Betfair Newbies Trading In The Dark

newbies trading in the darkI came across an epic classic thread from 2010 on the Bet Angel forum which was written by forum user James1st.

It is so epicly long that you might want to make a cup of tea or coffee before you sit down to read this.

This is a brilliant insight into what it really takes to do well at Sports Trading and features some of the best advice and interesting points that you will ever read on the subject.


Newbies Trading In The Dark

I have perused this thread through its 1500 posts and find it astonishing that nowhere in its history is there any fundamental advice for folk who are new to trading. Drawn here via the lure of riches and the postings of other successful traders with their 6 figure P/L’s, many newbie traders do not realise that they are walking into a lions den…and what is worse, they don’t even realise that they need to arm themselves for the battle ahead. Buying a subscription to BA does not make one a “trader” and the whole idea that untrained and unprepared trading virgins can immediately compete in the highly honed and sophisticated environment of the Betfair marketplace is simply false advertising and disingenuous advice. Having spent years trading in the stock markets, getting used to trading in Betfair has required another significant quantum leap in my knowledge and learning. It has not been easy.

What I have learnt after quite a long time trading is that until any “would be” trader addresses the following 6 issues, he is doomed to failure:

1. You must have an “edge”
2. You must fully understand simple trading patterns and the mathematics of trading
3. You must develop a trading plan and execute it flawlessly
4. You must lose before you can learn how to win
5. You must obliterate all character weaknesses that affect your trading
6. You must work harder than you imagine to achieve success

An Edge

Do not be fooled by the seeming ease by which several well-known and successful traders ply their trade. It may look like they are trading randomly whenever you read their blogs or even watch their videos, but in reality, they are following, very precisely, well tested and statistically proven entry and exit points. Whether they choose to lay or back at a particular juncture is not a random choice but is based on the simple fact that that particular “trade” will have a statistical higher probability of success than failure. If it were not so, then they would indeed be “net losers”.

Before you can become a “net winner”, you must identify a circumstance or circumstances, by whatever means and using all the data available, where your chances of a successful trade will result in a “better than evens” return. Whether you choose scalping or swing trading, this is a fundamental requirement for success. Tossing a coin to decide whether to back or lay first in a single scalp trade will result in a net loss (after tax). Even a 7yo knows that truth.

No-one, I repeat no-one who is a successful trader will be imparting their “edge” on these pages, so this is a task that requires a lot of personal research, much testing and the chosen methodology must define simple executable entry and exit points. Of course there are many suggestions of where to look for an “edge”, the most common (but not necessarily the best) is the behaviour of the Weight of Money (WOM) favoured by many traders. Others include moving averages or more sophisticated MACD or Candlestick analysis, Elliott wave patterns or Relative Strength Indicators. However you reach your “edge”, its potential strength and its frequency of occurrence is fundamental to your trading future; quite simply, “guessing” is not an option.

Do you really believe that some people “guess” better than others on a consistent and long-term basis? What those “apparent” guessers are actually doing is tuning into the wave patterns that drive the markets by recognising and acting upon repetitive patterns that occur in a pre-race market. There is nothing mystical about how these people trade, they do have trading plan that supports their chosen advantage or “edge” and although their chosen methodology is less formal than others, some do succeed for considerable periods.

Whatever edge you choose, it is vitally important that your Trading Plan supports it fully and comprehensibly.

The Mathematics of Trading

214r23ff3f3To my mind, successful trading is the understanding and managing of a simple truth…you need to win more than you lose. This seemingly simple statement is much more difficult to achieve than you may think possible because how much you can win is unlimited but it takes a ton of discipline to ensure that your losses are very strictly controlled.

