After having written two articles about probably the most widely used strategies for making a profit in the betting markets – Sports Arbitrage and Value Betting – I would like to turn to a third one, namely, Sports Trading. Now, it might not be fully correct to refer to Sports Trading as a strategy distinct from the other two. While Sports Arbitrage and Value Betting are fundamentally different, Sports Trading must not be used in isolation, but could be turned into a tool to improve the returns one gets with implementing the one or the other strategy.
What is Sports Trading?
Sports Trading is a betting activity taking place on betting exchanges as opposed to bookmakers. Examples for an exchange are, most notably, Betfair, but also Betdaq, Matchbook, Smarkets. Betting exchanges might look similar to bookies to the untrained eye but in fact there is a significant difference between the two categories.
Differences between bookmakers and exchanges
There are a few notable differences between a bookmaker and an exchange. Most importantly, when you make a trade in an exchange, you don’t bet against the exchange. You bet against other users of the exchange (other traders). How does that matter? Well, for one, that means the exchange does not care if you win or lose, since it is not a side on the bet. It only collects commission on your profit (or, depending on the exchange, your placed volume).
The above also means that, much like a sharp book, an exchange will never limit your action. Still, exchanges are different from sharps in their business model. Exchanges collect commission, whereas sharp bookmakers (similar to soft ones) profit from the overround. The commission depends on your volume. The more you play on the exchange, the more volume you generate – the lower your commission will be – at least in relative terms. The overround on the other hand depends solely on the event and market being played. It is the same for everyone, big and small.
Finally, in exchanges you can trade in and out of your position. This means you could benefit from short-term movements of the odds if you understand the market well. Granted, many bookmakers offer the cash-out option too nowadays, which is the same concept. However, it comes at a hugely inflated price – most cash-outs are offered at an overround much higher than the one for a regular bet. You don’t have such a “punishment” for closing your position in an exchange. Therefore, the exchange is the only suitable tool for profiting from short-term market movement.
What does that mean for you
Well, I have already outlined the one imlication of those specialties in the exchange’s business model above – the exchange does not limit you. However, there are further benefits from using an exchange. Since the exchange does not care if you win or lose – it only wants you to play, as much as possible – exchanges are generous in offering tools to improve your betting.
For example, Betfair offers its own free API, which allows you to build tools connected to the platform, analyze odds en masse or automate your betting action. There are only a handful of bookmakers offering similar services and only under certain conditions.
How do bookmakers and exchanges relate to each other?
Hopefully the above helps you understand the difference in the business models between a bookie and an exchange. In fact, bookies often copy the odds of the exchanges in the liquid markets. Exchanges on the other hand may take a position in the betting markets via a trader. In this way they can offer some action to their customers in the less liquid markets. Regardless, the different business models lead to some important practical implications for the bettor, namely:
- The Wisdom of the Crowds effect: The prices on exchanges are more efficient than the ones on the average bookmaker for events that attract a lot of liquidity
- Exchanges, unlike most bookies, don’t chase arbers
- Exchanges attract on average more professional players. Soft bookies are mostly a playground for the “recreational player” (as they tend to call the losing bettor)
- Depending on the exchange, larger turnover usually results in reduced commission for the bettor (trader)
How to approach Sports Trading
How can one make money from betting exchanges? Well, you have to make a guess regarding the direction of movement of the odds, open a position and if you are right you can close your position at a profit at a later moment. When this later moment is going to be depends entirely on you and your strategy.
Some traders hold their positions open only for mere seconds. Typially, they use their experience to foresee in which direction the odds will move next. Others would stay put until the beginning of the event, as it is a widely held view that for most events the closing odds reflect most adequately the real probabilities. But that surely does not mean that one cannot make money entering at this point too. Furthermore, this second group will benefit from the higher liquidity at event start. This will allow them to trade out at a lower bid/ask spread.
There are many different approaches to Sports Trading. The important thing to remember is that trading is more of an art then a science. There are people around there that have mastered this art quite well – you can try to become one of them.
Good trades mean instant profits
The real beauty of Sports Trading is that here you have the only strategy where you can get your profits at any time – including before a sports event has even started. Arbitrage betting being the exception here, but that only works if you hedge in a different book. In other words, if you can find value in the market, in theory you should be able to collect your profit right at the beginning of the event. So you would not care at all how it is going to end. This is significant advantage to employing a pure Value Betting strategy. The later typically comes together with large up- and downswings in your bank (and respectively, your mood). The reason is that, apart from fundamental factors, luck is always playing a huge role in every sports event.
So this was the basic introduction to Sports Trading. Thank you for reading. If you want to share a thought or ask a question, feel free to do so in the comments below.