Betfair Betting Exchange Course Lesson 6: Trading, cold trading and trading in-play

  • Written by David Bet
Betfair Betting Exchange Course Lesson 6: Trading, cold trading and trading in-play

Many people that use Betfair, even if they don't realise it, are traders. If you ever change your position on a Betfair market - then you are trading. If you ever try to lock in a profit before an event has finished, that's trading. Use this section for an in-depth analysis of trading and techniques around it.



The original versions of these articles were written in 2005 by Peter Webb, founder of BetAngel, specialist trading software for Betfair. Visit BetAngel for a wide range of demonstration clips and for more information about their products.

BetAngel is a third-party Licensed Software Vendor of Betfair. BetAngel produce and support their own products. To make use of any of these software applications you must enter into an agreement with the individual vendors - separate from Betfair. Find off-the-shelf applications, historical data, results and more at the Betfair Solutions Directory.


Ever wondered how these guys with no interest in horse racing can make steady profits by trading? Cold traders read the market and profit from its trends rather than studying the form.

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Betfair is modelled on the stock market and a growing group of customers now use the platform to trade sports markets particularly horse racing in a similar fashion to financial city traders. Instead of buying and selling shares or commodities these traders trade the No.2 at Wolverhampton on a Monday afternoon or Denman in the Gold Cup to make profits.


Users who trade horse racing markets in the style of financial city traders are termed cold traders. Operating in the last 10-15 minutes before a race starts, traders aim to lock in small regular profits regardless of the race result. As soon as the race starts they simple move onto the next race and trade again. Trainers, jockeys and form are irrelevant as the eventual outcome of the race does not affect the traders. The less they know about the horses the better, it prevents them from forming any opinions or having any emotional attachment to any bet. Volatility and heavy liquidity in the market is all that interests these individuals.

Cold traders operate in all UK and Irish races and account for a large sum of the total volume traded in the win market. Operating at the top end of the market around the favourite cold traders are fantastic for all users of the site. The shorter the price of the favourite, the more they get involved. (You need a bigger bank to lay first if the favourite is 6.6). They provide depth to the market and enable traditional punters to place substantial back or lay bets pre-race. It should be emphasised that cold traders operate purely pre-race and many successful traders prefer to be out of the market in the last couple of minutes before the race starts.

The following figures were taken from a standard race at Wolverhampton. The vast majority of the volume matched in the last 15 minutes of the race is a result of cold trader activity. It has been estimated that in the last five minutes of a standard UK race over £1500 per second is getting matched!

£93,831 16:05pm
£201,969 16:08pm
£275,969 16:10pm
£341,759 16:12pm
£431,250 16:14pm
£558,169 16:15pm

When cold trading is important to adhere to golden rule of Betfair: BACK HIGH LAY LOW! Think about share prices, if you were looking to guarantee a profit on an investment you would buy at a low price and sell at a high price. Your profit would be the difference in the two prices. In Betfair terms buying is laying and selling is backing but unlike shares you can do either transaction first, you can sell something before you effectively own it!

The following example is from the race outlined above. The trader has focussed on the favourite where the vast majority of the betting and volatility occurs. In the instance below the trader believes the price is going to shorten. They back the selection first giving them a position as follows:



Lay columns are shown in yellow to minimise errors - the brighter colour should serve as a bigger deterrent against clicking the wrong button. Click on More Options to switch colours.

The aim is to make a profit and be involved in the market for very short periods of time but on regular occasions. Remember you can make as many trades as you like in any given market. In this instance, looking to make a one tick profit as soon as the market moves in their favour they can lay off at a lower price - the trade is closed guaranteeing a profit on every selection.



Given the volatile nature of horse racing markets it is inevitable that some trades will go against you. This is where the vast majority of novice cold traders and recruits from traditional gambling go wrong. In the example above imagine if the horse had drifted. What would the trader do? Leave it as a speculative £50 bet as its price drifts towards 4.0? The TV pundit fancies it even if the market doesn't so it has to win netting the trader a potential £125!

As a trader it is imperative that when a market moves against you, you take a small loss! Upon entering the market you were only looking to lock in a small profit so don't expose yourself to losing what could be a whole day's work with one trade which goes against you. This is possible the hardest aspect of cold trading, accepting a small loss.

To give yourself the best chance of success at cold trading it is advised to equip yourself with the correct tools such as Bet Angel, Bet Trader Pro, FairBot or BFExplorer. These API programmes are specifically designed for cold trading. Giving a greater level of information on expected price movements with functions such as moving averages, weight of money indicators and many of the applications used by city traders it offers far more than the standard Betfair interface, that's not to say it can't be done.