Scalping (the act of buying/selling odds for small gain) is generally defined as single tick trading but does allow for the possibility of 2 or 3 tick gains. Obviously no one will be surprised when I say that you need to have a success rate commensurate with your gain, in order to make a profit. As I stated before, a 50% win rate on single tick trading will net an overall loss after tax, so it follows that you need a better than evens “edge” to profit from trading. Generally speaking, some traders are happy with 66% whilst others improve their edge to reach an 80% success rate. Another route is to develop an edge (much harder to do) that gains 2-3 ticks, at least “some” of the time, understanding that (success rate*tick gain less failure rate*stop loss) = profit, is not a complicated bit of math.

What’s this “Stop Loss”?

Not every trade you participate in will win and this is one of the most difficult pills for newbie traders to swallow, but it is a fact of life and of trading. Just accept it and get used to it…you will sometimes lose. Fact: you are certain to sometimes lose and how you manage and react to those losses makes the difference between success and failure.

Using a Stop Loss (right click on odds) is essential when trading whether or not you choose to operate a mechanical version or be always prepared to sell out your trade manually and in accordance with the strict rules of your trading plan. One of the major reasons why most traders fail to make a profit is quite simply NOT following their trading plan that stipulates that you MUST have a stop loss limit. Consistently breaking or moving stop loss limits whilst trading is the sure way to lose all your capital; just don’t do it. This single lesson is one that I personally took too many attempts to learn.

success rate*tick gain less failure rate*stop loss = profit
50%*1 less 50%*2 =LOSS

Boy, this is getting tough for the 50% coin tossers who fail to manage their stop losses.

The “scratch trade” is a very useful tool in the scalper’s armoury and getting out of a bad trade for a zero win or zero loss will help in keeping your success rate up to that defined in your trading plan. On the face of it, life is tough for scalpers who make even the slightest mistake in their Trading Plan, simply because the leeway between %age Success and Stop Loss is zero (or 1 at best).

Obviously swing traders are in a better position to allow some flexibility between their success rate and their stop losses, but swing trading (looking for long up/down moves in the market) has its own drawbacks. For a start, they are fairly infrequent and they often fail to materialise despite affirmative “signals”. They sometimes break down and can leave you in a negative tick situation. However some traders prefer this method of trading despite the less than 50% success rate because the tick reward verses the stop loss can return greater profits, but only if they are managed expertly.

What I have learnt about winning at trading is that it is simply the application of basic mathematics and ensuring that your trading plan is both profitably viable and precisely executed. Winning ticks is not where your efforts need to be concentrated; it is in correctly managing the losing ticks that makes the difference between success and failure. Most traders are net losers and the primary reason is a failure to manage their losses.

Simple Trading Patterns

11324334rt34tThe most important thing to understand about pre-race trading markets (during the 15 minutes leading up to the race off time) is that the market is either trending or ranging. For most of the time the market ranges between 2 sets of odds (usually where most money is being matched) and this “range bound” area is where scalpers ply their trade, always aware that the market may start trending at any time (going outside this range and heading north or south).

There is no magic indicator nor is there any forewarning just what the market will do next and all we can do is to rely on our trading plan to ensure that our stop losses are correctly positioned and that our exit strategy is managed efficiently.

Indicators (those I mentioned in post 1) are generally speaking “lagging” indicators (they come after the known facts), however WOM (but not the moving average) is a “current” measurement, as is price movement. There are many graphs available in Bet Angel and whilst some people may find them useful, I have yet to see any proof that they are predictive by any consistent or profitable degree.

However, an “edge” has to be found amongst the price movements you observe either in the ladder or in the graphs and that edge has to be consistent enough to form the basis of your trading plan. Perhaps the most widely publicised edge is formulating a trading plan around the price action when odds reach the top or bottom of the ladder history.

The pre-race market is not difficult to understand insofar that layers push the odds out and backers drive them down. Trying to fathom when and why this is so is more complicated than solving a Rubik Cube in microseconds and people who tell you that they can predict such events, are simply basing their prediction on known events such as “how many tipsters have advised this particular horse” or other equally unreliable data. None of them can predict just when a horse is going to sweat up in the paddock, so disregard these outrageous claims as bunkum. No one can predict market movement and a best guess based on historical patterns is the only tool available.

