What is the most reliable edge in Betfair trading? It’s a good question.
Aside from those beating time delays, I believe what I’m about to share could be it. The penny dropped for me on this one over a decade ago now and it still works.
Even if it isn’t the type of edge you want to pursue, this post will be quite insightful. It could help other Betfair trading edges you have so bear in mind the key dynamics as I drop some strong hints…
An Edge Presenting Itself Over And Over Again
A week or so ago I made the following tweet because it was a good example.
Have you seen a Betfair chart like this before?
It happens pretty regularly, right?
Now ignore my comment about emotion, we’ll come onto that in a second. First, I want to be crystal clear – this happens in just about every betting market. It’s not always as obvious or extreme, but it happens over and over again. Sometimes there are several instances of it happening inside a single live show (the most active betting window).
There’s a whole list of reasons, emotion and human behaviour being the broadest description as per my comment. I’ll explain the contributing factors more in a moment but the key takeaway here is; that this is happening all the time due to human behaviour and those trading the betting markets for a profit (in multiple contexts).
These instances are perfect setups to make a tidy low-risk profit in horse racing.
Understanding What’s Happening:
So let’s unpack what was going on here and why, it’ll reinforce those important points a little more…
Firstly you may have noticed I said ‘in racing’. That’s not to say this doesn’t happen in multiple sporting markets, it does. However, the nature of horse racing betting makes it somewhat more interesting. Why? Because horse racing prices are more subjective than say, tennis.
In addition to sentiment-driven markets, it’s worth bearing in mind that around 70% of all money traded on the Betfair Exchange is anticipated to be trader’s money.
Now, let’s look at this Betfair trading edge in the eyes of this situation:
Left of the dotted line, we have the betting market history in the lead-up to the last 5 minutes before the race starts (see how there are significantly lower traded volumes). Right of the line is the ‘active window’ where money is flowing into the market at a higher rate, as per the bars.
The circled area shows an aggressive spike in price between 5.3 to 6.8. For clarity; this was another person in the betting market desperately trying to dump their betting position. Prior to the spike, this runner had been steadily steaming in the market attracting a mild level of support.
The orange arrow shows a volume spike where they begin to panic. Marked with a light blue arrow shows the peak of their madness where the market absorbed their stake. The light green arrow denotes their stake being swallowed (clearly they were over-exposed). Afterwards, the price corrects back to its original position.
This whole instance played out in no more than 30 seconds. A painful 30 seconds for whoever was on the other side, although an extremely profitable low-risk 15 seconds for those who backed their exit at 6.8.
Situation, trading time, market type, liquidity and staking all created the perfect storm for a very clear example here but this happens on a far smaller scale again and again. It’s the type of human behaviour that creates those extremely frustrating trading profit and loss sheets. The ones where results are smooth and consistent before wham! a big loss.
Now I’ll explain a little more about those underlying issues…
The Underlying Issue (It’ll Never Change)
I really hope the value within this post isn’t lost on people because this Betfair trading edge isn’t going anywhere soon.
Achieving smooth consistent profit and loss sheets comes from applying logic to the market madness. Compared to everyday jobs, trading is counter-intuitive. We can make big sums in extremely short periods of time consistently, it’s not like a normal job. This bias in human perception is also a large reason this edge works so well.
Here’s another comment I made when thinking about writing this post:
The dotted line above clearly shows a change in the market activity – the live show.
Trading the markets before this can certainly be done, although a totally different approach is needed. Betfair scalping before this time period is complete madness, the market is weaker, there’s less turnover and using such a strategy leaves you extremely exposed. There’s a post about the stages of trading time on Betfair here for after you’ve read this post.
Why do I mention this?
Because overall situation, market type and timing are crucial in trading. We want to limit risk and maximise potential (a bit like backing at 6.8 in the previous example). Trading too early, using stakes that don’t fit (see previous example also) and being greedy, emotional or impatient result in pain every time.
The underlying issue is human behaviour and perception. Alter yours and it’ll get a lot easier, watch others in the market and you’ll make some money from it. However, if you ignore these things, you’ll probably be looking at another one of those chunky losses soon.
It reminds me of a Buffet quote…