10 Reasons Why You Should Trade, Not Gamble, on Betfair’s UK Horseracing Markets

By Adam Todd

Reason 1: More Consistent Profits Without the Wild Swings

A major advantage that short term scalping of prices before the race starts has over gambling on the result of the race is the much greater consistency of results that it produces due to the low payout, low risk nature of each short term trade.

Gambling on the results of races involves much bigger swings of fortune because you are dealing with much higher payout, and thus higher risk bets.

As a consequence you will have much larger drawdowns of your betting bank when gambling, making it necessary to need a much larger betting bank in order to safely ride out the losing runs.

Not only are bigger drawdowns and losing runs more stressful but more importantly they require a much larger bank than a trader making the same amounts needs, thus making the gambler’s percentage return much worse than the trader’s. This is because not only are the gambler’s profits derived from a larger bank, making them smaller in percentage terms, but also because of all the time that these losing runs take, during which you are making nothing.

You can see in my trading results for 2003, for instance, that I had only 12 losing days out of over 300 winning days in 2003, and the combined total of all those losing days came to less than my single best day.

With such a non-existent drawdown I was able to use my trading bank to it’s absolute maximum, constantly using my whole bank to Lay and Back, thereby producing not only consistent profits but also regular double digit daily returns with no losses. Figures like those are unimaginable and completely impossible for anyone gambling on horses.

2. Knowing Nothing About Horseracing is a Benefit

Another major advantage of scalping the favourite’s price is that you don’t need to know anything at all about horseracing. It's actually better if you don't know anything!

In the 3 years that I spent trading full time as my only source of income I traded close to 20,000 races and in that time I didn’t pick up a racing newspaper, open a formbook or even watch a horserace. Most of the time I didn’t even know the name of the horse on which I was trading, and I had no idea or interest in whether it won or lost.

Scalping is all about looking for very short term trends and Laying and Backing within seconds. Knowing nothing about horseracing means you don’t get distracted by the horseracing when you should be concentrating on the numbers. When making short term trading decisions that are completely unrelated to that horse’s chance of winning the race, knowing nothing about the horse on which you are trading is actually a benefit.

For instance, if I see the price is going down fast because there is a lot of money trying to Back the horse then I will also be trying to Back the horse with the idea of Laying it one tick lower if I get matched. Now whether that horse is a good horse or a bad horse, whether it’s matched to the going for that day, whether it’s capable of doing the distance, or whether it’s got 3 legs and a glass eye are all completely irrelevant to me.

I want to Back that horse because the price is going down and I believe I can make a tick out of it if I get filled, as soon as I’m filled I will be getting out of the position instantly. There is absolutely no reason for me to be wasting my time thinking about the irrelevancies of what will happen later on in the race: it’s chance of winning the race is not what I’m basing my decision to Back that horse on. In fact, when the race starts I will already be trading on the next race on another horse at another racecourse whose name I also haven’t bothered to look at.

If you are going into trading without any knowledge of horseracing you are blessed with an advantage over many other traders and gamblers who can’t separate the two.

Make efforts to avoid learning anything at all about horseracing and you will be a better trader. Don’t even look at the horse’s name and you’ll be able to trade the numbers without being unconsciously affected by anything you might know about that horse.

Don’t read the racing papers and don’t look at the results, keep your advantage and remain ignorant!

3. Horseracing is as Bent as a Nine Bob Note

Let’s face it, racing isn’t exactly whiter than white. There has always been an accepted culture of insider betting by trainers, jockeys, owners and people in the know on UK horseracing.

It’s inevitable, and horseracing provides a lot of opportunities for someone in the know to profit from, for instance, a horse not running quite as fast as it’s capable of running. Something to do with that extra gallon of porridge it was fed this morning! As a gambler, you can study form all you want but the fact is if you are purely doing form study without any inside knowledge then you are making decisions without being in possession of all the facts.

However, this corrupt undercurrent of insider betting is actually a good thing when seen from a trader’s point of view because it’s what makes the pre race prices so volatile and so perfect for scalping.