When you have studied thousands of graphs you will be able to tell (sometimes), at which points the layers are in control and conversely when backers hold the upper hand. However and bearing in mind that 90% of the liquidity in any market is created by traders themselves, it mostly boils down to a battle between traders since traders both lay and back the same selection, usually within seconds of each other.

A peculiarity in Betfair markets is that unlike stock trading, odds have a habit of accumulating traders (sheep) who forget when to stop laying or backing and as a consequence, odds often overshoot their natural position. The effect of this enthusiasm is to cause more pullbacks than would occur in a more conservative stock market.

Odds never move in a straight line and the typical “wave” pattern of rising or falling prices is easily observable on most graphs. There is some merit in the study of these patterns, as they often repeat themselves and some traders capitalise on the statistical data that indicates whether the next tick(s) is likely to be up or down. That is not to say that any trader can guess with any degree of certainty whether the odds will go up or go down but if they can do so with a better than 50% success rate then they have the means, through simple mathematics, to make a profit on that ability.

The Trading Plan

plan-640x250Ideally your trading plan should be really simple because you may have less than a second to recognise your entry trigger and complex plans take too long to execute. A trading plan is a set of simple rules that you intend to live or die by and having them written down and pinned to your desk will force you to abide by the trading plan with absolutely no deviation. If your “edge” is unclear then you will have problems making instant decisions, so it is best to define the edge as a simple entry and exit point. Executing your trading plan (as written down) should be such a simple process as to require no thought in its execution, so its wise to remove any ambiguities as soon as possible.

For reasons that I will discuss later, the first rule of trading is to remember that you are “trading” and not gambling. That means you will be settling your trade at the 60 second call, come hell or high water!. The final 60 seconds of the pre-race market is a time when many traders are getting out of their positions and the volatility is sometimes crazy…just don’t get involved and make sure you are out before the mayhem erupts. Most novice traders will “go to the wire” when trading and some even go “in-running” rather than take a loss and that is the certain way to the poor house. Here now is a set of Trading Plan rules as an example:

RULE 1: I will exit my trade, win or lose, at the 60second mark.

RULE 2: eg** I will LAY when WOM > 66% and there is a £3000 or more bet at the front of the Lay queue (this is your ENTRY point). My bet is placed ahead of the £3000 bet.

RULE 3: eg** I will BACK when I make 3 ticks or when WOM < 50% (this is your EXIT point)

RULE 4: My Stop Loss will be set at 3 ticks below ENTRY point and will be set immediately my LAY bet is taken. I will never move my Stop Loss to greater than 3 ticks.

** This is a fictitious “edge” for the purposes of this demo. Please define your own edge.

RULE 5: I will not trade on All Weather races


Just a word on the importance of Money Management. Most beginners seem to get the maths totally wrong when starting out and often over commit them selves by employing different stakes/liabilities and different stop losses with no idea about what their profit expectancy should be. As a suggestion, I would recommend an active bank* of no more than £100 (more is less, as we will see later). Stakes should be proportional to the odds being traded (£20 at 5/1 or £50 at 2/1) and the Auto Stake.Auto Update is a useful way to learn about staking. I would suggest that you further split your stake into 4 parts** and use 100% of your bank on each trade (later, when your bank grows, this will reduce to 10% of your bank on any trade). Depending on your trading plan and the “edge” you have defined, your Stop Loss should be set 4-5 ticks away (at between £2-3 loss) with a profit expectancy of around £2-3. In stock markets, win-loss ratios are generally 2-1 or 3-1 but in Betfair you will do well to average just over 1.5-1 ratio. Scalping was discussed earlier and obviously Stop loss needs to be set very tightly compared to swing trading and the profit expectancy depends on how many scalps are completed within the given time of the Trading plan.

