October 11, 2020

Sports Betting As An Investment

SPORTS TRADING – Essentials

 

In this article, we discuss what is essential to have when sports trading.

It is assumed you have a good internet connection and a PC (yes – you can trade on a smartphone, but it’s really not recommended if you are serious about this), so we won’t discuss that here.

 

BETTING EXCHANGES

 

First of all, in order to trade rather than just bet on horse racing, football or any other sport for that matter, you need to set up an account on a betting exchange.

There are currently 4 main exchanges that are licensed in several countries.

The biggest and arguably most important one to have an account at is the Betfair Exchange.

  • Betfair is the clear # 1 within the betting exchanges as it has the most widely licensed distribution and it has by far the best liquidity on the markets that can be traded. Liquidity is key as with a lack of it, your back or lay bets may not be matched (taken) – and that’s not a risk you want if you’re trading.

The other exchanges worth mentioning, and definitely worth considering if they are licensed in your country, are Betdaq, Smarkets, and Matchbook.

You may want to question why a trader would want several accounts – if Betfair has more liquidity, what is the need for setting up accounts at other exchanges?

There are a few reasons for this. Firstly, Betfair’s commission is at the top end of the scale, albeit they have recently offered the opportunity to pay a lower commission if you dismiss the option to receive special offers, etc (not applicable for all countries). Actually, maybe we should briefly discuss what a commission is before moving on…

A commission is basically the way the exchanges make their money. Since they are not bookmakers in the standard way, i.e. they don’t make their money when you lose a bet, instead, they charge a fee on your winnings (Matchbook being the exception). This fee, aka “commission”, differs between countries and exchanges but are typically between 1.5% – 6.5%.

Betfair’s commission is between 5% – 6.5%, depending on the country you’re living in – but recently they lowered the commission in the UK to 2%, provided the bettor/trader accept that he/she can no longer receive special offers like a free bet, etc. from them. The reason for this lower commission is undoubted that their main competitors Betdaq and Smarkets both use 2% as their standard commission. All 3 exchanges mentioned here, charge the commission on your net winning.

As an example, let’s look at a pure bet rather than a trade (as it’s simpler to explain). Let’s say you backed a horse to win at odds 4.0 for a stake of £10. It then goes on to win and so you will have won £10 x (4-1) = £30. As this is an exchange, you will now pay commission on your net profit, i.e. you will pay commission on the £30. Let’s say the commission rate is 5%, in which case you will be paying 0.05 x £30 = £1.50 in commission, so after commission, your actual profit is £28.50. You may then wonder why on earth you would use an exchange since the ordinary bookmakers don’t charge the 5%? Primarily because the odds offered on the exchanges are typically higher than what you can get from the bookmaker. Had you backed the same horse at a bookmaker, the odds may only have been 3.70, giving you a net profit of £27 if it won, i.e. lower than your net profits at the exchange after commission.

Now, returning to the question of why you’d want accounts at other exchanges than Betfair, especially if you can get the same commission as on Betdaq and Smarkets. There are a couple of reasons.

In general, it’s always good to spread the risk. Betfair has been known to sometimes suspend the markets for no apparent reason and if this happens and you only have got the first part of the trade accepted (say, the Back bet or the lay bet), then you definitely want the possibility to place the other part of the trade on one of the other exchanges, provided they have the liquidity for the market in question. Otherwise, it’s basically just a bet, in which case you’re a gambler and as a trader, you don’t want that!

Another reason to have access to other exchanges is the infamous Premium Charge which Betfair can impose on you if you are particularly good at making money on their exchange. The Premium Charge is not relevant when you start and it may never be an issue for you, as there are certain conditions needed for it to be imposed on you, however for those who “receive” it, it’s a very serious matter, as Betfair charges between 20-60% of their net profits. The specific details on how this is executed are something we may want to discuss more in-depth in a different article.

 

SOFTWARE

 

When you have set up your accounts on Betfair and perhaps one or more other, then you need to consider using software. It is not a requirement as such and it certainly depends on which markets you trade.

If you trade on a football match, it may not be 100% necessary (but is still recommended) as typically the odds movements are relatively slow. If, on the other hand, you trade on horse racing or on tennis, you definitely want software, as these markets can move very rapidly and you need to make sure your trade positions are taken when you want them to.

The trading software generally works faster than just using the exchanges directly. The exchanges impose a delay on bets when an event Is “in play”, i.e. when it has started. You will not get away from this delay even if you use the software but the response times are faster and split seconds can make a world of difference when trading.

Software can also be used for automated betting or trading – i.e., you can use it to set up certain conditions whereby it will execute the planned actions when or if the conditions apply. This means that you can trade even if you’re not in front of your PC. And there are a number of other benefits as well such as an easy overview of the weight of money, stakes waiting to be matched, odds development graphs, etc. All in all – if you want to trade, you need software!

There are a lot of software providers on the market and we will not mention them all here (new ones arrive constantly so we’d have to update this very frequently if this was supposed to be showing all), however, the major “players” in the market are:

  • Bet Angel
  • Fairbot
  • Geeks Toy
  • Gruss

Bet Angel was the first on the market and probably still is the leading software. It definitely has the widest range of “bells and whistles” on the market if you choose the Pro version. That version of Bet Angel is also by far the most expensive software on the market.

To decide which one of the software is the best is very much based on your personal needs and preferences. All of them can do the job but have different designs and different approaches on certain parameters.

When it comes to Windows or Mac or specific exchanges, the software programs are pretty much at the same level.

None of them are programmed to work on a Mac as a downloaded piece of software, but most of them mention that it is possible to make it work with compatibility programs or via VPS, etc.

They are all mainly designed for Betfair, which is essentially what you pay for. For now, Betdaq is available for free on all of them (or rather, for no additional costs) but there may be some functionalities that aren’t available on Betdaq. If you use Fairbot and want to use it for Betdaq as well, you need to download another program called Daqbot, which is, in reality, the same program, only based on the Betdaq exchange. It comes as a free trial for now, but they do state that there may be a cost for it eventually.

Only Geeks Toy offers the option to use it on Matchbook currently so if you use, or want to use, that particular exchange, Geeks Toy is your software to choose. None of the software providers currently offer the option to use it for Smarkets, as Smarkets don’t yet have developed an API option for that.

 

TO SUM IT UP

 

If you have set up your exchange accounts and have decided which software to use, you are pretty much ready to go as this is what you basically need, outside of a PC and a safe and stable internet connection.

It is recommended to have a back up online connection in case if for some reason your current internet connection suddenly shuts down. This back up could easily be your smartphone, just make sure you know how to use that for your PC if the problem occurs.

Now, of course, you need to know what to actually trade when you’re on the exchange and in our next article, we will discuss some of the more popular and known strategies for trading on football and horses.