Often, we talk about numerous factors that have an impact on the markets. For beginners, there is the common mistake of entering markets when there is poor liquidity and this leads to problems.
With this in mind, you always need to look for liquidity when assessing markets to enter on Betfair. Depending on what you're doing, low liquidity can be of use, or burden.
If you have never heard this term before, you are probably sitting there feeling a little confused right now.
However, liquidity is relatively simple in that it describes how much money is being matched in a single market. If a market has high liquidity, there is a good amount of money being matched. Generally speaking, this classification comes when a market reaches a five figure amount.
But, there are other considerations because this is no good if you can’t get your bets off and matched in a good time. Therefore, you do need the money involved but you also need to assess other factors too. When you enter the market at a certain price, you need to be sure that this price will be matched and this confidence comes from a high liquidity market.
Over time, we have learned various different signs that suggest a low liquidity market so let’s take a look at what they are;
Pricing Gaps - Within the market, you might notice there is a 1.50 option to back and then a lay at 1.70. With this gap, it suggests a low liquidity market. Instead, you will need to look for markets with less of a gap such as 1.50 and 1.51 to back and lay respectively.
Amount Matched - After this, you can also look towards the amount of money matched in the market so far and this information can be seen in top-right hand corner. Since this information is easily available, it should be your first port of call. If the number shows anything less than five figures, the market can be considered low liquidity. Of course, this doesn’t mean that you absolutely shouldn’t trade but your strategy will need to be adapted. It's also worth noting that, depending on the market five figures may be more significant (such as the greyhounds).
Unmatched Money - Normally, you can see the amounts waiting to be matched and this is normally a very good sign. If you see a lot of volume waiting, this suggests high market liquidity. Lower numbers can lead to problems when exiting a trade. It's good to consider the market has your stake covered within the first 3 ticks before entering.
Example - For big sporting events like Champions League games between two significant sides, you are likely to see a market that has matched five and even six figure numbers in the run up to the game. Half a million in matched bets isn't that unusual for top quality league games. In addition to this huge pot, the difference between prices were minimal with very little gaps. Finally, there will be significant amounts of money waiting to be matched in these types of markets.
However… - If you were to pick a football game from League Two on exactly the same night, there would be a much lower matched total, the gaps would be larger, and the amounts waiting to be matched would be smaller. Overall, this market would be considered lower liquidity and would not attract as many traders. As long as you spend some time in and around the market, you will soon find it easy to recognise and differentiate between the two types of market.
Of course, you might be wondering why low liquidity markets should be avoided so we have two main reasons to consider;
Bad Value - At times, the market can go with your wishes and you can find better value when first heading into the market. On the flip side, you will normally be left with poor prices if you need to leave the market in a rush. When trying to make a profit for the evening. Things are made harder when exiting a bad position because other's are only willing to offer prices where they shouldn't be (value for them).
Low Fill Rate - In markets where there is less liquidity, there is often less betting. It just makes sense right? So when you have an open position and wish to exit, it can take an age to get 'filled' (your bets matched). While this isn't the end of the world it can then lead to erratic behaviour for manual traders.
In truth, it is actually very simple because the largest sporting events will see the most attention. For example, a Premier League fixture will see much more interest (and therefore be high liquidity) than a Polish Second Division match. Because it attracts more viewers all over the world and there is more information available regarding the game itself, it becomes a popular option as you get closer to the event. In addition to this, cricket and tennis will also be good markets, especially when big names are involved.
Moving away from sports, you will also find that any event that attracts a good deal of interest from the public provides an opportunity to make money including TV shows and even the Eurovision Song Contest. However, popularity does not guarantee a high liquidity market so you will need to check the volumes. In terms of an individual game, the popular sections such as ‘match odds’ and ‘correct score’ will do well but the more obscure bets will not quite see the same level of interest.
All things considered, staying where the money is, is often best. More money means less risk. Although there is a benefit to trading low liquidity markets too, but that's a whole new ball-game (and probably best left to the automation nerds).