Thinking of becoming a Betfair trader? There’s a bunch of issues that you’ll inevitably experience. It’s best to know about them from the outset. Here’s my top 10 list of ‘Problems for Betfair Traders’.
1. Competitors Sussing You Out
One of the biggest challenges for Betfair traders is disguising themselves.
You’re operating within in a very competitive market. It’s a zero sum game — for every winner there’s a loser. And that means that everyone is motivated to suss out their competitors to get an advantage over them.
I have experienced strategies that worked over thousands of bets, and then stopped working. Did the opportunity just die? Perhaps. But I’m almost certain that in some of these cases I was found out by competitors (see an example here).
You have to stay alert, mix up your bet sizes and the times you bet wherever possible. Staying rigid is a good thing — but don’t let that be your downfall.
2. Market Efficiency
I write about market efficiency a lot on this site. I can’t emphasise enough how accurate, on average, the betting exchange is.
If you were to pick a whole bunch of random equal-stake bets right now, then chances are it’ll break even or lose a small percentage over a large enough sample. It’s fascinating that we, humans, ‘get it right’. For more evidence take a look at my analysis of a Mug Betting Experiment. After 270 bets it broke even with a 0.00% ROI.
The exchange is remarkably accurate and therefore difficult to beat. You need to test your theory/strategy over a large sample of bets. You have to find a way to outsmart the crowd. And if you can’t successfully do that, then you have the option to apply to methods like Scalping, where you only need a slight movement in the odds to secure a profit.
3. The Unbeatable Wide Spreads
I’ve studied the spreads on Betfair (the difference between the back and Lay odds). Generally speaking the ‘fair’ price lies somewhere between that spread. And in my experience it tends to be a little closer to the Back odds than the Lay odds.
Many Betfair traders identify a losing Back strategy and reason that “Laying those same bets would’ve made a profit, right?”. It sounds reasonable — but that’s usually not true due to the spreads. I’ll explain.
The Lay is significantly higher than the Back price. Therefore when you take the face-value Lay odds you’re giving away more value. In this case you want to aim to Lay at the Back price to reduce the liability (payout) when you lose.
Similarly there are countless occasions — particularly on wide spreads — where you’d earn a handsome profit if you were capable of consistently Backing (and being matched) at the current Lay odds.
Unfortunately, you don’t always get matched at those odds. This is particularly true of higher odds where there’s less demand/activity. As a result you have to lower your request to a price that’s more attractive, and therefore less value to you. In turn, it means that you might only secure a bet that’s fair value. This is the challenge of Betfair, and you’ll have to master this skill to find value and earn a profit.
4. Smart Bots
Many different types of Bots operate on the betting exchange. Typically you’ll notice them moving inbetween the spreads to beat the current price, like human Betfair Traders would (but faster). There are other types of Bots, too.
Market Making Bots enter the market and set the prices where they want them. They’ll put up early win prices in a bid to generate interest and create liquidity in the pool.
Many Bots set off a chain reactions in the market where the price shifts heavily in one direction. Some attempt to distort the weight of money and provoke the price move. But other Bots blindly respond to the activity of other Bots, temporarily pushing the price further in one direction.
Then there’s the (good) scalping Bots, coming in and lifting the Back and Lay odds, beating others to the punch. This happens so quickly that the average punter isn’t always able to respond quickly enough to capitalise.
Keeping up can be a challenge, especially in the horse racing win markets. You have to be aware of the presence of Bots and try not to respond to false alarms (yourself or with your own Bot!). Remember that many Bots are intent on provoking other Betfair traders to act.
5. Scaling Up
Betting the minimum £2 stakes is a great way to test a strategy and prove a concept. But there comes a time where you want to scale up. This often creates problems for Betfair traders.
Firstly, you may no longer not get matched on all of your stakes. This is something you have to monitor, because invariably you’ll get fully matched on the ‘bad’ bets (where the price moved against you), and left unmatched/partially matched on the bets you really wanted.
Additionally, placing large stakes often sends the weight of money into a frenzy, and makes the market respond in new ways that you hadn’t planned for. Bots and traders are triggered by volumes. If you’ve gone from £2 straight to £200, then you might need to slow down and consider how you can be a little more discreet.
How can you remain undetectable in a transparent marketplace?
Well, you can’t exactly hide. One option is to take the current Back odds and get instantly matched and therefore out of the market, if this works for your strategy. Otherwise you could queue your bets in smaller ‘chunks’ (e.g. 4 x £50) in order to prevent upsetting the market. Build up slowly, and try different approaches to see what works.
6. Commission Eating The Profit
It’s important that you realise how commission could impact the profitability of your strategy. You should be aware of this before you start trading on Betfair.
Refer to my Mug Betting Experiment where I used the Betfair exchange (Back odds) for all bets. You’ll note that before the exchange commission was applied the profit was +3.77% ROI. With commission applied it was 0.00% ROI. In a game where small margins mean a lot, losing 3.77% is significant.
Account for the commission in all of your calculations or back-tests. You may decide to discard bets which don’t have a big enough margin to cover the expense.
7-9. Unmatched Bets / Price Moved Too Fast / Market Went The Wrong Way
I’ve merged these three together, because they largely stem from the same issue.
If you’re consistently left unmatched then you’re doing something wrong. You’re probably shooting too high (or low if you’re Laying) with the price you request. Also consider that you might be betting too much in one hit and actually sending the price in the opposing direction!
If a price changes too fast for you, then make sure you’re equipped with the best technology to snap up the prices before others do. I’ve recommended the best Betfair Tools here, and also downloadable Betfair Bots here.
If you’re struggling to correctly predict the direction of the market then the only way to improve your ‘guesswork’ is to practice. You can do this in free mode in most Betfair tools to in order to get your confidence levels up. Monitor your results, then try low stakes and go from there.
You can also improve your chances of correctly predicting the market by learning how to read the Betfair volume charts. There’s a great tutorial on this topic here, written by professional trader Caan Berry. Start there.
10. Taking Pre-Race Trades Inplay
Most professional Betfair traders will tell you that taking pre-race trades inplay is not advisable.
It’s a totally different playing field once an event begins. The variables suddenly change, the pace in the market picks up, and there’s less ability to keep up with what you’re doing as a trader. Everything you’ve worked on up until the start of the event is pretty much obsolete once the race/event begins.
You should aim to secure a profit before the race starts and go onto the next race before that begins. Then repeat the process. To ensure that you do this, select the option to automatically cancel your bets before it goes inplay.
Don’t get attached to any event. Letting your trade run inplay is a bad habit to get into, and you’ll wind up gambling in an attempt to limit your losses, or force a profit.