I wanted to go over what it is I am actually doing with regards to trading. I am getting quite a few emails and comments requesting a bit more about why this is any different from putting a bet on and what I actually do! I will also cover the concept of greening up towards the end of the post.
To put this into some kind of context, you have to first think of a sports market - I am learning on horse racing due to the frequency of each race and the amount of volume that goes through these markets they make very good markets to trade. The objective of trading is to get into a position (preferably pre-race) where no matter which selection or runner wins you always make money. This can be achieved a number of ways but the most common is to make sure that before the off every runner has a positive amount against them. The slightly unusual thing about traders is that we back and lay the same selection in a market.
The price or the current odds available for these selections are all represented in decimal odds. 2 is evens or an implied probability of 50%. In this first picture we can see that I have placed a lay bet into the market on the favourite Galoshes at odds of 3.9 for a stake of £2. When you lay a price on an exchange you are offering up risk to the market. By laying £2 at odds of 3.9, I am saying that I will pay 2.9 times my stake of £2 or £5.80 if this selection does actually go on to win but if it loses I will gain £2.
So far, a conventional lay bet has been placed - the slight difference here is that I have offered risk up to the market add have stated that I believe the favourite will lose rather than win. This is the difference between a back bet and a lay bet. To complete the trade however, I could tell that the price on the favourite was drifting (going out, getting larger) and now I place a back bet of £2 at the new price (odds) of 3.95. So my bet in full is as follows:
Lay @ 3.9 = £5.80 liability or £2 gain
Back @ 3.95 = £2 liability or £5.90 gain
If we study these figures we can see what we have managed to achieve here. If the back loses we win £2 on the lay but lose £2 on the back so we end up with no gain or loss overall. If we look at the other outcome though we can see that if the back wins then we gain £5.90 and lose £5.80 on the lay so are up a marvellous 10 pence. In other words, if the favourite goes on to win then we make a small amount of money but if another selection were to win then we would be quits.
The final step in trading which again makes it different to placing a bet down the bookmakers is the ability to "green up", "greening" or "greening up". This phrase comes from the software I use called Bet Angel, and was first coined by the designer of the software for making the whole event green. The concept behind this is that after you have made money on the one selection as we have above, we then want to make it so that every selection in the market is green. This in turn would mean that whoever wins the race would essentially add to my profit for the day and I am not reliant on just the favourite winning. The process of "greening up" is essentially hedging any profit (or loss) at the current price to spread it over all the selections in the market. This does mean that the amount you make will be a fraction of what was made on the one selection but means that from a profit perspective it doesn't matter who winds from this point onwards. This ability to win money on an event regardless of who wins is obviously somewhat of a plus point - especially with the little downside risk that this presents. You can see in the image above I have greened up my 10 pence profit to between 1 - 3 pence on all selections.
Once greening up has been performed, I can then move onto the next race on the card and do the same thing again. All of this happening pre-race when the prices are more stable than in play. The trick to trading is to be able to read how the market reacts to the current price and volume rather than necessarily who will win the race.
Today's trading was good - I will try and provide a graph of weekly profit and loss in the near future and when I have more than 2 points to plot! I made above my target of £15 and recorded a very happy £20.09. I still felt I could've been in more markets than I was and predicted a couple of swings that I stayed out of today. I am still trying to get a feel of how to get into the swing (excuse the pun) as I do often notice them before they start but getting money taken up is difficult.
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