What is Trade Betting?
By The UK Horse Racing Tipster
You may have heard this term before in relation to the betting exchanges but not know what it means or how to go about it so here is a breakdown.
Trading is basically the placing of two opposing bets at opposite ends of the market e.g a LAY at a low price and a WIN at a higher price on the same horse.
You can either do this so that:
- If you lose your WIN bet the LAY bet means you have lost no money at all basically giving you a free back bet.
- If the price or amount is different between bets then you can “overlay the bet” which means that you can set your two bets up so that whatever the outcome of the race you can make a profit.
A real world overlay example
Lets look at a real world overlay trading example using small betting stakes.
As there is no “test mode” on Betfair (yet) and it’s always good to test your systems with real amounts of money so that you get used to winning or losing money without risking a fortune, it means placing real bets to prove any Betfair related system.
The minimum bet amount you can stake on Betfair is £2.00 so we can place overlay trades from as little as £2.24 without worrying about losing too much money. Even overlays at this amount on short priced or odds on favourites can work as long as you calculate your sums correctly.
Here is a real bet made on the 10th August 2012 on the odds on favourite Bowdlers Magic who had an SP of 1.3 or 3/10.
Before I made my first LAY bet of £2.24 at a price of 1.48 I had £108.95 in this test Betfair account. As you can see after the race I then had £109.09. Not an amazing profit but it is a test and is designed to prove a point so the result doesn’t really matter.
Overlay Steps – LAY then BACK (WIN or PLACE)
1. I make my first bet which is a LAY bet for £2.24 at a price of 1.48.
The liability of this bet if I lose and the horse wins is £1.08 and is calculated with this formula: Bet Amount * (price – 1.00) OR £2.24 * (1.48-1.00) = £1.08.
2. As soon as the first bet gets matched I set up an opposing WIN bet with a stake of £2.18 at a price of 1.56 which would return £3.40 and a profit of £1.22.
The difference in price between the two bets is only 0.08 ticks above the original matched lay bet price. Showing us that even small stakes and small changes in the market can be utilised to make money.
3. If the horse wins the race then I have won my WIN bet of £3.40 and lost my LAY bet of £1.08. If I deduct my stake of £2.24 from the return of £3.40 I am left with £1.22. Once the liability is paid out I am left with a grand old profit of £0.14.
This would return us £2.18 * 1.56 = £3.40. If our horse wins we deduct our stake of £2.24 to get a profit of £1.22. We then have to pay out the liability from our Lay bet of £1.08 leaving a grand old profit of £0.14.
4. If the horse had lost the race then I would have won £2.24 for my lay bet and I would have won 6p in total as I would have lost my back stake for the win bet of £2.18. With the overlay it meant that the profit was LAY Profit – BACK Stake
e.g. £2.24 – £2.18 = 6p.
Obviously this is not a lot of money either way the race plays out but on larger stakes and odds you can see the viability of this trading technique and although I am using small stakes and getting small winnings it proves the point that overlaying can produce profits whether or not your horse wins or loses.
This is a cut out of my test Betfair account with a couple of columns removed to make it readable.
|Bowdlers Magic Back||1.56||2.18||Won||-||1.22||109.09|
|Bowdlers Magic Lay||1.48||2.24||Lost||(1.08)||-||107.87|
As you can see the balance before the race was £108.95 and after £109.09 so profit was made even though I made two bets.
A day later I increased my test accounts minimum stake to £2.50 so that any overlay would be greater and tried the same process again.
The results are below.
|WIN (INPLAY)||Havana Gold||13.30||2.60||S||-£2.34|
|WIN (INPLAY)||Master Ming||14.00||2.98||S||-£2.31|
The profits may look small but remember that this is a test account purely there to test any new systems viability.
After a week of trying this system out my test Betfair account had increased from £109 to £240 using maximum stakes of up to £2.50.
Today I increased my stakes to £3.50 and had a few winners which increased the winnings. Details are below.
As you can see as the stake rose and so did the profits.
Although win bets on Cour Valant, Surprise Momen, Rosdhu Queen and Caskelena would have given me more back in profit, if they had all lost their races I would have been £14 out of profit.
