MODULE 1 INTRODUCTION TO THE BETTING EXCHANGE CONCEPT

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1 MODULE 1 Introduction to the Betting Exchange Football markets Odds Movement INTRODUCTION TO THE BETTING EXCHANGE CONCEPT The betting exchange has revolutionised sports gambling. Anyone who is familiar with Betfair (it has a 95% share of the market) will probably smile nostalgically at the days spent in bricks & mortar betting shops placing his hard earned on a single win bet and hoping 90 minutes later he will be queuing at the pay-out desk. I always remember that in the bookies shop there were 3 payin booths and only one pay out. That tells you something. He will win - but only 5% of the time. A mug's game for sure and only a combination of skilful analysis, inside information and luck would see a punter come out ahead in the long term. The betting exchange introduced the word trading to compete against the term betting. (We will leave the linguistic difference between betting & gambling for students of semantics.) Trading became the prime way in which to improve your chances of winning. Operating on the same principle as a stock exchange, traders of "sports" commodities now could buy and sell his "stock". This stock can be in the form of a horse, a tennis player, the number of goals in a football match and can be bought and sold like petroleum or company shares. The trader buys at one price and hopes to sell for a higher price with the difference being his profit. Easy to explain but what about the mechanics of trading. lnside information and luck can play a part in helping achieve a profitable outcome but above all successful trading depends on skill and knowledge of the markets. lt also is paramount to have the requisite mindset. (This element will be covered later in this presentation) Betting exchanges enable person-to-person betting: Betting exchanges are a platform for people to swap or exchange bets. You may wish to bet on a specific horse at 2/1 (that is decimal odds of 3.0) and someone else may want to offer or lay that same horse at 2/1. At a betting exchange that transaction can take place. Betting exchanges offer better betting odds: Betting exchanges offer better value than traditional bookies. They do charge a commission but that is more than compensated for by the better betting odds. Betting exchanges offer up to 25% bigger betting odds than a traditional bookmaker: The maths behind this is that the overround of a mature betting market is always 100% with a betting exchange rather than up to 125% with a traditional bookmaker. What this means is that the betting odds at a betting exchange have zero house edge so betting exchanges offer up to 25% more value (depending on the particular betting market). It is not important to know the detail of the maths or to grasp the concept of overrounds. What is important is to recognise the tremendous value that betting exchanges can offer a punter compared to traditional bookmakers. To summarise: betting exchanges offer bigger odds. Commission: Betting exchanges make their money by charging a commission to the winner of the bet (not to the loser). You could have many bets on a single event. Some bets may win and others may lose. It is only the net profit on that event that is liable to commission. The usual starting level for betting exchange commission is 5%. So if you win 100 on an event then you will pay 5 commission, however this commission rate decreases the higher your ongoing turnover is and can get down to just 2%. Get better betting odds than are currently available: If you want better betting odds than are being offered at the time on the betting exchange, you can place an order for a better price. For example if a horse is available at best odds of 3/1 (4.0 in decimal odds) but you only want to back it at 4/1 (5.0 decimal odds) then you can place that order for your chosen stake (say 10). That order will remain i) until it is filled ii) until you choose to cancel or change it iii) until the start of the event. If it

2 has not been filled when the event starts it will be cancelled. However it may be part filled (say 5 of your 10 matched and the rest unmatched). Betting in running: On betting exchanges you can bet in-running on almost every single event: a horse race, a football match, a golf tournament. You name the sport and, on a betting exchange, you can bet during that event if you wish. Lock in a profit: Unlike a normal bookies, it is possible to guarantee a profit when using a betting exchange. Imagine having a 10 bet on a horse at 10/1. Imagine that the betting odds of that horse then contract to 2/1 (either before the event starts or even in-running ). You may then choose to lay that horse at 2/1 and take a 20 bet to lose you 40 if the horse wins. In this example if the horse wins you win 100 and you lose 40 = 60 profit. If the horse loses you lose your 10 bet and you win your 20 lay = 10 profit. This concept, also known as an arbitrage situation, is used by thousands of seasoned betting exchange clients to lock in profits. Many people trade on betting exchanges full-time, a bit like trading on the stock exchange. Privacy: You bet and lay in anonymity. Your identity is never disclosed to other betting exchange clients. The best betting exchange: There are only three serious betting exchanges and two of them suffer from a severe lack of liquidity or volume on many betting markets. Our number one choice, arguably unfortunately is Betfair

