The Comprehensive Guide to Pre-Race Horse Trading on Betfair: Horse Race Trading For Beginners

Scalping

Scalping is a popular short-term trading strategy that revolves around making quick, small profits by capitalizing on minor price fluctuations in the market. Instead of waiting for significant price movements, scalpers aim to benefit from the tiniest shifts in odds, making multiple trades in a short time frame.

Example:

Imagine you're monitoring the odds of a horse named "Lightning Bolt." You observe that its odds are consistently fluctuating between 4.0 and 4.1.

Sensing an opportunity, you decide to back "Lightning Bolt" at 4.1 with a stake of £20. Within a few moments, as expected, the odds contract to 4.0. You quickly lay "Lightning Bolt" at these shorter odds, securing a small profit. 

If you were to replicate such trades multiple times during the pre-race period, these small profits can accumulate, leading to a substantial gain by the end of the trading session.

Best Races for Scalping

When scalping, it's essential to choose races with high liquidity to ensure your bets get matched quickly.

A good rule of thumb for scalping is to target races where the matched bet volume is consistently above £80,000, and there's a liquidity flow of at least £250 per second in the final 5 minutes leading up to the race.

• High-Profile Races: Events like The Grand National, The Derby, or The Cheltenham Festival are prime scalping opportunities due to their massive public interest and high liquidity. The sheer volume of bets being placed ensures a steady flow of odds movement, providing multiple scalping opportunities.
• Races with Clear Favorites: Races where there's a clear favorite, especially if the favorite has odds below 3.0, tend to attract significant betting volume. The market's confidence in such a horse can lead to consistent, albeit small, odds fluctuations perfect for scalping.
• Races with High Media Coverage: Races that are broadcasted live on TV or have significant media coverage often see a surge in betting activity. The commentary, expert opinions, and live visuals can influence punters' decisions, leading to dynamic market movements.

As a rule of thumb, every weekend has many markets primed for scalping because that is the busiest time for betting, punters and traders alike.

Swing Trading

Swing trading in the Betfair pre-race markets involves capitalizing on more significant price movements over a longer period compared to the quick in-and-out nature of scalping.

The aim is to enter a trade at an opportune moment and then exit once the price has moved sufficiently in your favor, capturing a more substantial profit from the swing in odds.

Examples of Swing Trading:

• Anticipating Market Reactions: Let's say a well-known horse is participating in a race but has shown signs of fatigue in its recent outings. If the market hasn't fully factored this in, you might anticipate a drift in its price as more traders become aware of this information. You could lay the horse at lower odds, expecting the price to drift out, and then back it at higher odds to lock in a profit.
• Reacting to News or Events: If a top jockey gets injured or a leading horse is pulled out of a race, this can lead to significant market reactions. By quickly positioning yourself in line with the anticipated market move, you can capture the resulting price swing.

Best Races for Swing Trading:

• Races with Uncertain Outcomes: Unlike scalping, which thrives on high liquidity, swing trading can benefit from races with more uncertain outcomes. Maiden races or races without a clear favorite can see more significant price swings as the market tries to determine the likely winner.
• Races with Changing Conditions: If the weather suddenly changes or there's a change in the track condition, it can influence the odds dramatically. Races that are susceptible to such changes, like those held in areas with unpredictable weather, can offer excellent swing trading opportunities.
• Races with Late Breaking News: Any late news, like a last-minute jockey change or a horse acting up in the paddock, can lead to sudden and more substantial price movements. Being alert to such news and reacting swiftly can provide profitable swing trading opportunities.

Swing trading requires a keen understanding of the market, a good sense of timing, and the patience to let the trade develop. It's essential to set clear stop-loss points to protect your bankroll and to be prepared to adjust your strategy based on the market's movement.

Back-to-Lay and Lay-to-Back

These are two of the most fundamental trading strategies in the Betfair pre-race markets. Both strategies revolve around the concept of trading in two steps: entering a position with one action (either backing or laying) and then exiting with the opposite action, aiming to lock in a profit regardless of the race outcome.

Examples of Back-to-Lay and Lay-to-Back Trading:

• Back-to-Lay: Imagine there's a horse named "Speedy Sprinter" that typically starts races strongly but tends to fade towards the end. You could back this horse at a certain price, anticipating its odds will shorten as it takes an early lead. Once the price has decreased sufficiently, you would then lay the same horse, locking in a profit. If "Speedy Sprinter" starts at odds of 10.0 and you back it with £10, and then its odds drop to 6.0 due to its strong start, you can lay it at these shorter odds to secure a profit.
• Lay-to-Back: Conversely, if there's a horse known for its slow starts but strong finishes, you might lay the horse at lower odds, expecting the price to drift as it lags in the early stages. Once the odds have drifted out, you can then back the horse at the higher odds. For instance, if you lay a horse at odds of 4.0 with a liability of £30 and its odds drift to 6.0, you can back it at these longer odds, ensuring a profit regardless of whether the horse wins or loses.

