6. Trading techniques
There are many ways to trade on betting exchanges, and everybody will find their own individual style that will suit them. There are a few basic techniques that we will cover here. Firstly we will cover 2 very different styles of trading that are time dependant:
- Pre Event
- In Play (during the match, race, etc.)
In addition, we will cover the most common techniques successfully used by professional traders:
- Scalping
- Swing Trading
- Market Making
- Arbitrage
- Bonus Bagging / Matched Betting
Pre-match & pre-race trading
Trading sports events before they begin is called pre-match or pre-race trading. You can do this in any sport, but every sport has its own specifics that will be covered in a later article. The most important characteristics of the markets in the pre-match & pre-race trading are:
- Increased liquidity (more money in the market)
- Lower volatility (prices change less)
What do these new terms mean? As already mentioned, the liquidity is the amount of money in the market. When there are a lot of people betting on a game, there is also lot of money in the market, which usually enables you to trade with higher stakes. Conversely, when liquidity is lower, so too are the stakes you can use to successfully trade.
In contrast, volatility is the extent and degree of price movements, in other words how much the prices go up or down. Each sport and for each event it is different. Football and tennis are extremely popular sports on which most people bet, which means that these markets will usually attract more money, and subsequently less movement in price.
In-play trading
Trading during a sporting event is called in-play trading. In-play is characterized by the fact that the odds change depending on what happens in the game / race. In-play trading has the opposite characteristics to pre-race trading, i.e.:
- Lower liquidity
- Higher volatility
Volatility is usually significantly higher in-play because the odds change according to game development, like in our previous example where the price of Chelsea changed significantly after scoring a goal. In sport there can be many unexpected twists and results on a daily basis, and this causes volatility. In contrast, before the game there is much less that can affect prices, hence why there is much lower volatility before the off.
Scalping
When you are scalping, the aim is to make regular small profits from small price movements by leaving your trades in the market for the shortest time. If you are scalping, then you are doing a lot of very short and small trades. For example, when scalping Horse Racing pre-race, your typical trade may look like this:
- Back £50 @5.1, Lay @5.0 three seconds later, etc.
Swing Trading
Swing trading is the way in which your trades take a longer time because you are trying to catch profit from a bigger move of the price. If you swing, you will be doing trades less often, but they will be much longer in nature and hopefully each trade will yield greater profits. A typical trade can therefore look like this:
- Lay @3.05 , Back @3.75 about three minutes later
When you swing you have a lot of small gains and losses, and sometimes you have a big profitable trade. It is however generally more difficult and less frequent to predict big price movements.
Market Making
Market making is the term for placing offers on the exchange for others to take in the hope of making a profit. In any market, there can be lay offers and back offers for others to take, which on a highly liquid market will meet and be a single price increment apart. For instance, if the best prices on a runner are 4.0 to back, and 4.3 to lay, you could place a lay bet & 4.1 and a back bet at 4.2. If both of these bets are fully matched, you will end up with a small profit.
Arbitrage
Arbitrage is another form of trading that involves using a combination of the betting exchange and a bookmaker to lock in a guaranteed profit. For instance if a bookmaker is offering odds of 10.0 on England winning the world cup, and the price on the exchange is 9.0, you can lock in a small profit by backing England at the bookmakers & laying them on the exchange.
Bonus Bagging / Matched Betting
Similar to arbitrage, this method locks in consistent profits from bonus bets that bookmakers offer to either new or existing customers. So for instance let’s say Super Bookie is offering a free £20 bet to new customers. With some clever maths similar to hedging, you can use this bet to back a selection at Super Bookie, and make a smaller lay bet on the exchange, which will guarantee you the same profit regardless of the result. If you are interested in learning more about matched betting, check out our dedicated partner site http://bet72.com.
Summary
We have explained the most common techniques used by traders on the exchange, and in doing so we would like to make clear, that no single technique is easier or better than any other. It depends entirely on your personal preference, personality and skills. You can also use any combination of techniques on the betting exchange, as there are so many options and opinions. Everyone must choose his or her direction, and if you persevere you will reach a point where you will have your own unique and individual technique. It's the same as anywhere else - there aren’t two people in the world who think exactly the same. And since the markets on a betting exchange are based on the opinions of individual bettors or traders, it means there are as many strategies and techniques as people participating.