The idea that someone knows something is at the front of people’s minds when they see large amounts of money being placed to Lay or Back a horse on Betfair, and this is what makes the horseracing markets so good for short term trading. Such large amounts of money will instantly send the price soaring or tumbling, with scores of people desperately trying to second guess what’s going on and piling in. The favourite’s price in the last 5 minutes before the off can be extremely volatile, but there is nothing actually happening!

The only thing that’s making the price move about so much is people’s perception that something might be happening, of which they are unaware.

By comparison, tennis and soccer prices in the final 10 minutes before the start of the match are totally static. In Play tennis and soccer prices can be volatile whilst the match is being played, but that volatility is in reaction to what is actually happening on the court or the field. These In Play prices can be extremely volatile and as such cannot be traded with your whole bank as outside influences are affecting the price.

In the last 5 minutes before the start of a horserace however, there is nothing actually happening in the race and the volatility is enough to provide untold opportunities for a profit, but without the risk that the price will move whole points away from you. The price is only moving around because the corrupt nature of horseracing makes every market extremely twitchy and sensitive to any kind of imbalance in the bids and offers.

Like I said, watching a soccer team’s price in the last 10 minutes before the game starts is like watching paint dry, it hardly moves at all. That’s not because there’s no money being traded either, the average Premiership match on Betfair will trade a lot more money than your average horserace.

The reason is that a Premiership match is perceived by everyone to be a lot straighter and people feel that all the relevant facts about each team are in the open. Someone coming in and Laying five grand on Liverpool just before the match doesn’t spark panic Laying by everyone else. Such a bet won’t even get noticed and the price can trade hundreds of thousands of pounds in matched bets without so much as moving a tick up or down.

As a result trading soccer, tennis, cricket etc matches just before the start of the match is not nearly as profitable as trading the horses for the simple reason that they are not as bent!

As a short term trader jumping in and out of the market trying to steal single tick profits here and there, you don’t need to know why the price is moving up or moving down. The reason why it’s moving is irrelevant so any kind of insider betting doesn’t adversely affect the trader. It actually helps the trader because the opportunities come when there is movement and uncertainty.

However, as a gambler you are trying to predict, not follow, the direction of the price and as a result any insider activity can turn whatever form study you have done into a total waste of time, and money. Not knowing what is really going on when you are gambling on the result is a recipe for disaster.

4. Avoid the Dreaded Losing Run

Short term trading is much more risk averse than gambling. All of your trades are effectively extremely low risk, low payout bets the same as any other bet. But by making them such low risk, low payout bets you can eliminate the downfall of every gambling system: the dreaded losing run.

The sad fact is that no matter what you do you’re eventually going to hit the losing run, there’s no possible way around it. And it will go on for as long as the probabilities say it can.

For instance, if you’re betting on black at the casino you can reasonably expect that after 2 or 3 reds on a run then maybe black will come up, and you might be right a lot of the time. But the fact is that you are playing a 50% chance and the laws of probability say that when working with a 50% chance it’s perfectly reasonable to expect a losing run of 8 or 9 as a matter of course, and a losing run of 13 isn’t out of the question.

Now, if you are betting on horses at average odds of 3.0 for instance, then you’re dealing with a 33% chance of winning. You can study the form all you want but the fact is that one day you’re going to hit a losing run of 20+ losing bets that will wipe you out.

And that’s if you are only betting at 3.0, if you bet on horses with higher odds than that then you’d better get ready for a losing run of 30+ because it will happen. The only certainty with probabilities is this: Whatever can happen, will happen.

Trading on the other hand prevents these horrific, soul destroying, time consuming, bank busting losing runs by drastically reducing the chances of each bet losing.

In a short term trade you are only going for a single tick profit and if that doesn’t look like it’s going to happen you have the Scratch Trade to come to your help, where you can at least bail out with no loss, which I discuss in another article called Scratch trades: Heads You Win, Tails You Break Even.