Golden rules:

-This is still gambling, it is not a guaranteed way to make profit.
-Cold trading is specifically pre-race. Never leave trades to go in-play.
-Be prepared to accept small losses this is the most important aspect of cold trading.
-If your downside is no bigger than your upside, you just need to be right more times than wrong. If your downside is much bigger than your potential profit, then you might as well be backing 1.2 shots.
-There is always another race.
-Invest in the right tools to give yourself the best chance of success.
-The majority of people who attempt cold trading fail because they attempt to mix punting and trading. To profit from trading, discipline is the most important factor.

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In-play betting is one of the biggest benefits of Betfair. It enables you to place bets right up to the final whistle or until the winning horse passes the post or even after that if it's a photo finish. It also enables you to see how a game is unfolding as a result of the line ups, conditions and tactics. Prices constantly fluctuate throughout a game or race as the chances of a selection ebb and flow, this enables traders to constantly revise and improve their position.

Example 1 - Cricket

Cricket is a wonderful trading sport; markets can react violently to a wicket falling or a six being hit. Here's an old example from a Test match between India and Australia in November 2004.

• Needing just 107 in the fourth innings to win the match, Australia traded at 1.05 when the target was set, India are matched at 20. Being only day three, the draw is out of the equation, but with so many wickets falling already, the pitch was very tricky to bat on.
• Australia lost a wicket immediately (0-1) and drifted to 1.10.
• Wickets continue to tumble, and at 58-6, India became favourites at a price of 1.86.
• Another wicket, 62-7, and India were now strong favourites trading at 1.22 - their lowest price in the match.
• Mini-revival, Australia reach 77-7 and regain favouritism at 1.89.
• A wicket reverses the betting dramatically, India now 1.30 at 77-8.
• The tail wags, at 90-8, both teams are trading at evens (2.0).
• The ninth wicket fails, India back into 1.50.
• Australia all out for 93, the final price available for India was 1.30.

The following graph illustrates how the prices fluctuated in relation to how the wickets fell as outlined above.


Imagine the position you could have put yourself in if you believed Australia's record in dead rubber tests and chasing small totals was worth a risk. If this was your opinion you would lay Australia at 1.05 which wouldn't exactly kill you. For a potential profit of £100 if Australia did not win the game, you risk a whole £5 - barely the price of a pint these days!

Think about it - what is the downside of such a lay? If the opening batsmen defy the trend of the match and get to 50/0, Australia trades at 1.02 and you can't get out of it.

At virtually any point in the innings after the first over, you had a healthy position to trade from.

Would you then back Australia at 1.5 or 2.0 or higher? There are plenty of options available to you and you don't need to jump in all at once. You could bet back piece by piece - first covering the potential loss you have on Australia so you then have a 'bet to nothing', then chip away to even up your result on both sides. You can weight the position to however you want to cheer the result. That's the beauty of Betfair.

Example 2 - Football

If only it was so easy - not every game will go exactly as you plan. Watch a few games and make some notes, rather than investing cash. If you have any statistics to help you out (number of draws on a certain cricket pitch, most popular time for goals to be scored in soccer etc), all the better.

Go into the match with a strategy. Do you think one team will win? How confident are you? Do you wish to ride them all the way, hedge for an even profit all-round, or somewhere in-between? Are you prepared to risk a little bit for a chance of a big payoff?

A popular trading system is backing the draw first in football matches that you expect to be rather dull and lifeless, particularly in the first half. The average draw price of a relatively even English Premier League match is 3.4. If the game is still scoreless at half-time, that price will drop to 2.6-2.7. But beware the late goal, stats show that the last 15 minutes of each half are the highest scoring segments of the match, even after you allow for the addition of injury-time.

Scratch it out first on a piece of paper: Of course the example below is only hypothetical, but it's a match and market situation which occurs regularly.

• Back the draw at 3.4, for £50

o Team A =-£50
o Draw =+£120
o Team B = -£50

• After 35 minutes, lay the draw at 2.80 for £30

o Team A = -£20
o Draw = +£66
o Team B = -£20

(nb - effective position is now £20 on the Draw at 4.3, better odds than were ever available)

• At half-time, if the score is still 0-0, lay the draw again, 2.66 for £30

o Team A = +£10
o Draw = +£16.20
o Team B = +£10

This is now a GREEN BOOK, whichever result occurs you win!

