinced by other markets, but will often trade them if an opportunity presents itself.

The are many big races at Leopardstown during this week and one of them is the Christmas Hurdle. On the day of the hurdle, the meeting overall has prize money that often exceeds all the other meetings combined. That’s why is a focal point for me and a key trading target during this busy Christmas period.

Leopardstown 2011

The 2011 meeting at Leopardstown and the Christmas hurdle in particular. Will always go down in Betfair history for something went very, very wrong.

The exchange is the epitome of fairness. You lodge money upfront to place your bets and all bets are honoured. With a third party bookmaker, there are reasons not to pay out but not on the exchange. On an exchange, you see a price and you can take it safely in the knowledge that it will be honoured. Sometimes there is the odd error, but rather than being a Betfair error. It’s usually an error on behalf of an errant bot or person on the other side of the exchange. But regardless of the error, the bet stands. That is one of the beauties of exchanges.

Christmas hurdle 2011

In a fairly standard race, Voler La Vedette ran home to take the win. There was nothing unusual about the win and I pretty much ignored the race, focused on the next market that was about to arrive. But there was something really odd about the in-play market.

For most of the race, £21m was available to back at good odds. Even as the horse pulled away to stride past the post. You could be forgiven for thinking that it should be 1.01 to lay as it strode miles past the post. However, it was still available to back at odds of 29, not only that you could do it for incredible amounts of money! Never before had such a thing been seen before on a betting exchange. Yes, you see some odd things, but this was bizarre. You had £21.4m available to back at decimal odds of 29! Not only that but this was on a feature race, the Christmas hurdle at Leopardstown racecourse

There was so much money that nobody was able to take all that money in-running. ‘Only’ £1.6m was matched, meaning the loser would have to pay out a cool £44.8m to the backers. It seemed too good to be true. Unfortunately, it was, the market was never paid out.

Betfair did, eventually, give a rough explanation of a technical glitch that occurred that had been spotted and corrected so it could never happen again. But there weren’t huge amounts of depth to the explanation, though there were a few plausible theories.

When we looked at the data we could see, honestly by coincidence, that the amount of money that was being offered was the maximum positive value for a 32-bit signed integer. For the less technical amongst you, the maximum amount allowed by some computer systems. Was this the cause? Some really obscure bit of code, a lack of error trapping or a weird database issue. Most likely, but I guess the reason for not offering a full explanation was to avoid future exploits? Since then the API and the infrastructure behind the exchange has changed significantly. So I am guessing that this exploit probably doesn’t exist anymore. But it was a ‘funny’ thing to see.

Meltdown & IBAS

Everything went into melt-down that day. For the full story, you need to read the full blog posts, but also the forum posts for the race. I’ve listed them all for your enjoyment. It will be a day never to forget!

As though the meltdown in the Betfair trading community wasn’t enough. The meltdown in the wider betting and trading community went on for some time. Betfair took the unprecedented step off voiding all bets in the market citing a software failure caused by “a unique set of circumstances’.

People who had, legitimately, backed Voler La Vedette for the win at 29 were left wondering why they hadn’t paid out, as other exchange errors always had been. This brought up the spectre of counterparty risk on the exchange. Who actually was on the other side? It turned out an account with just £1k in it had accidentally exposed a freaky error on the API.

200 punters took advantage of the error. When Betfair voided some of those decided to go to IBAS, the independent betting adjudication service. The full reason for the error was never fully made public, but for anybody that has coded or knows something other than denary in number terms. It pointed clearly towards a certain type of error. Which was subsequently closed down by Betfair. No further action was required by the gambling commission, it was just one of those freaky things that can happen with technology. A betting exchange equivalent of a ‘flash crash’.

If you want the full story, here is the list of forum posts of what happened on that day. It added some extra spice to Christmas that year : –

  1. Bet Angel forum posts
  2. Biggest ever loss on Betfair?
  3. How to lay £600m worth of bets on Betfair
  4. £1k account caused £600m of error

The post The Betfair error that gifted punters £45m appeared first on Betfair trading blog | Expert advice from Professional Betfair trade.

