When I started my Betfair trading career, I didn’t actually start sports trading immediately but I wasn’t gambling either. Instead, I was doing something not unlike what you would define as Matched betting. Though it wasn’t exactly the same way matched betting works in modern terms. it was a little different from that.
But it was also the thing that drove me on to start Betfair trading, as it turned out that any opportunity was very limited where a bookmaker was concerned. Whereas, with Betfair trading, the opportunity to profit seemed almost unlimited!
What I did before Betfair trading
If you were to transport yourself in a time machine and go right back to my very first few bets that I ever placed on a betting exchange they were very similar to matched betting. I started with this strategy as it was an obvious one for that time in the industry.
The Betfair betting exchange was completely new. Another internet fad and something that nobody knew much about or cared much about. Sportsbooks didn’t really exist on the internet and the Internet itself wasn’t that well established. Bookmakers were bookmakers and punters were traditional gamblers looking for an easy way to back a winner. Nobody cared.
My first ever Betfair trading strategy
So my first Betfair trading strategy was more or less arbing (arbitrage) between betting exchanges and bookies, there were few sportsbooks back then.
I was going to a bookmaker and then hedging my position on the exchange. It was very similar to the sort of thing you would do with Matched betting. Bookies didn’t tend to do many introductory offers back then, so I had to look for pricing errors or inefficiencies. The industry went through a burst of punting offers in an attempt to grab new customer, which is why the whole matched betting community grew. Though that relies on the goodwill of legislation and marketing budgets!
But my general tactic would be to go to a bookmaker, preferably an obscure one, and get really good odds off them on a certain event. I would then go onto the exchange and lay it off on there. This was impossible before as you never had the chance to lay, only to back. I spent a lot of time scouring everywhere for the best price on different events.
In the very early days of the exchange, people were just putting up odds, left right and centre. So people didn’t really know the true value and if they just did a little bit of work it was quite possible that you could actually back at a bookmaker price on the exchange and get your profit straight away. It was that easy. It was the proverbial printing of money back in those early days.
However, it wasn’t quite that because there was no money there, so you couldn’t do it on any particular scale. It was a quid or two here and there and a couple of quid a tenner and very small margins. But very soon quite a few people started doing that so the opportunity just to Arb immediately started to fall absolutely out of the mix.
That was the very first thing that I did on exchanges.
Low hanging fruit
As with all things, the low-hanging fruit goes very quickly. Suddenly, it was getting quite competitive, so I just advanced my strategy a notch up. I would go and get the decent odds from a bookmaker and then I would just offer the position on the exchange. This was the very start of trading, though I didn’t realise it at the time. It was just trying to be more efficient and grab a few extra pennies.
I’d back something at 15.0 and lay something lower, including the commission on winnings, on the exchange. In order to make a bit of money, I would just go into the exchange and put the position on the exchange at the price at which I wanted. That’s one of the beautiful benefits of the exchanges is if the price doesn’t exist you ask for it. That could be just one tick or it could be a few away and as the market wobbles your order gets filled. So that’s what I started doing.
So I had moved away from standard arbing (or matched betting as people would recognise it nowadays) to offering a price on the exchange in a profitable position. But I was still going around high street bookmakers searching for little opportunities wherever I could find them to put onto the exchange. I was effectively a liquidity provider to the exchange.
The interesting thing about doing this is that you have to ‘dig out’ prices to make it work for you and this was a great way to learn about Betfair trading. If you start matched betting now there are tons of sports betting sites all encouraging you to open an account, a least put in a min deposit and be enticement with a bonus amount. You can then offset on the exchange as long as you take into account the commission on winning bets. So it looks similar, but matched betting is often about offers. Whereas I was looking at pure arbitrage and trying to squeeze as much profit out of the mix.
The problems with matched betting and Arbitrage
Matched betting requires betting companies to have offers to exploit, but the problem with bonus offers is they are seen as an expense to bookmakers. They want to recruit new customers with offers, but they can’t offer them to existing customers as they have already incurred expenses. In marketing terms, you end up in the CPA column. They can litter the terms with qualifying bets and so on, but ultimately it costs them a fair amount of money. If you just turn up and exploit that and never bet again, a cheap way to lure customers into the mix because quite expensive. That’s one of the problems with the longevity of matched betting, it isn’t encouraging much core betting.
More recently free bet offers and the general kind of offers that the matched betting community exploits have come under the scrutiny of the government who are keen to stop people ending up with a gambling problem or worse, a gambling addiction. The lure of tax-free cash is obviously quite a pull.
My line of work wasn’t immune either. In my desire to get better odds and a wider margin, I discovered the palpable error rule. On one occasion I backed a correct score at 125/1. Elsewhere it was widely available at 120/1 but that extra bit of money would be helpful.
How I ended up at the gaming and vice squad
Not for the first time ever, the outsider won and I bagged a huge profit on my bet, or so I thought. When it came to withdrawing the winnings, the bookmakers simply refused. They then ‘reviewed’ my account and said it was an ‘error’.
It clearly wasn’t an error and I was entitled to my money. Especially as I had a, slightly smaller, loss on the betting exchange to pay off. It was a bum squeaking moment, this lay liability on the exchange was a huge amount of the money that I had earned so far.
