Sports Trading Explained:
Interest in sports trading is growing.
Despite this, the average bettor doesn’t even know what sports trading is. Some don’t even realise an exchange is different to a sports book!
Betfair’s Exchange is the biggest. Founded in 2000, it’s now a public company with millions of active users. Betfair’s Exchange claims to have 20% better odds than the average, old-fashioned bookmaker.
In this article, I’m going to:
- Introduce you to sports trading, showing you the basic concepts
- Explain why sports trading is growing in popularity
- Answer some of the most commonly asked questions
- Give you some of the best sports trading resources around
Sound fair enough? Let’s get cracking…
What Is Sports Trading?
The simplest explanation I could think of:
Sports trading is the practice of placing two bets against each-other, on the same selection, in order to profit.
In essence that’s it. Although it’s an extremely broad explanation, in a little more detail…
One way to explain it is: sports trading is just like stock trading. Instead of buying and selling shares of company, we buy and sell bets on sporting events. The real beauty of sports trading is that we don’t care who wins or loses the event. Just if the price moves. Because of this, we don’t have to pick winners to be a winner.
A stock traders main aim is to buy low and sell high. The principles are exactly the same in sports, but we lay low and back high. Making a profit, regardless of the result.
Just like this… (before the race started).
How Sports Trading Works… (In 3 Stages)
Sports exchanges work just like any other financial markets.
Traders from all around the globe use the exchange to place bets with each other. Betfair acts like a referee. By taking real-time information from thousands of football matches, horse races and other sports, Betfair makes sure the winners get paid and the losers pay up. For providing this service, Betfair take a 5% cut on all winning bets.
When you place a bet at a traditional bookmaker, you are (almost) always placing a back bet. This means that you are betting that something will happen.
By accepting your bet, the bookmaker is effectively placing a lay bet. They are betting against you that your outcome won’t happen.
Using a betting exchange such as Betfair, allows us to place both back and lay bets. By doing this multiple times, we can produce a guaranteed profit no matter what the outcome.
I’ll show and explain the mechanics of a successful trade in a second. Before I do, keep in mind that betting exchanges are very different to using a bookmaker in the sense that:
- they won’t limit or ban wining accounts
- you’ll nearly always get a better price
The only downside being; some have additional charges for the highly successful, such as Betfair premium charges.
Let’s look at the matching behind a successful trade:
(1) Opening Bet:
To make a successful trade in any instance, we have to have a reason we expect the price will move – or at least get both our bets matched.
For the sake of this explanation, we will assume we’re very confident the price will move on Mershardal. In this case Mershardal is likely to drift in price, being shorter than it currently is before the start of the race. We open the trade by placing a lay bet at [4.8] 5 minutes before the start. Our lay bet of £100 is fully matched, as seen in the image below.
At this stage we merely have a lay bet (liability expressed on the left).
On to stage two…
(2) Closing Bet:
As expected Mershardal’s price has drifted. This leaves us in the opportune position. We now have a bet that is of ‘value’ when compared to the current market price.
Why? Because if we were to lay at the current price, we would have to outlay more liability. Assuming we now expect the price is where is should be, or better still, higher than it should be. We simply need to ‘trade out’ of our position. Closing the initial bets liability (amount we previously stood to lose).
Notice we now have a position were we profit should Mershardal win the race, but nothing should the horse loose.
In order to spread our result, be it profit or loss – we need to hedge up. Otherwise known as greening.
To do that, I personally use software (it saves extra calculations). Basically, there needs to be an extra lay bet in our example to guarantee a profit. No matter what happens – before the start of the race. I’ll explain the different stakes and why that is in a moment. For now, take a look at the ‘hedged’ image below….
And there you have the understanding of a successful sports trade.
Now I’ll explain compare and explain the bets…
You’ll see on the right of shot (above) that ‘average odds’ is ticked. This means our backers odds have changed a little along with the lay stake, this is because I had to place a ‘hedge’ bet of £9.43 at the available price.
If you compare the two bets against each-other:
Lay bets totalling £109.43 at 4.84 carrying a liability of £420.53 and a payout of £109.43.
Back bets totalling £100 at 5.3 carrying a liability of £100 and payout of £430.
Should Mershardal win the race:
Win £430 from the back bet
Lose £420.53 from the lay bet
Total position = +£9.47
Should Mershardal lose the race:
Win £109.43430 from the lay bet
Lose £100 from the back bet
Total position = +£9.43
How Much Can You Make Trading Sport?
Sports trading profits can fluctuate massively. There’s a huge set of variables at play; sports traded, advantage size, bankroll, skill set, speed advantages – all sorts.
Realistically, many won’t reach the upper levels. I’ve had the privilege of meeting a few top earners who make mind-blowing sums, but on the flip-side have heard of many never making a penny. Some time ago I addressed this topic for the Q and A playlist on YouTube….
If you’d like to see the full question and answers playlist on YouTube, see this link.
Sports Trading ‘Systems’
A few words about sports trading systems… many find their way to this site in the search for a fixed ‘sports trading system’.