Betfair trading during Christmas week

First of all, I’d like to wish you a very Merry Christmas and a happy new year. We have had a busy year at Bet Angel and expect a busier one next year.

It’s almost time to relax, but typically this can start and end sooner than you expect on racing markets.

The real reason for Christmas

The first point to make in this post is that the holiday period now is the time to catch up with friends and family, to eat drink and be merry. Sometimes betting and trading can take a back seat and I hope you use the time over this period wisely. If you are not a professional then enjoy your time off.

The point of this blog is to tell you how I use the time and what this period means to a professional Betfair trader. When I started trading my kids were just toddlers and now they are adults, so I’ve successfully navigated the key years of their life while doing a job I love. Part of the reasons for that, is that I’ve never been far away from them thanks to being able to work from where I wish. It’s something that’s been an honour. Now they are pretty ready to trade themselves!

One really redeeming feature of Christmas that I like, is that after months of darkness closing in around you and disrupting your daily pattern, things get better from here. The timing of Christmas near the winter solstice means we can start looking forward again as the day start to lengthen. It’s no surprise that for millennia people have worshipped the sun god!

Horses for courses

Of course, a key factor for your sports you will be trading on the Betfair exchange. Different sports have different cycles and, for example, the Cricket traders will be tucking in the Big Bash T20 tournament in the run up to and over Christmas.

Football traders will have a few markets on most days, but the big stuff comes thick and fast between Boxing day and New year. If you Betfair trading is horse racing, then you get a flurry of higher quality leading up to new years day.

My mainstay is horse racing markets, so the rest of this blog post really focuses on what I see around this period.

Pre-Christmas period

The markets in the run-up to Christmas day can be a bit barren. It actually works well for me, as it means you can most likely take the entire week off and not really miss anything. I say the same thing each year and that is more or less what happens each year. Earnings are not strong during this period, so I have a very relaxed attitude to the markets in the week before the Christmas period.

It’s a nice build-up to Christmas and I tend to use it to visit people and do all those other things. It’s an opportunity to get everything sorted ahead of Christmas. Then I can breathe and relax and enjoy Christmas.

Post-Christmas period

The period after Christmas day is interesting if a bit chaotic, especially the day after Christmas. With Black Friday behind us Boxing day brings the Christmas sales and the King George meeting at Kempton Park.

The big race, The King George VI Chase, is obviously a feature and I’ve often pulled a good result out of this. The issue you will have is finding anything outside of this!

There are many meetings on boxing day and it will be chaos, with clashing races will be the order of the day. I tend to just pick off the races at Kempton and then return to the living room and be sociable. Generally, I wouldn’t recommend trading Boxing day manually unless you are confident you will get good money from it. Your social commitments will be far more important. But I have traded Kempton every year for as long as I can remember as it’s possible to get some decent results from it. There is just usually the trading equivalent of bubble and squeak left over for the other meetings.

The day following Boxing day is quieter but still contains quality and can work quite well as there is less racing to clash with. So I quite like the meetings that follow between boxing day and the New Year. While these days are not public holidays, most people take these days off and the drinks flow, as does the money from their wallets into the bookmakers satchel. They often may for good markets.

As the week trundles on, you can pick off some good opportunities elsewhere. The festival at Leopardstown can be great but some of the other stuff can throw up opportunities too. If you don’t have commitments, this week can be a useful end to the year.

The Leopardstown festival is ‘famous’ for being the race where Betfair experienced a glitch and somebody ended up losing £43m in-play. Check out the blog post for this if you want some background.

New years day

If you haven’t overdone the booze then the next bank holiday, New Year’s day, is a smaller version of boxing day. Cheltenham sticks out as the traditional feature on this day, but you will run into the same problems as on boxing day of clashing races etc. But picking off the better quality at Cheltenham can work quite well. Once new year’s day is out of the way, things get a lot quieter so it’s traditionally the time I take a proper break.