Your chances of either winning or breaking even, if you trade correctly and use the scratch trade effectively, can be closer to 80% which drastically reduces the severity of the inevitable losing run. When it comes you might get 5 or maybe 6 losing trades on a run but that’s the kind of number you can handle. You can have the absolute worst case losing run happen to you and still make back all your losses on the same day, sometimes in the next couple of races.

Being able to go through your losing run and still come out of the day with a profit makes your daily chance of winning even higher. If we apply the chances of a losing day to my trading results for 2004, for instance, we can see that in 2004 I had 10 losing days out of over 300 winning days, so therefore my chance of having a winning day was 290/300x100=96.6%.

In 2004 I had a 96% chance of having a winning day so as unlikely as a losing day was, it was extremely unlikely to have 2 losing days on a run and almost impossible to have 3 losing days on a run. 3 losing days on a run was my equivalent of the 30+ losing run for the guy backing favourites to win but sure enough it happened on the 24th, 25th and 26th of August.

What was the result of this catastrophic losing run? I lost GBP113 in total over the 3 days and on the 27th August had an average, normal day where I made over twice that much to put me in profit over the 4 day period.

I could not have taken such a statistical beating and bounced back so fast doing anything other than scalping. Scalping is the only way of keeping your inevitable losing runs under control, as soon as you increase your chances of losing you are inviting the losing run to carry you out.

Remember, if something can happen it will happen, and if you’re following a gambling system which you know in the back of your mind could experience a bad losing run then you’d better brace yourself. Better still, ditch it and start trading!

5. Make A Fraction of a Percent Profit on Turnover Worthwhile

Another major advantage of short term trades is that you have the time to do so many of them over the course of a day. Being able to do hundreds of trades everyday irons out the effects of good and bad luck without having to wait weeks for your luck to come back like so many gamblers do.

Selective gambling on certain horses is all very well as long as you keep getting it right, but if you’re only betting on 1 or 2 races a day and you get your losing run it will take you forever to come back from it. And all that time you’re spending is lost time which is badly affecting your overall percentage return over time.

The frenetic nature of trading not only eliminates the effects of luck but also gives you a chance to do huge volumes of bets. By trading large volumes of bets you can survive on the tiniest percentage return on turnover and still make it pay just by doing the volume.

My average profits worked out at around a quarter of one percent, 0.25%, profit on turnover.

Now you might think that a quarter of a percent is a ridiculously low return and isn’t worth bothering with, but the ability to trade in and out positions all day using the same bank can mean that your volume of matched bets can easily make such a small return worthwhile.

As an example, take a look at my matched bet volumes for 2003, 2004 and 2005 which were GBP17.6 million, GBP21.7 million andGBP15.5 million respectively from a starting bank of GBP200 which never exceeded GBP3000 at any time.

I may have only been making a quarter of a percent profit on turnover, but a quarter of a percent of over GBP50 million is GBP100,000 profit, a 50,000% return on my initial GBP200 bank.

Any percentage return on turnover, no matter how small, is worth having when you’re trading because you have enough time in the day to do enough trades to make it worthwhile.

6. Traders Pay Less Commission than Gamblers

Betfair’s commission structure also greatly favours price traders making small, consistent profits over those that gamble on the result of the race. This is because their commission is charged on your net winnings for each market.

As a gambler you expect to have many losses but also some big wins to pay for those losses and therein lies the problem. As you are evening out your results over several different markets this means that when you do hit the big win the previous losses that you had are not taken into account and you must pay commission on the whole amount.

You don’t get to pay the commission on your net profit because your profits and losses were spread over different Betfair markets. As a result you end up paying a much higher proportion of your winnings back in commission than a trader who made the same net amount does.

For example, say you're gambling on each race, if you win GBP 200 on a race, then lose GBP 180 on the next race and then win GBP 200 on the next race and then lose GBP 180 on the next race you have made GBP 40 profit overall from 4 races. 5% commission charged on your 2 winning races is GBP 20 so you end up with GBP 20 profit.

