Trading Algorithms and Overlays.
This is an in-depth example of using trading algorithms and the equations used to calculate overlays when trade betting to ensure a profit whatever the outcome of the race.
The calculation is obviously going to depend on whether you place a WIN or LAY bet first and the size of the stakes you are using.
As we are testing our system we want to use minimum Betfair stakes of £2.00 or more and this is enough to prove that both forms of overlay can work. Remember though that if you are planning on converting a LAY bet as your second bet from an exchange bet to a BSP bet then your minimum liability must be £10 for it to be matched by Betfair.
How you calculate the “Best Lay Price” or ”Best Win Price” in the overlay examples is up to you. I have a big database and a BOT that constantly scans the Betfair markets (place and win) checking the current best prices for all runners. I then have a calculation that checks to see if the price is rising or falling, it’s average price over the day, recent and total price changes and how many times the lay price has crossed the back price – something I call a “Crossover”.
What is a crossover?
Lay prices are always higher than back prices on Betfair. The smaller the price the less difference and the closer the race gets the difference also narrows. With strong favourites there will be very little difference (sometimes none) and with longshots you could easily get a back price of 21.00 (20/1) and a lay price of 51.00 (50/1).
Therefore if the Lay price goes below the average back price for the runner and then back up over it I count this as a crossover. I use standard deviation to ignore crazily high or low prices like 1000.00 or 1.01. The more crossovers a runner has with it’s price the better the chance of obtaining a trade bet as it shows the volatility in the market.
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