Ahead of this I tend to do all my socialising and good deeds in the week before Xmas. That leaves the deck clear for family time and picking off a few opportunities between Boxing day and new year. I’ll be back behind my desk on boxing day, trading software to hand. To get my last shot at a good week before the new year starts.

Whatever you do, don’t forget to enjoy yourself. After all, it is Christmas. Have a Merry Christmas!!

The post Betfair trading during Christmas week appeared first on Betfair trading blog | Expert advice from Professional Betfair trade.

How bookmakers ALWAYS win at betting

So you might have heard this phrase before, only the bookmaker wins!

But how does a bookmaker make money and how would you price a market like a bookmaker? Whether it’s horse racing, football, tennis or betting on sports in general, they always win, so what is the secret?

Betting exchanges offer near-perfect books, that’s a feature of exchange. So while this isn’t really applicable to a betting exchange, it’s worth examing so that you can fully understand the concept and how that influences prices on the Betfair exchange.

Step one : Create a betting market

The reason that you would need to do this, is because you’re going to lay odds into that market that people will bet against.

You create the market ☞ You create the odds ☞ Then they will bet against you.

So let’s take a really simple example of creating a set of odds and for that, we’re going to use a coin. If I toss a coin, barring any oddities, the coin will end up on heads 50% of the time and tails 50% of the time. So there’s a 50/50 chance that it’s going to end up head or tails.

The classic example describing a simple off – 50/50

How do we price that in a set of odds? What we’re going to do here is use decimal odds because that’s how the exchanges are priced.

Well we know that there’s a 50/50 chance (0.5 in decimals) of that coin being heads or tails.

So if we do:

1 ➗ 0.5 we get 2.

Bingo – we have a market!

So let’s say that the market for heads is 2 and the market for tails is also 2. The way to assess how efficient and how good a market is from a betting perspective is to do the opposite calculation.

If you see a market priced at odds of 2.00, if you do 1 ➗ 2 , then we get 0.5. Therefore, if we had a market with two runners in it, priced at odds of 2.00 on the exchange. If we add both it equals 1 or a 100% chance that either of those selections is going to on to is going to win this particular market.

In the case of our coin toss, what’s actually going to happen is that we have a 100% chance of the coin being head or tails as they are both priced at 2.00. Knowing these terms, there’s no margin lost to either side of the book.

The backers can back something with a 100% chance and the layer in this case, the bookmaker who’s making the market in the book, can lay into the market at odds of 2 for 100%. He’s not making any money either.

So that’s a perfect market, there’s no margin on either side!

Step two : Creating your own odds

If you were a bookmaker one of the things that I would want to do, is to make money from the backers. So if we were looking at our coin toss market and I go into this market and offer odds of 2 on a head or 2 on a tail, then basically I’m never going to make any money.

Over the long term we would expect heads and tails to equal out and I’m going to pay out 100% of my money for 100% probability.

Will it be heads?

So, in fact, there’s no advantage in me doing that. I could convince you that the chance of a head occurring on the next toss is high because we’ve had five heads in a row beforehand. Obviously, that’s complete rubbish, but I could convince you that was the case and therefore, I’m only going to offer you odds of 1.50.

What happens if I offer you odds of 1.50?

What am I actually offering you when I’m offering odds of 1.50? Well, if we go and do that little bit of maths again, we do 1 ➗ 1.50 it comes out at 0.66666 occurring. In other words, what I’m more or less saying is that it’s got a 67% chance of occurring.

That’s nonsense because a coin has a 50% chance of being a heads or tails. So if I offer you odds of 1.50, there’s absolutely no reason that you would choose to take those odds, because I’m offering you odds of 66% chance of something occurring when it’s only got a 50% chance. It just makes absolutely no sense whatsoever!

People do this all of the time in betting markets, however. They will back something despite the fact that the odds just don’t stack up. So when you’re backing in a betting market, you want to get the highest odds that you possibly can. Then when you’re saying you want to get the lowest possible odds to that, because doing either of those two things is how you make money in the long term on a betting market.

