4 Betfair Exchange Trading for Beginners: How do you actually trade on Betfair?
Here I am going to talk you through a real life example of a trade on the Betfair exchange.
The basics
There are 2 stages to a trade on Betfair
The opening trade
The closing & Hedging profit
Like the standard bookmaker you can use Betfair to place a bet on the outcome of an event and also you can place a lay bet, simply put:
Back bet – Betting that an event will happen
Lay bet – Betting that an event won’t happen
Let’s take a really simple example.
Liverpool v Manchester United
We could back or lay Liverpool depending on what we think the outcome of this match will be (outcomes: Liverpool win, Draw, Manchester United win).
This is where the Betfair Exchange comes into is own and gets very interesting for us as betfair traders, because the prices are constantly moving before the game in the build up and also in play the price reacts and is not static this gives us betfair traders an opportunity.
We can both back and lay an event, this is where the two stages of the trade on betfair come into play.
The Opening Trade
To make a successful green trade, we have to expect the price will move. In this example we back Liverpool at a price of 1.80 with £100 to win the match.
Looking at the numbers now then, we have
£100 stake on the match, the scenarios are:
Liverpool Win £80 Profit
Draw £100 Loss
Manchester United Win £100 Loss
That is in a betting example but we are trading on Betfair now and have an opportunity to sell this trade, so in the above example lets say its half time and Liverpool are winning 1-0. The odds will have changed as I have explained the prices are moving, we can now execute the second part of the trade ‘The closing/hedging profit’.
The Closing/Hedging Profit
In this example Liverpool are winning 1-0 (sorry United fans!!) we could now Lay Liverpool to win the game say around 1.2 with £100. This would leave £60 profit if Liverpool were to win the game and £0 profit on the other two outcomes (Draw & Manchester United Win).
You are buying lowing and selling high in trading! But in Betfair trading terms the goal is:
Back higher then lay lower
Or
Lay low then back higher
We can then hedge this profit across all 3 outcomes so we get a guaranteed profit no matter what happens in the game now, you might be thinking it is complicated to work out how much stake to do the second part of the trade! It really isn’t, in fact Betfair have now added this into their exchange interface so it will do the maths for you, how good is that? I don’t recommend using Betfair’s cash out function as they will not give you the best profit and you will be leaving money on the table.
But if you ever need to work this out there is a couple of options available to you:
Chromaweb Arb Calculator
Use Betfair Trading Software (I will cover this in this post later on)
That covers the basics of trading on the Betfair Exchange, you are now able to open and close a Betfair trade!
Next we shall move onto the jargon that you will see used…
#Betfair #BetfairExchange
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