There’s a problem though: in most cases, they don’t exist, and where they do and or have, they aren’t fixed. Why? Because of the nature of a betting market. We are not making money from a bookmakers offer here. Period.
Each betting market consists of a huge amount of variables. Some influence the market more than others, that’s understandable. Over the years I’ve tried most things, not all, but most. The overall findings being; the best and easiest ways to make money in Betfair’s (or Betdaq’s) markets is to understand the situation. Understand the variables, the market characteristics, why things happen. Once you do this it becomes far easier to make money, and more consistent too. Unsurprisingly, this is why I created the trading guide and video package. I love to help others, but there has to be some upside to spending my time teaching… plus it helps with the dreaded premium charge!
Experience counts for a lot in the markets, aside from having an edge you’ll need to control your actions.
So if we look at our edge as system or method of approach, it’s important to start from the ground up. Building a successful sports trading system isn’t so hard as long as you are prepared. I’ve said it elsewhere before but, focusing on specific facets of the market is the right place to start. It’s a bit like building a wall; you don’t just think about a wall and it appears. You have to pick up each brick at a time, study it and what you’re about to do next!
Here’s a few easy steps, if you understand me fully:
- Pick a sport – one you understand the rules for or limitations at least. For example: greyhound racing.
- Go deeper – what part of that sport are you going to focus on? example: Sprint races.
- Develop a hypothesis – why are you doing this? example: I believe the markets are bent.
- Confirm or deny – is the market reacting as you’d expect?
Once you’ve proved or denied your thinking, pick up the next brick…. get me? Knowing the influences within the market is key.
Sports Trading Techniques
There are countless ways to trade sport.
Each trader might have their own “style”, but they all use similar techniques. At the end of the day, all we’re looking to do is:
Back high and lay low.
Of course, there are many different techniques used to achieve this.
Technically, value betting isn’t actually a form of sports trading. However, I thought it was important to include as it forms the basis of a lot of sports trading techniques.
Value betting is the act of placing a back or lay bet on something if you think odds are good value. Let’s use a coin flip as an example:
- A coin has a 50/50 chance of landing on heads or tails.
- If you bet £1 that the coin would land on tails, you would stand to win £2 if you were correct. That’s £1 of your original stake plus an extra £1 of winnings (less comm).
- The effective odds of the bet above is even’s, or 2.0 in decimal odds.
- If you were offered £3 for every £1 you bet on tails, that would be a great value bet. The odds offered would be 2/1 or 3.0 in decimal odds.
- Getting odds of 3.0 for a 2.0 bet is a value bet… a successful trade you might say.
Value bettors know that not all of their bets will win. What they do know, is that they will be in profit in the long run. So long as they only bet on are of good value.
The coin flip example above can be translated into any sports betting environment. We can look at recent performances of football teams, amongst other factors to calculate our own odds. There’s no right or wrong way of calculating your own odds for sports events. Some people like to include all kinds of factors into their calculations.
Others prefer to keep it simple.
It’s important that you test your value betting strategy before using real money. Trading, and closing out is just another way of taking the value – instead of letting results pan out, through variance, over a large sample of bets. Why? Because it’s rarely that long until odds return to a ‘true price’ on Betfair. Or any other exchange for that matter.
Stealing Small Moves (Scalping)
Scalping is a term that’s commonly used in financial markets. It’s used in a very similar fashion throughout sports trading too.
Scalping is a trading technique that involves trading small price movements.
Typically, scalper’s use a tight stop-loss and only aim to make 1 or 2 ticks. This technique is best used in very stable markets where the price isn’t moving very much. In other words, there is less volatility. You may want to save it for later but, you can see a full guide to scalping on Betfair here.
Example: Cheltenham Market Previous Blogs (look how the prices don’t move much)
Trading Price Shifts (Swinging)
Almost the opposite of scalping, swing trading aims to profit from bigger price movements. Stop-losses are generally further away from the current traded price. This is because swing trading is more suited to volatile markets where the price is jumping around and liable to move.
Impatience will often lead to loss through this kind of sports trading technique.
It’s important to have a clear plan before you enter a swing. When will you enter? Under what conditions will you exit? Ideally, you should use trading software and working out where you plan to exit – before entry.
Software For Sports Traders
You can do a lot with the Betfair website but you’re missing a big trick if you’re not using trading software.
What are the benefits of using sports trading software?
- Use of advanced charts & trading ladders.
- Real-time odds (the Betfair website takes longer to update odds).
- One-click betting.
- Full market depth, multiple markets.
If you’ve seen my pre-race trading videos and want to have a go yourself, it’s essential that you use trading software. The added speed and data advantage is arguably the biggest and best. Most trading software refresh Betfair information (odds/money available etc) every 200ms. This is miles faster than using the Betfair website.
As well as being able to see the odds faster than on the website, you are able to place your bets quicker too. At the click of a button, you can place a bet using a pre-specified stake amount. Without this feature, you would have to click on the odds, type your stake amount, click bet and confirm. The time you save can make the difference between missing a big swing and catching it at the perfect moment.