3 FOOTBALL MARKETS With football being the most popular sport traded on the betting exchanges it is not surprising to see on certain high profile matches over 25 different markets on offer. We can dismiss most of these as they are designed more to attract the punter rather than the trader. Any market that is not "in-play" a trader should ignore as he needs to manage his position during the live game. The main markets to consider when selecting a match to trade are: Match Odds Over/Under goals - all of them Correct Score Half Time Asian Handicap Next Goal Other more exotic markets we can use on occasion: Both Teams to Score Clean Sheet Corners Match Bet Draw No Bet Half Time/Full Time First Goal odds lf you have a desperate urge to throw your money away then Hat Trick Scored/ Penalty taken/booking odds/first Corner are the markets for you. Our advice is to leave well alone. One of the major reasons to use the main markets described above is liquidity. The closer the overround on the Lay side is as to IOO% means the market has strength and liquidity and you will need to be in a trade for a shorter time. Without sufficient money in a market, the more difficult it will be to get your back & lay bets matched quickly. As a rule of thumb it is advised to select matches to trade where there is at least 50K in the Correct Score market. With a decent amount of liquidity available the less volatile the market will be. Prices will "behave" themselves and reflect accurately the time decay during the match. Occasionally you will notice a large "spike" - someone who has put in an overly large amount of money into a particular market, thereby affecting the way in which the market reacts. This normally will show the market to slow down or hold up while this large amount of money is being traded. This behaviour is generally seen in the Match Odds/Over2.5 goals and 0-0 in the Correct Score market.

4 ODDS MOVEMENT Odds movements in Betfair in-play football markets are governed by 2 factors : Time passing in the game Goals being scored ( and a red card issued) NB: You may also become frustrated with seemingly unnecessary SUSPENION signs. This is due in most part to inexperienced Betfair employees or monkeys as we like to call them. As time passes, and goals are scored, the Betfair football markets anticipate the finishing score, The odds adjust in all markets accordingly. lf the odds didn't adjust in an organised and predictable manner, Bots (Robot staking software) would step in and make guaranteed winnings. Betfair football markets are extremely efficient due to the volume of software that is monitoring the markets looking for the slightest of edges. Also the volume of general trading (often into millions of pounds in some games), snaps up any value odds that may be offered in any market. Any variation from the expected odds offers a trading edge to any software that is programmed to monitor these very efficient markets, so if odds are offered that are not in step with time passed in the game and goals scored, bots will step in and back or lay the market to where it should be. You may have your own opinions, but in my view Betfair football markets offer virtually no edge whatsoever, simply because of the volume of trading that takes place in these very popular markets. The only way forward to make a profit from Befair football markets is to gamble on goals being scored, or time passing in the game. Whether you use a strategy, or simply back & lay, the success or failure of your trades will be totally dependent on just 2 elements - Time and Goals. There is no other way of trading these markets - except one.pre match trading: When an event is scheduled, odds compilers create what is known as a tissue. Normally, they use a general formula to work out firstly the Match Odds. Bricks & Mortar bookmakers produce their football coupons 3-5 days before the date of the event and will rarely re-print. But what if Wayne Rooney, for example, is declared unfit to play a day before the match. The match odds and almost certainly the Over/Under goal markets will drift out as the market re-adjusts to this news. This offers the trader an opportunity to lay and then back at a higher price. information = money, so scour your newspapers/online resources for information that you feel will have a direct bearing on odds movement. A great personal example was a match between Gent v Genk in the Belgian Jupiler league. I discovered that the home side (who were 1.60 favourites) were forced to field their 3rd choice goalkeeper, a 16 year old rookie with zero reserve team let alone first X1 experience. The home side Match Odds drifted as this information became more widespread throughout the day and a simple hedge after laying the 1.60 and the L.98 nearer KO produced a nice profit. The unfortunate kid conceded the first of 3 Genk goals in the 5th min by the way

5 INTERDEPENDENCE OF MARKETS We have mentioned that all markets move together proportionally. A simple example is the Under 1.5 goals market and Correct Score market. Backing O-O/1,-O/O-1 and backing Under 1.5 goals for the same stake will give you the same profit. Similarly, when the first goal is scored the price of 1-0 or 0-1 will be exactly the same as the odds on Under 1.5. lf they are not (and you are quick enough!) you may be able to execute an arbitrage¹ trade. We have noted that the odds movement follows a mathematical principle. All prices reflect the Overround/Underround in any given market. Prices will sometimes move more slowly as time passes or when a goal is scored depending on how the match is progressing. Dour, tight games will see 0-0 odds for example moving quickly downwards; a high tempo end-to end game will see 1-1 odds for example barely changing for a lengthy period of time. To improve your trading skills it is essential that you monitor diligently how, why & when odds movements occur. Fore armed with this knowledge will make your trading decisions in-play more effective and less stressful. ¹arbitrage: is the practice of taking advantage of a state of imbalance between two (or possibly more) markets: a combination of matching deals are struck that exploit the imbalance, the profit being the difference between the market prices. The imbalance is normally found in different exchanges offering prices on the same event