If we went into a market and we could back heads or tails at 1.5, we would lose money hand over fist to the person that’s pricing that market. However, if we go into the market and back heads or tails at odds of 3, then we could effectively buy the chance of the coin being heads or tails for a 66% chance, giving us 30 odd percent margin.

If we back it at 1.5, the margin goes in the other direction and it’s actually the layer that has the margin within that particular market. So when you look at a market and you see the odds, that’s effectively telling you the chance that something is likely to occur. The layers want you to take the lowest odds possible, but as a backer, you want to be able to take the highest odds possible.

Understanding how a bookmaker works

Bet Angel can help you do this!

Let me show you a practical example of this, I’ve chosen for this example a Newcastle v Huddersfield market. You can see above that the market is super efficient here and that it’s priced at 100.1. That means if you’re backing into this market, you’re only losing 0.1% to the other side of the book which would have traditionally been a bookmaker.

However in this market, the layers on the other side of the market and you can see in the image above that it’s super efficient, there’s almost no edge to a layer in this particular market at these particular odds. So if I was a bookmaker, that would obviously be completely unacceptable to me.

The betting exchange market is so hyper efficient, you will never find a bookmaker that can offer these odds, as they coulnd’t possibly make money in the longer term with a margin of 0.1% There are many problems to doing this on the exchange. You can’t balance your book, you can’t be sure bets will arrive in proportion and you can’t adjust prices to encourage a balanced market.

In a conventional market, the best way of creating margin is to change the pricing, so if I change from back all to manual on the bookmaking tab on Bet Angel, I can actually reduce the price on each one of these.

My % odd increases

You can see the percentage starts to rise and that’s how a bookmker would make margin on this particular game.

If you want to cross-check this, get some bookmaker odds and have a play around with this feature in Bet Angel. What I did was I nipped out and went to my local high street bookmaker to find out what else they were offering within this particular market. Of course, you could go to an online bookmaker, but a conventional bookmaker will probably need higher margins.

According to the odds that I picked up on the coupon, they were offering 4 to 5 on Newcastle, which in decimal odds is 1.8.

The bookies offerings

On the draw they were offering 12 to 5, which is decimal odds of 3.40 and on Huddersfield they were offering 13 to 5, which is decimals of 3.6. So can you see that slight difference between the margin (circled on the right on the image below) that you lose at the bookmaker and the amount that you lose on the exchange (circled on the left in the image below.)

How the bookies market looks

You can see here that if you bet on the exchange, you almost lose nothing to the other side of the book because you’ve got a very competitive market. However, if we went into a local bookmaker and placed a bet there, you can see that they’re asking for nearly 13% theoretical margin on this particular game.

Now we can actually give them credit, they are fairly competitive on Newcastle so it’s not a ridiculous proposition on Newcastle. You can suspect that probably believe that the exchange is full of smart money and they probably have that price right, but it’s undoubted that these prices will change as we head into the weekend and the market adjusts for new information.

In comparison you can see that pretty uncompetitive on the remaining selections and very uncompetitive when we go for the away win. So there’s absolutely no way that you would back an away win here, but maybe you would be able to get a decent price at the bookmaker if you were backing just Newcastle.

Summary

What you have read here is a practical example of how a bookmaker prices their margin into the market.

Bookmakers essentially make money by pricing a market at different odds to the likihood that underlying event happening. This means you can’t win in the long term as you are betting or something that simply can not happen or at odds that do not accurately reflect the chance of it happening.

If you use a betting exchange to bet, then the odds tend to be very close to the real chances of that event happening and very little money is lost to the the other side of the book whether you choose to back or lay. This makes finding value much more likely on a betting exhange as opposode to a traditional bookmaker or sportsbook.

The fact the market is almost perfect, amongts other things, means it also impossible for conventional bookmakers to operate on an exchange. It’s just your judgement against others.

Knowing how a bookmaker makes their money will help you outsmart the bookmaker. By compare there odds to an exchange you will be able to see what odds they are offering that fairly reflect the market, or are somewhat out of ‘shape’

That should help you understand where the value betting opportunties are and how broad price changes in the market are likely to affect the exchange.

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