Scalping is a high-frequency process of placing bets on both sides of the market (Back and Lay) in order to profit from small price moments. Betfair scalping is considered a low-risk strategy.
So just how profitable is scalping?
Scalping On Betfair
The high liquidity on the Betfair exchange makes it ripe for scalping. This is particularly true of the horse racing markets, where price pressure causes the odds to constantly fluctuate.
Scalping is seen as a short-term “in and out” trading strategy. The aim is to take a very small profit from minor price movements. For example, if you backed a horse at 5.5 then you’d look to Lay at 5.4 or 5.3, skimming a 1 or 2 tick profit. Thus scalpers do not trade with a long-term view.
The strategy is dissimilar to Swing Trading in that the trader isn’t looking for significant price move. So naturally scalpers aren’t interested in the individual horses/jockeys/trainers in the race, or outcome of the event. They’re ‘cold traders‘ with one thing on their mind: capitalising on a small 1 (or 2) tick price movement.
Pros Of Scalping
- The concept is simple and rule-based, so it can be automated. It can potentially generate consistent profits with little input.
- Those skilled and well-equipped can make it profitable and scaleable. Doing so requires bots or trading tools that are super-fast at executing bets.
Cons Of Scalping
- The best scalping software comes at a cost. Usually this is available on a monthly subscription.
- Successful scalpers want others to scalp to create liquidity for their trades. Like most concepts you apply to Betfair, there’s a risk you’ll end up losing your money to the experienced professionals.
When Do Scalpers Enter The Betting Market?
Usually scalpers will enter when new information hits the market. For example, after a non-runner announcement or a tip was given by a racing broadcaster. This new information impacts the odds. The prices gather momentum and the market reaches a consensus of where the odds should settle (i.e. the price is “discovered”). This process is often fast-paced, so scalpers have to be quick to respond.
But here’s the thing: not all market movements are ‘wise‘. False signals are often created by traders — or even other scalpers — acting on very little information, or ‘feeling’. It only takes a few large trades to mimic the effect of a ‘intelligent’ price movement based on new information.
The early (and most successful) scalpers enter the market first, and the rest of the scalpers usually come in a tick or two later.
Making Scalping Profitable
To profit from scalping the ticks of profit must be greater than the outcome of the scratched and losing trades. Here’s how to make it profitable.
Don’t Believe Every Success Story
There’s several sites which claim to teach you scalping, so that you’ll earn consistent profits by the end of their subscription-based course. Maybe I’m cynical, but in all honestly…. they look a bit dodgy.
It strikes me that these courses and tools were made by unsuccessful — or only moderately successful — scalpers. Surely these guys would be earning from scalping themselves if it’s as profitable as they claim. After all, it’s not like Betfair limits your account once you’re winning. So it seems that these guys would prefer to sell the solution as opposed to scaling up. You’ve got to wonder why.
Don’t believe everything you read on the internet, or see on YouTube. Be cautious whenever you’re being sold a trading technique that promises vast riches.
Speed (Most Important)
The fastest scalpers are undoubtedly the most successful ones. I’ll explain why.
Scalping is a bit like a Ponzi Scheme. The fastest in and out of the market make a profit. If a scalper is consistently able to get his one or two ticks of profit from the late arriving scalpers, then he’ll succeed long-term.
Late scalpers on the other hand may only secure a small profit (providing the price move continues). Otherwise, they’ll have to scratch the trade if it doesn’t move, or incur a loss if the price moves in the wrong direction.
To consistently act quickly, technology comes into play.
Using Technology Effectively
(b) is the route most people take.
But be aware of the limitations to using trading tools. Manually trading one market at a time may not better the income you’d make from working a regular job. Bare in mind that the very small profits earned from each scalp means you may be forced to raise stakes (and therefore risk) to make it a viable venture.
Trading Tools & Bots
- Racing Traders is a horse-racing in-browser trading platform. Many scalpers use this.
- Geeks Toy is one of the most popular tools for scalping due to it’s renowned speed.
- BF Bot Manager provides several features which enable traders to automate scalps.
Developing your own bot is a lot more work, of course. But if you’re tech savvy then you may find a way of front-running the market, in order to make a profitable automated scalping program. The only potential snag to this is that Betfair could put you under the controversial premium charge as a reward for your success!
Tips For Scalping
- Trade in liquid markets. It needs to be busy and active. Slow moving markets mean you’ll be waiting around for a price change. UK horse racing, in the final 20 minutes before the off, provides ample opportunities to scalp.
- Start small. Practice with small stakes and use low odds. Trading the high odds outsiders is riskier, and also has less liquidity; doubly dangerous for a beginner.
- Keep your discipline. This isn’t unique to scalping. Don’t allow trades to run too far against you. Remember that you’re skimming 1 or 2 ticks, and you just need your winning profits to outweigh the losers.
- Watch out for the tick sizes. You will notice that tick size increments become steeper as you go up through the odds. For example, when you get to 2.0 the tick sizes start moving in 0.02 increments instead of the 0.01 below 2.0. An upward swing of 2-ticks from 2.0 means more than a downward swing of 1-tick . Therefore if the price has an equal chance of moving up or down you need to be careful — or alternatively find a way to benefit from this…
So… Does Scalping Work?
In answer to the question in the title of this post: “yes — you can make a steady income by scalping the betting exchanges”. But to what degree you’ll succeed ultimately depends on your persistence, approach, and time/monetary investment. Scalping isn’t an easy one to crack.
For more on making money online check out my NicheCarve post: How to Earn Money At Home