• Team A scores after 60 minutes, the prices are now: Team A 1.50, Draw 3.6, Team B 17.0. Lay Team A for £20

o Team A = £0
o Draw = +£36.20
o Team B = +£30

In this position, you don't mind if the home team hangs on, but you'd prefer an equaliser from the visitors. Team A continue to shorten as the clock ticks, but Team B are pushing everyone forward...

75mins - Team A 1.28, Draw 5.0, Team B 30.0

Do you ride this out or lay the favourite again?

80mins, the visitors get desperate and bring on fresh legs. Team A 1.20, Draw 6.0, Team B 50.0

You think the home team are at risk of conceding here, let's try a small lay. Take a liability of £10 by laying Team A for a backer's stake of £50.

o Team A = -£10
o Draw = +£86.20
o Team B = +£80

87mins, the visitors equalise!

Team A 11.0, Draw 1.20, Team B 11.0. Lay the draw for £100.

o Team A = +£90
o Draw = +£66.20
o Team B = +£180

90 minutes - somebody scores, but do you really care who with a book like that???

Alternatively, you might wish to lay the odds-on favourite if you don't think they will score in the first half-hour. There are many different strategies, many different variables, the only way to work out what's best for you is test them out. Watch markets evolve over the course of a match. Take notes, make predictions, understand why the prices move so much and learn to predict where they will go as the game continues.

Important tips for live trading

1. Go into the game with a strategy.
2. Keep thinking a few minutes ahead - what will happen if ...? With live trading, you are focusing on what happens next, not necessarily the end result.
3. Always be prepared to risk a short-priced favourite for the sake of a couple of beers!!!

Practice on paper or for small stakes first.

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Example 3 - Horse Racing

You know your racing reasonably well and are confident that the horse you have chosen will be leading with a furlong to go. At that stage its price will be much shorter than the odds it started the race at, as its chances of winning are greatly improved. Whether the horse has the class or not to stay in front to the winning post is your concern. How about trying to lock in a profit before the race is over, and not have to sweat on it?

Remember the golden rule - Back High, Lay Low.

You back your horse at 8.4 pre-race for £10. You stand to win £74 on the bet (ignore commission for the moment). At the furlong pole, your horse is still in the lead with a chance of winning, it is trading at 3.2. You decide to lock in a small profit by 'selling' back some of your profit, and taking in more stakes (by laying) than you initially spent (in the back bet).

You lay your horse for £20 at 3.2 - risking £44 to win £20. Your position becomes:

Horse wins: +£30 (74 backing profit - 44 laying risk)
Horse loses: +£10 (-10 back bet + 20 laying profit)

If and when the second bet is matched, you then cannot lose either way. Commission is then taken out from your final position - not individual bets. This is why we recommend you do not use the 'Show P&L including commission' setting if you are trading, at least not until the end of your trading. The system will show commission coming out of the first bet and then when you calculate how much to trade to balance your book, the figures won't add up exactly.

Similarly, if you identify a horse very popular in the betting but you know its running style means it will be held up for a late run, there is a strong chance its odds will drift (lengthen) before the horse makes its move. The opportunity is there to lay the horse at low odds before the race, then back it at a higher price during the race to give yourself a green book (all profit whatever the final outcome).

Golden Rules for Trading:
Back high, lay low
Lay for higher stakes than your Back bet

Remember though, there are no guarantees this will work.
- the horse may not perform as you expected and thus the odds don't move as you predicted.
- the running style of higher profile horses is much better known than in weaker races, thus the market may resist fluctuating too far.
- he who hesitates misses the opportunity. You may not get matched, particularly if you wait to place your bet manually. Use the 'Keep' function to set up your bet pre-race.
- another horse may simply dominate the race, reducing the opportunity to trade other runners.

Example 4 - Tennis

Tennis is the ideal trading sport. As two players go head-to-head in a market which will sit close to 100% book percentage (when the match is televised), any positive move in price on one player forces a negative move in the odds on the other player. Every point will change the odds, with the degree of volatility dependent on the position of the match. The opening point of the match won't affect the odds too much, but a mini-break on the opening point of a tie-break will have a marked effect on the market.

Watch how the market reacts to the flow of a match. When a player starts a service game, the market expects them to hold serve (much more so in men's tennis than women's). So if that player holds serve, the odds won't move a great deal - the expectation is already built in. If the receiver has some chance of breaking serve - even getting to 15-30, not necessarily holding a break point - then the market moves significantly.

The most profitable ways of trading on any sport are when you find value in opposing the consensus opinion - i.e. if one selection is overbet, then opportunities must lie with selections which are underbet. But if it was that easy to pick out those juicy opportunities, nobody would ever need to work!


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