Why Losing Is Good For You!

betfair newbies 1No matter how many times I might say or write that my expected win rate is 80%, I have in my personality the ability to absolutely refuse to accept that this high a %age win rate includes the fact that I will lose 20% of the time. As I merrily trade away, chuntering through the races I am happy with my 80% and 1/3rd way through the day, I get a losing trade. The market changed….how dare it!…doesn’t it realise that I have only had 7 winners in a row. This losing trade must be wrong, I remove my Stop Loss awaiting a market correction…but of course it doesn’t happen and the market continues to dive in the wrong direction. Now I am facing a huge loss, and all because I refused to believe that 80% win rate does not mean 100%, even though my Trading Plan stated this quite clearly. What is it in me that refuses to acknowledge that trading means accepting losses as well as wins? Is it that I can’t accept being wrong?

Accepting losing trades is part and parcel of trading and the sooner we get used to that fact the better. It is so much better to lose according to our trading plan than to have no idea where we stand in the size of losses we might incur. Sods Law will ensure you are taught a lesson if you make this mistake. Manageable losses, defined in our plan, are exactly that…we are managing and minimising our losses.

All too often do novice traders, myself included, put our entire bank at stake by refusing to accept a planned loss and allowing our trades to go in running. Before you get to experience how that feels, let me caution you against such a foolish move. Just try to get used to allowing your Stop Losses to trigger out and continue with your next trade or move onto the next market. The sooner you experience that minor pain compared to the agony that awaits if you lose your whole bank, the better. That is why I am encouraging you to lose a few trades, accept the loss and move on. This is the only way you will learn to win overall. In a later post I will tell you just how much I hate to lose at anything and just why this otherwise laudable character trait has hindered my progress for a considerable time.

Your trading plan will prepare you for the losses, depending on your known strike rate, and you need to accept what your plan is telling you. If your plan allows for a certain percentage of losses, then you can only realise your daily target by accepting both the gains and the losses stipulated therein. There are countless other reasons why you will lose at trading, none of which I have covered thus far, so do not complicate your life by breaking the rules deliberately and failing to follow your plan.

Newbies should start off by completing 20 small stake trades based on their trading plan, following it strictly to the letter, accepting wins and losses before they even think about looking at their P/L. Only after 20 trades should you look at the P/L and see the whole picture. If the plan is working there will be an overall profit and the presence of minus figures on the page will appear unimportant in the greater scheme of things.

I have managed to get around 15 winners in a row whilst others claim to have made 45 or more, but realistically most novices are doing well to string 3 winners together before encountering a loser. Never let the losing trade distract you from following the plan. Practise makes perfect and attention to detail is how we add precision to our trading.

Next time we can look at a few other reasons why most traders lose and we will examine a few character traits that may hinder your progress towards becoming a full time trader.

Why Traders Lose

This  is based on my own experiences as a trainee trader and although some of these will not apply to yourself, at this time, care should be taken to fully understand why we act in the human way we do when operating a mechanical system.

1. I am/was a gambler at heart but I have learnt that pre race trading is not about making a quick kill and success is measured by the slow and steady accumulation and compounding of wealth.

2. I do not follow my plan/my plan isn’t specific enough (triggers are interpretive rather than factual)/my trading plan has no “edge” and is not delivering

3. When I face a losing trade, I deviate from my plan; anything to avoid taking a small loss. Sometimes I double up my losing trades, go in running or back/lay the horse I was trading

4. I sometimes trade when I feel ill, hungover or stressed when my reactions are compromised. I often miss Entry and Exit points during those times.

5. I sometimes make a mistake in following my plan and back instead of lay, fail to obey all the rules of my plan, press the wrong button etc

6. I get distracted or interrupted during trading and miss out on the juiciest trade of the day. That soccer match I was following also lost me money. I am now depressed (see 4 above).

7. I get angry when I make a mistake or when a trade goes against me and my next few trades are affected

8. I overtrade by seeing opportunities that are not in my plan. They mostly lose, I lose concentration and now I am getting stressed (see 4 above).

9. I freeze and fail to trigger my entry point because I’m watching the TV pictures and can see my horse bucking, crapping and neighing (as horses do!)

