Monday, December 17, 2018
How does football trading work?
When we are trading football, we need to use a so-called betting exchange. At the moment I can name four exchanges: Betfair, Betdaq, Smarkets, and Matchbook. Betfair is by far the biggest and my examples will be taken from this platform.
With traditional bookmakers, you can only back an event. A team to win, a match to go over 2.5 goals, 5 yellow cards in a match etc. On the contrary Betting exchanges makes you able to both:
- Back an event. This is the traditional bet, where you bet on something to happen, for instance, a team to win. Backing means to bet on what you think will happen.
- Laying an event. This is the opposite. This means playing against something, for instance, a certain team winning a football match or a match staying 0-0 because you believe there will be a goal.
Betfair has blue buttons for backing and pink buttons for laying and you can back and lay the same event.
Let´s me show you an example. We look at a match between Arsenal and Liverpool.
In the first screen dump below I have backed Liverpool at odds 2.1 for 1 point. 1 point in this case is 100 units, equivalent to around 10 Great British Pounds. This gives me a profit of 1.1 point if Liverpool wins and a loss of 1 point if Liverpool draws or losses.
The concept of laying will be new to many, so let´s try to get the hang of it.
Below I have layed Liverpool at lay odds 2.12. When laying I hope that Liverpool will NOT win. I win 1 point if Liverpool draws or losses and lose 1.12 points if Liverpool win.
Your losing position will be shown as red numbers (1.12 points) and your winning positions will be shown in green numbers.
When laying (without doing further), the amount you have layed is the maximum amount you can possibly win. You only win, if what you layed is NOT the winner of a given event.
To calculate your stake/liability of a lay bet, you subtract 1 from the lay odds and multiply by your stake.
In the above example it would be 2.12 -1 = 1.12 x 100 = 1.12 points liability.
When we have a group of traders backing Liverpool and a group of traders laying Liverpool we have a market.
You can not place a back bet on Liverpool if nobody has layed Liverpool and vice versa. It is player against player and the betting exchange makes money from taking commission from winning trades.
A trade can in many cases be a set and forget, where you do not have to trade out.
In the above example, we could just back Liverpool and leave the position as a bet.
Two of the strategies in this book is set and forget after you entered the trade in-play. But with the two other remaining strategies you have to trade out after a goal is being scored. This means we close the trade before the match is finished.
The only way we can make money trading in and out of a football match is to either:
- Back an outcome (at as high odds as possible) and lay the same outcome for lower odds (as low as possible)
- Lay an event (at as low odds as possible), and back the same outcome at higher odds.
Let´s take an example:
Let´s say we back Rayo Vallecano to win against Barcelona at odds 10.0 for 100 GBP. We now have 900 units on Leganes to win. (Odds 10.0 x 1 points minus stake).
Let´s pretend Rayo Vallecano go ahead 2-0. Their odds now drop in-play to odds 2.0 because the market now rightfully believe that Rayo Vallecano has a bigger chance of winning the match. We can now lay Rayo Vallecano to win at odds 2.0 for fx 5 points.
Because we have backed at high odds for 100 units and layed for much lower odds for a higher amount we have created a situation where we can´t lose and will win 4 points no matter the result of the match.
Think of this example as buying cheap (backing at high odds = high reward) and selling at a lower price (lower odds than the initial back bet).
I remember it took me a while to get my head around “laying”.
I suggest you go to Betfair and just search for a given match in the search field in the top menu. Look at the match odds market. Try to push the back/blue button and lay/pink buttons and put in different stakes to see how it turns out in terms of profit/loss on the different teams and the draw.
Try also to push both the back and lay button on the same outcome on the match (fx home team) and play around with different stakes to get an understanding of how the profit figures behave when you for instance back higher and lay lower.
Finally, you can learn a lot about trading from following matches in-play and looking at how the odds move as time elapses and goals are being scored. Watching without engaging is the best teacher for sure.
You can also read my article "What is the benefit of trading?"
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