Betfair Trading

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"Trading" The advent of the betting exchange has given rise to a new type of gambler - the trader or arbitrageur. Traders are generally not concerned with the final outcome, in as much as an exposure to an outcome occurring or not occurring, but instead bet

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Betfair Trading: 

Betfair Trading Andy Mir Bet Trading

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Slides being constructed Betfair Trading Trading The advent of the betting exchange has given rise to a new type of gambler - the trader or arbitrageur. Traders are generally not concerned with the final outcome, in as much as an exposure to an outcome occurring or not occurring, but instead bet on both sides of a proposition in equal amounts prior to the start of the event. If the gambler can back at longer odds than is layed they will make a positive trade or spread. A negative trade or spread can be achieved if the layed price is higher than the backed price. Profit is achieved if the bettor has a positive trade and the event occurs. The betfair trader will gain the value of the spread times the staked amount. This occurs because the amount received from the back is higher than the payout for the layed amount in the case of a positive trade. If the event does not occur the trader will not lose any money as they have no outright exposure to the event and have backed and layed in equal amounts. This as seen as "riskless" in outcome, however, there is risk inherent in making a negative trade if the layed price is higher than the back price. Furthermore with the advent of fixed price betting, there is an opportunity to make an intra-market trade as opposed to an inter-market trade where all bets are made on the same exchange. This opportunity can be achieved where the bettor lays at a low amount on a betting exchange and then backs an event with a bookie or another exchange at a higher price. This must be done simultaneously or else the opportunity could quickly cease to exist with liquid markets quickly correcting prices and bookies trying to avoid being arbitraged. Almost all betting exchanges charge commission on net winnings only, which suits the trader's high turnover, low profit strategy. The profit or loss for a trader will typically be no more than 10% of the total amount of his combined back and lay stakes - so to make meaningful amounts of money a trader needs to commit a relatively large amount of capital. The trader therefore runs the risk of having a large unwanted bet on an event if he is unable to close his position before the event starts (e.g. if there are technical problems with the exchange).

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