Even though commission is only 5% you have actually paid out 50% of your winnings in commission.

Now, if you had been trading those same 4 races and made an average of 10 pounds on each race, not only would you have made the same profit from a smaller bank without having to stomach the 2 big losses but you would pay much less in commission also.

5% of each GBP 10 profit is 50 pence so you would end up with GBP 38 out of your original GBP 40 profit. 5% commission when you don't have huge swings to take into account actually means 5%.

You can see that my total commission payments for 2003 totalled GBP 2336 which equates to only 5.54% of my total winnings, it's slightly higher than 5% because I didn't win every race that I traded on, I only made a profit on 9 races out of 10.

7. Betfair's UK Horseracing Markets Are a Trader's Dream

Limiting yourself to picking the winner or loser of a horserace is such a waste of opportunity when you look at what the UK horseracing markets offer you.

For 7 days a week at the same time every day you have 20 highly liquid markets with plenty of volatility which all get busier and busier one after the other in perfect order ten minutes apart from each other.

Starting with the first race you have 200 minutes of busy, two sided trading markets with loads of volume and movement. Who cares what horse wins the race!?

People can’t see the wood for the trees, just because the market is based on a horserace doesn’t mean you have to limit yourself to guessing which stupid horse is going to win the race. What a total waste of what is in front of you.

There isn’t a financial market in the world that is as consistently active and volatile at the exact same time everyday for so long as the Betfair horseracing markets are in the final minutes before each race starts.

8. Trading is Less Stressful Than Gambling

Another advantage that trading has over gambling is that it is less stressful. When the race starts and the prices really start to move the trader is no longer involved in the race and has already moved on to the next horserace which is due to start in another 10 minutes.

The scalper spends his time and energy looking for the smallest movements which he gets in and out of in a matter of seconds and which have a high chance of not losing.

Putting any kind of decent sized stake on a horse and then watching it lurch out of the stalls and set off is by contrast quite stressful.

Ofcourse, you could also say that watching the horserace is exciting and trading for tiny 1 tick profits is boring but then you have to quantify exactly why you are on Betfair: Are you there for fun or are you there to make money, because you can’t do both.

I am not on Betfair for excitement, I am there to make money. If you are on Betfair to have a dabble and enjoy the racing then that is another subject entirely, I am talking from the point of view of someone who wants to make money.

Most people don’t go to work to get their excitement, they go to work to get money and then get their excitement with that money. Betfair should be no different, either you’re there to make money or you’re there to enjoy a flutter on the racing.

Risking money on the outcome of a horserace is much more stressful than holding a bet for 10 seconds before getting out of it with a tick profit, especially when you are financially dependent on your results.

9. People Are Much More Predictable Than Horses

Picking winners or losers on UK horseracing is especially difficult because there are so many variables from one day to another and one racecourse to another. The going, which way around the course runs, the temperature, how the horse feels that day etc all have an effect on how fast a horse will run.

Trading doesn’t have any of these variables. When scalping you are trying to predict the price movement in the immediate term, and therefore what the other market participants are going to do, not what the horse is going to do. The race hasn’t yet started so the horse has got nothing to do with it.

And it’s a lot easier to predict how a bunch of humans in an exchange environment will react to a certain price sequence that you have seen a hundred times before than it is to predict what order a bunch of highly strung thoroughbred horses will be in 2 miles down the track.

People are a lot more predictable than horses.

10. Trading is Easier and More Profitable

The plain fact of the matter is that short term trading is easier and more profitable than gambling.

There are so many factors in your favour when you take your destiny into your own hands and stop guessing which horse is going to win.

Traders are operators that react to familiar price sequences and gamblers are hopers that would rather make a decision once and then sit back and hope they were right.

The relatively large profits from a successful gamble compared to the slim pickings of a successful trade make it hard for many people to see the light and come over to the trading side, but as Abraham Lincoln once said:

“I may only walk slowly, but I never walk backwards.”