Sunday, 10 January 2016

Betfair trading

After messing about with the Betfair API and getting comfortable with backing and laying sports events as part of  a matched betting strategy, it was only a matter of time before we starting playing about with "sports trading".

Simply put, this is the process of placing a back bet, followed by a lay bet (or vice versa) on a quickly-fluctuating market. It's often called "scalping" and is a technique often used by financial traders.

As we've had the Darts World Championships over Xmas, complete with an overlap (the PDC Darts was running up to New Year and ended on 3rd Jan, while at the same time, the WDO Darts tournament was just getting going). Darts fans are familiar with the players and their form, quality, likelihood of winning and so on. But the great thing about trading is that you don't need to!

Trading is a form of gambling.
Let's get that out there already. It's not risk free. But if you follow a few simple rules, it's also quite easy to make a few quid with a relatively low risk

The first thing to do - particularly while starting out - is stick to a "limited" market; that simply means one with very few outcomes. A tennis game, or - luckily for us at this time of year - a darts match - is a perfect example of  a limited market.

  • There can only be one winner
  • There are only two possible outcomes
  • As one player gains the upper hand, their odds shorten, while the odds on their opponent lengthen

This means that the odds on the players are like a see-saw. As one player's odds go down, the other's go up. They can't both go down - that means that both are more likely to win, which is impossible in a head-to-head challenge (whereas if trading on horses, for example, two or more horses can become the favourites or joint-favourites). Likewise, they can't both "drift" (see their odds go up) at the same time. Odds on the outcome tip from one side to the other.

The other thing to look for in a sports trading event is "liquidity". Simply put, that means money. Look for one with lots of it! It's not uncommon for a popular event - like a darts quarter-final - to have literally millions of pounds traded on it.

More money means faster action. This may be a good thing, or a bad one, depending on how you trade. Personally, I like to trade quickly. Here's an example of a trade:

Phil Taylor started his game at odds of 1.41.
The betting public thought he had a good chance of winning the game.
His opponent took an early lead - but even then, The Power's odds remained low, while his opponent's odds stayed resolutely high. But as the game wore on, Phil's odds sometimes drifted - as far as 1.8 when his opponent had a good set; when Phil got the darts, and looked more likely to win (like a tennis player with serve, a darts player with the darts has an advantage) his odds shortened.

Without putting a back bet, and just as a game started when The Power was throwing second, I placed a lay bet on Phil Taylor when his odds were around 1.5. My reasoning was that his opponent would throw first, score a decent score, and before he even threw his darts, the betting public would see this as a threat and bet in such a way that Phil's odds would grow a little bit.

In trading, the odds don't need to move much. I'm not backing Phil Taylor to lose. At this stage of the game, it still looked like he could win. But I'm not going to leave my lay bet running until the end of the game. I'm just going to put money on Phil to lose at the current odds of 1.50.

Sure enough, the first darts scored 140 and Phil was 501 to 361 down.
The odds on Phil Taylor winning the entire game went up a little bit to 1.55.
I stuck a bet on, backing Phil Taylor to win at 1.55

Now, whether he won or lost, I had locked in a bit of profit.
I'd secured a profit of 155-1.50 = 0.05 or five percent of my bet stake.

As it turned out, I'd only put a bet of a tenner on, so I was 50p up.
But if the stake had been £100, I would have been a fiver to the good.
And all for placing two bets within less than two minutes of each other!
Even though I'd bet a tenner, the full £10 was never at risk. Even if things hadn't gone the way I'd expected, I could always "cash out" the bet early, and take a much lower loss than the full ten pounds.

But that's basically how sports trading works.
Put a bet on, then place another bet on the opposite result when the odds have moved in your favour. The reason the term "scalping" is used, is that in a highly volatile market (such as a head-to-head game with evenly matched players) the odds tend to bounce around a set point.

The odds for one player may be around 1.80
They may drop to 1.78 or even 1.76, or go as high as 1.82 or 1.84, but they tend to gravitate around a fixed point. The trick to scalping is to get in and get out quickly. Place a bet, then place a reverse bet just one or two "ticks" above or below it (depending on which way the market is moving). Take a little profit on lots of bets, rather than a big profit on just a couple.

Why?
Well, I thought trading was easy.
I saw the odds on Phil Taylor bouncing around the 1.66 mark at one point in the match, and stuck a "back bet" when they reached what appeared to be a high point at 1.72. But - because I was trading "blind" (I didn't know what was actually going on in the game, I was just following the money) the odds went up to 1.74, then 1.76, before settling back at 1.72. It turns out that he'd just missed an important double to finish the game. His opponent came on, scored a fantastic "check out", and Phil Taylor's odds shot up to 1.9 (as his opponent's also fell to around 1.98 from the earlier 3.4).

So now I'd backed Phil Taylor at 1.72 but his odds had moved up to 1.9.
The best I could lay the bet at was 1.88 as this became the new "norm" for his odds. Which meant I had to swallow a loss of 1.88-1.72 = 0.16 (or 16% of my bet stake).
As I was betting £10 a time, this was £1.60

Compared to my 50p win earlier, I was now £1.10 down.
Within seconds, trading had gone from really easy money to really quite hard! I had to make three more successful trades like my first one to get back into profit!

I was going to need some help making these trades a little more quickly than through the clumsy betfair interface. What I need is some kind of trading software......