The Weight of Money (WoM) is represented by a percentage value and shows when the market is “balanced” or “unbalanced”. It’s used by Betfair traders to predict whether the odds are likely to rise or fall. Predicting market movements correctly will enable a traders to generate a profit.
Balanced & Unbalanced Markets
The market is said to be “balanced” when the amount of money matched on each side of a selection is the same. This means the amount placed on Back bets must be approximately equal to that placed on Lay bets.
Unbalanced Markets Result in the Odds Changing…
- When there’s more unmatched money on Back bets than Lay bets the odds decrease. The Weight of Money pushes the odds down.
- When there’s more unmatched money on Lay bets than Back bets the odds increase. The Weight of Money pushes the odds up.
The key to successful trading on the exchange is to anticipate market movements; hence why an unbalanced market is of importance to professional traders on Betfair.
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Calculating Weight of Money
The Weight of Money formula is:
WoM = Money on Best Three Best Lay Prices / (Money on Best Three Lay Prices + Money on Best Three Back Prices)
Where the WoM is less than 50%, the amount waiting to be matched in unmatched Lay bets is greater than the amount in unmatched Back bets. Where the WoM is greater than 50%, the amount waiting to be matched in Back bets is higher than the amount in unmatched Lay bets.
Risks & Weaknesses in Weight of Money
When using WoM as a method of forecasting the market you may want to firstly check for sufficient liquidity. Imbalances are often caused by proportionally high (but ultimately insignificant) stakes — particularly if the market is not well formed.
Basically, in illiquid markets WoM is highly sensitive. So it’s imperative that you incorporate some kind of “sanity” check into your betting model if the WoM is to heavily influence your actions.
Market manipulation, like in finance, is another risk. Large orders in a financial market deliberately create a misrepresentation/distortion of supply & demand in order to intentionally provoke movements in the price. This practice is highly illegal in finance but not in betting. With this in mind you need to be vigilant when basing price predictions on WoM.
Naive Strategies Using Weight of Money
Here are some examples of strategies seeking to profit from naïve traders who are reliant on WoM:
- Bots can place orders of a significant volume, much larger than the previously unmatched amounts just outside of the current spread. The stake intentionally tries to force a move in the odds by unbalancing the WoM %. Often the order disappears, with little or none of the amount matched. The bot has profited from the price movement it deliberately instigated.
- Other bots could self-match by Backing and Laying the same odds, to create the illusion of liquidity. Whilst this would attract a hefty commission, an experienced professional with a low commission rate and a good idea of where the odds are heading may entertain this approach if they have orders queued elsewhere on the price ladder. Again, the WoM misleads the market in this theoretical scenario.
Another weakness in WoM is that it does not take into consideration how much was traded prior to the current state of the market. What we calculate in the WoM is essentially a % value reflecting the here and now, and nothing more…
A more encompassing, alternative method for gauging the flow of money is to monitor the total money matched on Back and Lay selections and their previously traded odds. This way we can better interpret the value of the current odds and appreciate the significance of the WoM relative to the trading day as a whole.
You Can Impact the Market Unknowingly
Something else to be aware of is that your own stakes can influence the market, too. You could for example queue a relatively large stake, say £200, in an illiquid market. In this scenario your stake is likely to create an imbalance in the WoM. This can work against you by encouraging the odds to move out of your favour, leaving your bet unmatched at higher odds.
So what can you do?
Taking the available odds in the market is one option; another approach is to average-in your desired odds with a total stake split up into multiple, smaller bets.
Key Points To Take Away
- While useful for supporting a trading strategy, WoM can produce many false signals — particularly in the hours leading up to a race. It’s best used alongside other trading techniques.
- WoM holds more significance in an active, liquid market, where proportionally large stakes unbalance the market due to real knowledge, expertise, or simply a drastic shift in opinion. Price movements follow thereafter.
Interested in seeing WoM in action? Observe it inplay during a race. Look for an imbalance and watch where the odds go.
It might also interest you to read a detailed analysis I published on Drifters & Steamers. It underlines the importance of correctly predicting market movements in order to identify value.
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