Due to Betfairs lack of a “live race test mode” you should always test your systems with real money – but use minimum stakes.
You will always get the odd winning bet at high odds like Complexity 8.60 today that makes the difference in any overlay more worthwhile than usual but if you can get both parts of your bets to always match then you have the makings of a pure money-making machine.
Remember this is how those banksters in the stock market make their millions each day – lots of small trades - buy low and sell high etc and in my eyes stock brokers and bankers are nothing more than bookies in suits betting with other people’s savings and pensions.
For anyone thinking of writing their own BOT using the Betfair free API the simplified logic my AutoBOT uses when it is automatically betting for me breaks down like this :
- Constantly checks the market using the compressed markets method to see whether the trend for a certain runner is going up or down.
- Logging “crossovers” where the lay price goes below the average back price (using standard deviation) and then back up over it again. The more times the prices cross over this line more likely it is that a trade can be placed and both parts matched.
- Place a LAY or WIN bet at a point I expect it to be matched according to point 2.
- Once that first bet is matched I place an opposite bet e.g a LAY for a WIN or a WIN for a LAY that is a few points lower / higher than the matched price of the first bet. I use a table that shows the price to use according to the matched price of the first bet which is made up of historical data and the likelihood of the price being matched.
- I divide the possible profit up evenly to create an “Overlay” so that whatever happens I make a profit even after paying out the liability to a winning horse on a lay bet or vice-versa.
The key to this system is not to put the opposing bet in too high or too low a price in comparison to the original bet so that it doesn’t get matched.
Also make sure to leave any opposing bet (2nd step) to be matched INPLAY in case it is not matched before the race. Leaving it to be matched at SP is obviously wrong as it could mean either that:
a) If your liability is not over £10 you won’t get your LAY Bet converted from an Exchange bet to an SP bet.
b) You get a price that makes the total trade a losing bet and if the price drifts or steams in quickly you could lose instead of winning.
There are 3 main reasons to Trade your bets on Betfair
- To make money as often as possible.You might not make as much on the big 20/1 winners but you also won’t lose when you lay them either. Trading all your bets with the overlay technique to try and ensure profits whatever the outcome of the race is an attempt to always gain a profit from a runner however it performs.
- Using this technique to mitigate loses. E.G a horse you have backed but think is going to lose due to price changes either before or during the race. Remember Betfair supports in-play betting so you can always place a bet as you watch the race in action. A BOT is obviously not as good for detecting the actual pattern of a race apart from seeing dramatic drops and rises in prices once the race is in-play. Therefore if you have already placed a LAY bet at a price of 2.20 and the back price has drifted to 2.60 then you could either take the risk that the horse will lose the race and claim the whole LAY Bet Amount or you could place a mitigating bet so that if the horse does
- If you have laid a horse at a low price that then has a drifting back price. Doing this means that if it does win you can still pay off the liability of the lay bet and make a profit and if it doesn’t then your lay bet should be higher than the stake anyway (see overlaying) to ensure a profit after losing your back stake.
Also when trading always remember the following whether your lay or back your first leg:
- Include an overlay to ensure a profit whatever the race outcome.
- Raise or lower the opposing bet price enough to make a profit but not too much that it won’t get matched.
- For lower price bets increase your stake so that if you are matching the first bet SP and the second INPLAY if the first leg is a LAY it won’t lapse due to the liability being less than £10.00.
- When testing create a test account like I have or set aside a special amount of your betting bank to try the system in small steps and stakes.
- Ensure the prices for both back and lay parts are not out of sync. Usually lay prices are a tad higher than back prices, apart from longshots, but as the market nears play the prices usually draw close together. If you are laying a horse at 500.00 you are going to need to back it at a higher price to make any money, especially if the horse goes on to win, which DOES occasionally happen. So swerve bets with big price differences.
If you want to try this out but don’t have the money to risk then sign up for a free £25 bet from Betfair now and as long a use up £25 worth of bets in 30 days you will get back another £25 which you can either withdraw or keep in your account to carry on.
Just click the image below and sign up, add your £25 and make your bets.