The bookie continued to refuse to pay, using a variety of excuses, despite me bombarding them with calls and messages. So I set up an internet page and got some publicity to see if anybody else was affected. It turned out a lot of people were and it looked more like a fraudulent operation more than a palpable error. So I ended up at the Vice and Gaming squad at the Metropolitan police and they invited in the serious fraud office.
In an odd twist, while it turned out legislation wasn’t exactly helping us in this particular case, I got quite friendly with the Met Police and this led to quite wide-ranging discussions on the betting industry and me giving them the low down on betting exchanges and how they could reshape their knowledge.
An unusual resolution
Given the lack of progress through conventional means I decided to ‘go large’ to get a resolution. So early one morning I went to the head office of this bookmaker. Waiting carefully for the first employees to arrive for the day, I slipped through the entry door, past reception and made my way to the office of the managing director. He wasn’t there, so I decided to make myself comfortable in his seat until he arrived.
When he arrived he got the shock of his life. He realised the person sat in his chair wasn’t an ordinary punter and after a nice chat, my cheque arrived a few days later.
Why I switched to trading on Betfair
My relationship with arbing was souring, there was no way this was going to work long term or scale to the level where I could make money from it. How was I going to be able to achieve that given all the problems I was having?
Then one morning I just woke up and thought why don’t I put both bets on the exchange?
Then I thought “Wow this is ridiculous, that could never work, it could never be that simple, there’s no way I can see that working. Why would somebody back at a worse price than they could lay at and why would somebody later worst price they could back? Why would that happen?
But the simple fact is, that day I went on to the exchange and I put one order at higher odds than the lay order and then just sat and waited. Magically both of those positions got matched. It was that point at which the penny dropped and I suddenly realised what I really should be doing.
Things accelerated from there. That was the moment, that was the pivot point at which I went from just messing around, hobby type style, to suddenly realising the thing that I could do something a lot bigger and start pushing those boundaries and trying to figure out where can I go with this? That is how trading was born, for me it was a subset of arbing. I figured out that if I just put two positions on the exchange and waited for them to get matched it generally worked, then I evolved the strategy from there.
Betfair trading and match betting – Key differences
When I first started it was “let’s just put two positions into the market“, now it’s a lot more complicated than that!
There’s a lot more thought and depth that goes into each trade. It’s a lot more detailed and complex than it ever was, but that’s a function of scale because for it to go to much larger numbers you have to start thinking outside the box. You have to start thinking about clever ways of doing things and how can you put more money through a sports trading market. There is more than one way in which you can do things.
I got a message this week from somebody saying ‘I’m really interested in trading, I’ve been matched betting for a while. I have built up a bit of a bank but my concern with Betfair trading is that it seems to involve risk’.
That is the big difference between matched betting (which is pretty much risk-free) and Betfair trading. When you’re actively trading you’re putting yourself in a position that could potentially profit but you could also potentially lose money. It’s the balance between those profits and losses that really matter. In the very early days of my Betfair career I was effectively doing matched betting, but in order to be able to grow and put through larger amounts of money then you start taking positions in advance of them getting matched, essentially that’s what trading is.
You’re putting one position in the market you’re taking a view on what’s going to happen to the odds and then you’re putting your closing position in at a point a little bit further up or somewhere else within the market. By doing that, that’s how you effectively trade but you also have to accept that there is an element of risk within that.
One of the things that stop people from being effective traders is the inability to take a risk or taking too much risk. So you have to get that balance right. Betfair Trading is effectively a balance of all of your profits, all of your losses and just making sure that your profits are slightly bigger than your losses. To do that you need to fit a strategy to a market and anticipate price action.
Just doing a generic strategy generically across generic markets in a generic way, will produce generic results; which results in break-even less any commission you pay. Part of the trading process, which is very different from match betting, is anticipating roughly where the odds are going to go or putting yourself in the potential to profit without too much downside.
Effectively, Betfair trading and matched betting are sort of joined at the hip in terms of what they’re trying to achieve. They achieve the same thing in terms of the result that you get at the end but they’re just achieved in slightly different ways.
It’s all a question of scale
I can’t return to arbing, or even matched betting in the modern sense, as my bridges have long since been burnt with every bookmaker. I used up all my goodwill nearly two decades ago. Besides things obviously changed for me.
The thing that drew me to trading was the sheer scale of it. Doing anything with a bookmaker was tricky to do only any scale, but there are billions matched the Betfair betting exchange each year. When I saw that horse racing markets on Betfair turning over about ten billion a year, or so. I immediately decided to learn how to trade horse racing markets. Each market trades slightly different from the prior one and each has its own challenges and opportunities. But there are lots of them!
Anyhow, I hope that that’s giving you a bit of insight into where I started and you know my path was going from match betting or arbitrage and towards Betfair trading. I imagine a lot of people are also along with that path. They are very distinct in terms of the way they achieve profit and with Betfair trading, you’re going to have to take some risk. You are going to have to take some losses as well in order to be able to trade profitably. That’s usually a shocker the first time you realise that.
But hopefully that’s given you an oversight of that path that process and where the differences are between match betting and Betfair trading.