10. I miss my Entry or Exit point because my computer freezes on another window I was distractedly looking at, my ISP crashes, my electricity is cut etc

11. I practise yoga during a trading session and fall asleep at the wheel

12. I start trading with some of my BA settings wrong because I forgot to reset them after last nights tennis trading session

13. I am late getting to a race and decide to follow just ½ my trading plan. I doesn’t work out so I sweep the result under the carpet and will repeat the same error tomorrow

14. I decide mid way through a trade that this trade is a super bet and I double my stake, only to get wiped out by the mad spiker

15. I attempt to trade in 2 directions during the same session, something that is not in my current trading plan

16. I just traded an All Weather race, despite my plan saying that my edge is not there in such races

17. I had to leave my PC mid trade for water/lunch/a phone call and missed my Exit point. My Stop triggered. I swear and get upset (see 4 above)

18. I never seem to learn from my mistakes and I repeat 9 above the next day

19. I have 4 losses in a row and I begin to have doubts about my trading plan. I make a minor untested adjustment and the next race becomes a loser instead of a winner

20. I get bored because 99% of the time I am either waiting for an Entry or an Exit, so I have a few speculative bets to keep me amused. They lose.

21. I move my stop loss further away because immediately I Entered my trade, the market moved against me. I reckon it will come back. It doesn’t.

22. I have made my daily target but this one last race looks appetising. The trade is a loser and I hate finishing the day on a losing trade. I decide to allow the trade to go in running, the horse wins and I have lost my whole days profit

23. This Irish market is very volatile and I am unsure about my Entry. I go ahead and the trade fails. I try to avoid all volatile markets in future only to later discover that avoiding Irish markets was the right thing to do

24. I lost money last Saturday, so I no longer trade on Saturdays

25. My wife calls out whilst I am in mid trade; it seems she has fallen from the loft and is hanging from her fingertips. Am I a trader or a fireman?

Hard Work and other Miscellany

One of the first questions new traders ask is whether they should lay or back first. Replying that it “doesn’t matter” conceals the fact that you should concentrate on a single direction (most will choose to lay first) until you have mastered the skill of trading. It is inadvisable to mix trading the 2 directions in any single race.

On the face of it, it would seem that a £50 Back bet around the 4’s mark should net the same return for the same number of ticks as a Lay bet but this is not the case. A Lay bet here will return you almost twice a Back bet as you cross increments. When trading across boundaries (odds marked in the ladder in orange), be aware that all is not equal. The unequal values are 10, 6, 4, 3 and 2).

It is not necessary to go “all or nothing” when backing/laying. A favourite trick of mine, used by several traders I know is to split ones stake into 4 equal parts; that allows you to Enter or Exit at different odds. For example you might Lay 4 x £25 bets at 2.1 looking for 1-3 ticks according to your trading plan. You might then Back 2 parts at 1 tick (2.12), one part at 2 ticks (2.14) and the final back part at 3 ticks (2.16). It is a useful strategy that allows you to lock in some profit whilst capitalising on a stronger move that may be happening. It is more useful in trend trading and pulling your Stop Loss up behind you will ensure that you do not fall prey to a sudden drop in odds.

On a final note I would like to wish all the new traders all the very best for their future.


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  1. claus zachariasen says:

    “As a suggestion, I would recommend an active bank* of no more than £100 (more is less, as we will see later). Stakes should be proportional to the odds being traded (£20 at 5/1 or £50 at 2/1) and the Auto Stake.Auto Update is a useful way to learn about staking. I would suggest that you further split your stake into 4 parts** and use 100% of your bank on each trade (later, when your bank grows, this will reduce to 10% of your bank on any trade)”

    what does he mean by 100 % of bank on each trade? Am a bit puzzled here, can you clarify?


    1. Sports Trading Life says:

      Hi Claus,

      I guess he means actually putting all of your bank into the market at once.

      This is less risky on the pre-race/match markets where the markets wont move against you too quickly but in-play this would be pretty dangerous.

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