Best Races for Back-to-Lay and Lay-to-Back Trading:

• Races with Known Front-Runners: Horses that are known to take an early lead but might not have the stamina to maintain it are ideal candidates for back-to-lay trades. As they surge ahead, their odds will often shorten, allowing traders to lock in profits.
• Races with Late Bloomers: Conversely, horses known for their strong finishes but slow starts are perfect for lay-to-back trades. As these horses lag in the early stages, their odds will drift, but as they start to catch up, the odds will shorten again.
• Races with Clear Tactics: In races where trainers and jockeys have clear, known tactics (e.g., holding a horse back for a late surge), traders can anticipate how the market might react and position their trades accordingly.

Understanding the characteristics and past performances of horses is crucial for these strategies. Traders need to be aware of how certain horses run their races and how the market is likely to react to their performance. It's also essential to have a clear exit strategy and set stop-loss points to manage potential losses.

Fading the Public

Fading the public is a contrarian strategy that involves going against the general consensus or the majority of bettors in the market.

The idea behind this approach is that the public's opinion is often overvalued, leading to mispriced odds. By identifying these situations, traders can capitalize on the market's inefficiencies.

Examples of Fading the Public:

• Overhyped Horse: Imagine there's a horse named "Media Darling" that has received significant media attention due to a recent win or because it's trained by a renowned trainer. As a result, a large number of casual bettors back this horse, causing its odds to become artificially low. Recognizing this, a trader might decide to lay "Media Darling" at these shorter odds, anticipating that the odds will drift outwards as the race approaches and the market corrects itself.
• Underestimated Underdog: Conversely, if there's a horse that has been performing well in training or has a good track record but hasn't received much attention, the public might overlook it. If the majority are backing the favorites and neglecting this horse, its odds might be higher than they should be. A trader can back this horse at the inflated odds, expecting the odds to shorten as more astute traders and bettors recognize its potential.

Best Races for Fading the Public:

• High-Profile Races: Events like The Grand National or The Derby, which attract a large number of casual bettors, are prime opportunities for this strategy. Casual bettors are more likely to follow the crowd or make bets based on emotions, leading to mispriced odds.
• Races with Clear Favorites: In races where there's a clear favorite, especially if that favorite has been heavily promoted in the media, there's a good chance that the odds might be skewed due to the weight of money from the public.
• Races with Recent News or Developments: If a horse has recently had a change in jockey, trainer, or has come off a notable win or loss, the public perception can shift rapidly, often overvaluing or undervaluing the horse's actual chances.

For this strategy to be effective, traders need to have a deep understanding of the market and be able to identify when odds are genuinely mispriced versus when the public might be right.

It's a strategy that requires confidence, research, and a willingness to go against the grain. 

Always remember, while the public can be wrong, they aren't always, so it's crucial to have a clear rationale behind each trade and set stop-loss points to manage potential losses.

Utilizing Resistance Points

Resistance points in trading refer to specific odds levels where the price movement tends to stall or reverse due to psychological or market-driven factors.

These points often act as barriers, making it harder for the price to move beyond them. 

By understanding and leveraging these resistance points, traders can make informed decisions and capitalize on predictable price movements.

Examples of Utilizing Resistance Points:

• Approaching a Key Level: Imagine a horse's odds are drifting from 3.0 towards 4.0, a known resistance point. As the odds get closer to 4.0, traders might notice a slowdown in the drift, indicating hesitation in the market. Recognizing this, a trader could place a lay bet just before the odds hit 4.0, anticipating that the odds might bounce back and start shortening.
• Breaking Through a Resistance Point: In another scenario, if a horse's odds break through a significant resistance point, say from 5.9 to 6.1, it can indicate a strong market sentiment in that direction. A trader might decide to go with the flow and back the horse at 6.1, expecting the odds to drift further out.

Best Races for Utilizing Resistance Points:

• High Liquidity Races: Races with a high volume of matched bets are ideal for this strategy. A steady stream of bets provides more data points, making it easier to identify and validate resistance points. Ideally, you'd want to see a liquidity of at least £2,000 per minute for a clear indication of resistance levels.
• Races with Clear Market Sentiments: If there's a strong consensus about a horse's performance, either positive or negative, the odds are more likely to approach, touch, or break through resistance points. These races offer traders the opportunity to anticipate and capitalize on these movements.

Resistance points, like 2.0, 4.0, and 6.0, are pivotal in trading due to the psychological significance attached to them.

They represent clear, round numbers that traders often set as targets or barriers. By understanding the behavior of odds around these points, traders can make more informed decisions and increase their chances of securing a profit.

As always, it's essential to monitor the market closely, set stop-loss points, and be prepared to adjust your strategy based on real-time market movements.

Moving On

Mastering these basic pre-race trading strategies is crucial for any aspiring Betfair trader. While they might seem simple on the surface, each strategy requires practice, patience, and a keen understanding of market dynamics.

As you progress in your trading journey, you'll learn to combine these strategies, adapt them to different situations, and develop your unique trading style.

Up next, in Chapter 6 - Advanced Trading Techniques, we'll delve deeper into more sophisticated strategies and tools that can elevate your trading game to the next level. Stay tuned!

Chapter 6 - Advanced Trading Techniques >>>