Big Betting Online's Guide to Trading

That's right we said trade. Most professional gamblers have moved away form betting in the traditional sense. The creation of Betting exchanges has lead to most professionals acting much more like stock brokers than gamblers. However, they are not buying and selling shares; they are backing and laying bets.

Trading on betting exchanges like Betfair is exactly the same as trading in any other market in the World. On eBay powersellers buy cheap products at a low price and then sell them at a higher price. On the London Stock Exchange, giant corporations buy up cheap shares and hope to sell them as the price increases. It is exactly the same on Betfair, or any other betting exchange. Everyone has heard the mantra, "Buy low, sell high." Well on Betfair it is, "lay low, back high."

So, what makes trading better than betting? Well it's all about risk management. If you place a traditional bet, once you've made it that is it. Should things start to go against you there is no way out. You've lost all your money. If you were trading, however, you could have closed the trade for a minimal loss. Similarly, if it looks like you've made a good decision, you can trade out and guarantee a profit no matter what else happens. How many times have you lost a bet because of a last minute equaliser? This will never happen when you are trading.

Lets take a look at how trading on a betting exchange works. Trading is possible because of the fluctuations in price. These fluctuations occur for a variety of reasons which we will look at later. The important thing is being able to spot when a price is about to rise or fall. Then it is time to get in on the action. If the odds start to drop on a 'steamer' as it is known in horse racing, we want to back this horse as quickly as possible. We then wait for the odds to keep falling. When the odds appear to be bottoming out or have levelling off we then lay the horse for a lower price. It is this difference in price that results in a profit. Now if this horse goes on to win the race we will make that money, if it loses we lose nothing. Alternatively, it is possible to spread the money throughout the field by hedging. This will guarantee a profit no matter which horse wins.

The beauty about trading is the ability to minimise a loss. Say in the previous example we made a mistake. Instead of 'steaming' the odds began to rise or 'drift.' As a trader you will always go into a trade with a cut off point which will be your 'stop loss' price. At this point you will accept that you have made the wrong choice and take the small loss in favour of a larger loss. The great thing about this loss is that it often want materialise. Remember, this loss will only occur if the horse wins the race. Since favourites only win approximately 1 out of 3 races. You will only make a small loss a third of the time things go against you. That is one of the reasons trading on horses is so profitable.

One of the major advantages of trading on an exchange is the ability to make a profit regardless of which way the odds move. If they rise you should lay first. Then back later. If they fall, then back first and lay later. This can be quite confusing at first and it is easy to make the wrong decision. Remember if you do make a mistake a mistake you can always trade out for little or no loss.

One of the biggest challenges that face any new trader is the ability to change your state of mind. It is very important to keep any emotions or thoughts of 'what if' from your mind. You have to go in with a plan and stick to it. Before going any where near an opening bet, you have to decide two things. How much profit you want to make and how much risk you are willing to expose yourself to.

Deciding on how much profit you want to make is not as simple as it sounds. Your team might be up 3-0 at half-time. It would be very tempting to leave this trade open to make the most possible. If you do this then you are leaving yourself open to unnecessary risk. It is very possible that the game could go on to end 3-3 and you will loose all your money. However, if you closed it at half time you would not have lost any money. If you had hedged at half time you could have enjoyed the second half safe in the knowledge that you will win money no matter what the outcome. It's a very satisfying feeling watching a game knowing that you are going to win $80 no matter what happens. When you are trading it is very foolish to be greedy. Most professional traders follow the motto "little and often." That way your profits soon start to stack up and your bank can easily absorb the odd small loss.

While it can be easy to make the right decision when you are making money, it is a lot harder when you are losing money. It is extremely important to decide on a stop loss, and when you reach it -get out! As a general rule never expose more than 5% of your bank. That way your winnings will easily absorb any losses. This rule is probably one of the hardest to follow and is single biggest reason most new traders fail. Why? Because it goes against the natural perception not to accept loss if there is still a chance to break even. When you reach your stop loss your brain will be screaming, "Stop, just leave it a little bit longer, things will turn around, he can still come back." You have to be able to ignore this because the chances are things will continue the way they are going and you will lose more. It helps if you think of it as a win instead of a loss. By accepting a $5 loss rather than a $50 pound loss, you are essentially winning $45 as well as learning a valuable lesson.

After you have mastered this way of thinking, you will have to work on spotting which way the odds will move. Odds change for a variety of reason, both before the event and in-play. Many situations can cause the odds to move before an event: the weather, injury rumours, hype from pundits... I made a nice profit before Wimbledon this year. All the media speculation about whether or not Nadal would play made the odds on him winning fluctuate wildly. It does help if you follow the sport you are trading on but it is by no mean necessary. Price movements on the betting exchange usually follow the normal rules of supply and demand. For instance, a forecast of rain during a test match will increase the chance of a draw. This will trigger a flood of people on the exchange looking to back the draw. This will result in excess amounts of money waiting to be matched on the lay say. You can see this on Betfair by looking at the amount unmatched money under the lay prices. If the people looking to back the draw want their bet to be matched, they will have to lower their price. The trader can then ride this change in price for a tidy profit before the match has even begun.

Looking at the unmatched money can be a good indicator as to which way the price will go. If the sum of unmatched money on the lay side is more than the sum of the unmatched money on the back side, it is likely that the price will fall. If there is more money on the back side than on the lay side it is a good indicator that the price will rise. Although, this is a good indicator it is not a guarantee. It is a good idea to know the reasons why the weights of money may be out of balance. This will reduce the chances of a surprise movement in the other direction. Betfair also has graphs to illustrate past movements. It is well worth looking at these as they will show a general trend but it is essential to remember that there is a significant time delay when viewing them.

Probably the best opportunity for trading occurs when a key event happens during a live event. This can be a goal, points scored, red cards or injuries. The best events for bet in play are without doubt, tennis, football and cricket. I will not go into too much detail here but I will be publishing more detailed articles on this soon.

It is always a good idea to start with sports that you are familiar with. You can then add another sport to your collection one at a time. When you want to add a sport to your portfolio it is always a good idea to watch the way odds move in reaction to key events before using any real money. For instance, in tennis the odds for a player will drop significantly when he breaks his opponents serve or takes a set. After watching a few matches you will soon pick up when this is going to happen. Knowing your sport will allow you to take a proactive approach to trading. Being able to predict when a key event is likely to happen will give you an edge over everyone who is reacting to the event after it has already happened. Likewise, if you have a choice, always watch live sport on terrestrial TV, as this will give you up to a 4 second advantage over people watching on satellite or broadband.

Often the changes in odds are very quick, too quick to place the bets using the betfair website. There is software available to help with this problem. BetAngle allows you to place your bets with one click. It also allows you to spread your profit across the field with just one click. There is a free basic version available as well as a more professional version available for a small monthly fee. If you are going to bet on horses then the professional version is a must. It has many features like live graphs to show wicj way the odds are going. There is other software available but in my opinion BetAngel offers the best value for money.

Whilst making money trading is relatively risk free compared to gambling. It is important to remember that things out of your control can cause you to lose money. Website can fail. Although this is rare it can happen. You should have a number of active accounts with other bookmakers just in case your preferred one fails at the worst time. It is also a good idea to find one that offers telephone betting just in case your internet connection fails. Most importantly it is to cautious of the fact that it is possible to lose all of your stake and for that reason alone you should not risk more than you can afford.

Trading can be very profitable and many earn a full time income from it. Others just do it for fun or a little extra income. As with everything else with life, practise makes perfect. It is normal when you start out to make more losing trades than winning trades. Start out slow with small stake and you will soon pick it up.