The gambling world has changed a lot in the last decade. The emergence of betting exchanges such as Betfair, Betdaq, Smarkets and Matchbook means that the bookmakers no longer control the odds of horses.
This has given way to a new way of sports trading where regular punters can trade the price movements of horses before the off, meaning it doesn't matter which selection wins or loses because the profit is already locked in before the race starts.
Personally, I love trading on Betfair. However negative this article may sound, I always try to give people as much information as possible. I realise this article may seem off putting, but I just want to be as honest as possible and warn people of the possible downsides to trading the sports markets. You should definitely try sports trading but you obviously need to be aware of the risks.
This method is called pre-race trading and it is a very popular way to make a tax free income from the UK horse racing markets.
Should you try it? Is it worth your time, to risk your hard earned money by trading on the betting exchanges?
What Are The Risks?
The risk involved when trading on the horse racing markets are rather straight forward, but unpredictable. It takes time and practise to get to grips with them all because some of these situations cannot be taught, they have to be experienced.
Think of it as breaking up with your first girlfriend/boyfriend. It is a rocky ride and no one can guide you through it and so you just have to try and learn from your mistakes.
Let's look at some of the risks involved when you trade on the exchanges.
Normal Risk on Every Race
On a normal race on an average day the risks are quite straightforward. You enter the market at a certain price point and you expect the price to move in your favour. Sometimes you close your trade for a few ticks profit, other times it goes against you and you accept a small loss.
However, as long as you win more than you lose by using your edge in the market, the edge being your ability to read the market and predict what is likely to happen, you will come out ahead at the end of the month with a nice chunk of profit in your trading account.
This why trading is lucrative because there are over ten thousand races per year. If you can profit only a couple of pounds per race then you are earning a full time income!
This is how the vast majority of markets go. You enter your trades and depending on your trading style you either scalp in and out of the market dozens of times, or you place longer term trades in hope of a large swing trade. Personally, I like to combine them both as every market will read a little bit differently.
A maiden race on a Monday evening in Ireland will trade quite differently than a handicapped race on a Saturday afternoon which is being shown live on Channel 4. Again, this is part of your edge, knowing which markets are more suitable for your own trading style.
However, there are few things that can happen which is totally unpredictable. If you are caught on the wrong side of these events then it can cost you some serious money.
I have been caught out a few times by this event. Sometimes a horse does not want to race, for whatever reason. At the end of the day a horse is an animal and if a horse is in an uncomfortable situation or it is in some sort of distress, the horse will act up and cause problems at the start of the race.
The final 5 minutes before the off is the most fluid, potentially volatile but profitable time to trade. Unfortunately, this is also the time when a horse may throw the jockey off it's back or run uncontrollably down to the start at an alarming pace.
This is when the price will drift (increase) dramatically, in just a few seconds and if you happen to be on the back side of this trade, you will find yourself in a huge losing position unless you react quickly enough.
Bear in mind, once this happens to you once or twice you quickly learn to jump on the lay side and you will learn to profit from this situation. But the first time you will probably get caught out! It stings but it is a valuable lesson.
Large and Sudden Price Moves
Some markets are unpredictable, especial maiden races and markets with a low turnover as the market is less solid. This causes very drastic, sudden and long price shifts which can catch newbie traders out.
When I say large price moves I do mean 10+ tick movement in less than 5 seconds. One minute the price is trading nicely at 3.15 and then the next thing you know, the price has moved 20 ticks before you could even react.
The reason for movements like these might me:
- an overbet horse which has been coming in all day, only to drift out suddenly to its original price from 5 hours prior.
- a bookmaker dumping huge liabilities.
- a random punter who puts in a huge stake - £20,000 for example.
- professional traders who push the price out.
The last reaction to this is the simple human element here. As soon as a price moves quickly, there is a natural tendency for people to follow a new price move.
Also, remember that all the traders, like you, are now trying to exit their positions for a loss which, ironically, will push the price even further away and increase your own loss if you do not get out in time.
This one is incredibly hard to deal with and can lose your entire bank. If the actual exchange crashes and you have an open position in the market, it remains live.
Meaning if you are trading with £100 stakes and you have one lay position open at 4.5 at the time of the crash, your liability is £350. Should that horse go on to win the race, you lose £350!
The same applies to your computer crashing or your Internet breaking down. Unfortunately these cannot be avoided because when it happens, it happens.
The only real solution is to have a laptop in reserve and an additional Internet connection, such as a dongle or a mobile phone so you can close your position, if any of these scenarios occur.
You can also have a secondary account with a different exchange so you can cover any liability you may have. This obviously requires quite a large bank but it is worthwhile doing.
How To Overcome These Problems
Here is the truth. The only way to overcome these problems is to experience them. Sure, all the trading guides and gurus out there will warn you about them, just like I have, but these things cannot be taught.
Think of it as learning to drive a car. You can read about it all day and know the theory but until you get behind the wheel, you can't put it to practise.
Everything requires patience, time and commitment. If you immerse yourself in the horse trading world, you will become competent and make money. You will learn how to scalp and predict swing trades. You will know how to avoid these situations I have mentioned, but you have to get burnt a few times first.
Best Places To Learn Trading
There are three places I recommend you learn about trading the betting exchanges, such as Betfair.
- Betfair Scalper - this is a training course aimed at complete beginners. You will learn some reliable and profitable methods of trading on Betfair. You use Bet Angel to trade and I can highly recommend this service.
- For a more intermediate level I recommend Caan Berry. Caan is a professional trader and his video course takes you through his mindset and shows you a whole host of valuable tips and tricks of the trade. Caan's trading software is Geeks Toy, which I have also used. I also recommend this service. It is excellent!
- Peter Webb's YouTube channel. Peter is the creator of Bet Angel, a trading software which most traders use to trade with. He has an incredible mind and is probably the most famous full time trader online. He has a great collection of free training material on his channel and is a must for any wannabe trader.
There is a lot to learn but if you apply yourself, you can do it. Nothing comes easy and, as with anything online, it takes a bit of time but I can wholeheartedly recommend you try your hand at trading the pre race horse markets on the betting exchanges.
Have you got any experience with trading on Betfair? Share with us and let us know what your experiences are!