The software I use when trading horse racing markets is Geeks Toy. For more information about Geeks Toy and how to use it, check out this post. All new users of Geeks Toy get a free trial. If you like what you see, Geeks Toy is one of the cheapest sports trading software’s available.
YouTube Video Here
Sports Trading Communities:
In recent years there seems to have been a lot of small sports trading communities pop up. The trouble is, most of them aren’t that great.
And when you get a good one, who’s worth listening to?
Advice about sports trading communities: Pick a longer-standing reputable one. Read through old posts and you’ll soon see who the best contributors are… sadly, most of the profitable ones don’t comment so much these days (to my knowledge). If you look hard enough though, there will always be a few gems!
The most reputable communities tend to be the top software vendors forums, GeeksToy, BetAngel and Gruss. They’ve been around the longest. Excluding that, there’s the Betfair forums although traders don’t seem to use them anymore…
You’ve also got Twitter and Facebook, but it’s hard to know who’s-who. Most of the aliases that tend to post won’t even show their identity… tread carefully when following advice.
Learning to Trade Sport
There’s never been a better time to learn to trade on Betfair.
When I first started, there was very little information available. Now, there’s quite a bit of content out there. If you bookmark half the links on this post, there’s plenty to be learnt from the individual articles.
Talking of videos…
One of the best things I did when starting out was to record my pre-race trading. I used screen recording software (just like I use on my YouTube channel) to watch what I did during each trade.
It was extremely helpful to look back and see what mistakes I’d made. After watching yourself trade, you soon learn that it’s quite easy to be right and still lose! But on the contrary, it’s very important to see what you did right when you make a profitable trade.
Sometimes, it’s hard to soak it all in. Markets move so fast, and when you’re still learning, it can be mind-blowing. Being able to see exactly what happened when you’re in a more relaxed state of mind, can be worth it’s weight in gold. One of the main problems with sports trading is the mental outlook on a trade.
5 Common Sports Trading Questions:
Most new sports traders ask similar questions. To that end, I’ve complied five of the most-asked questions below. Additional questions are answered in further depth on the playlist linked earlier in this article.
Which Resources Would You Recommend?
An extremely broad question. Depending largely on what you are intending to trade, and in which manner.
Betfair themselves have a learning directory where they recommend a few reputable characters, myself included. Aside from this, there are several different statistics based services that are of use. Namely Proform and Patternform.
Many seem fond of the YouTube Channel, probably because of the learning format. And of course the sports trading forums mentioned further up this article.
Is Sports Trading Profitable?
Absolutely, but it requires work. It’s a skill that needs nurturing.
There’s no fast way of making consistent profits on Betfair. You will need to put the work in. Study the markets inside and out.
Whilst the majority of Betfair users aren’t profitable, those that are can reap massive rewards. Take a look at this article I wrote a while back where 6 successful, full-time sports traders answer 3 questions exclusively.
Many come into sports trading through arbitrage or matched betting. Both of which are good ways to make some extra money. Sports trading however, is quite different in the sense it is no a fixed ‘system’. To look at it like this is counter-productive. There are many striking similarities and it’s likely if that’s your background, it’ll be a little easier getting into trading. You’ll already have the core concepts of backing and laying for profit, but it will require more work!
The upside being: you can make way more through effective sports trading.
Is Sports Trading Gambling?
Technically, yes. But only by dictionary definition.
Gambling: the activity of betting money, for example in a game or on a horse race.
The problem is, gambling has a bad name. The media is filled with horror stories about big losses on fixed odds slots machines. The stereotypical gambler is somebody who places a bet because they are “feeling lucky”. Essentially, they are betting without an edge.
All successful sports traders are profitable because they are gambling with an edge. That edge will depend entirely on the individual. Some traders might be extremely knowledgeable about a particular sport. Others may have a good understanding of market forces which helps them to trade pre-race horse odds. To my mind, that’s not gambling…
Therefore it’s important to always have a plan before you start trading. If you’re trading without an edge, you are gambling. Pure and simple.
Why Trading Over Straight Betting
If you’ve an account already, the chances are you’ve placed a straight bet some time or another. Trading is different.
It’s not quite as simple as placing a bet and then checking the sports results later on. But the most rewarding things in life are rarely so simple, financially anyway. When you place a ‘straight bet’ on an event, the amount of variable factors contributing increase. You’re at the mercy of said team or horse. With sports trading there is far more control on the things you bet. For example; if you are trading a specific horse down at the start of a race and it’s behaviour should change, you have the option to close out that trade. If you were placing a straight bet, it would still stand.
Trading brings a level of flexibility straight betting just can’t.
How Much Capital Do I Need To Start?
Often an early concern for many.
Firstly, you don’t need much. Because starting out in the markets doesn’t have to be costly. Most software has a training mode setting, allowing you to lose nothing but your time while learning.
Beyond training mode, I would suggest starting small. If you’re succeeding, the numbers will start to add up quickly. Consistency is the most important element to master. Starting with a £200 bank on £2 stakes isn’t a bad thing. Try to look at sports trading longer-term. Over the years I’ve seen many come and go, often because they expected too much too soon!