Are traders the biggest source of value at Betfair?

Most people won't understand this, so may as well do a simulation:

We assume 1.6 was too short, so for argument's sake, let's say the true price was 1.65.

Let's say it's 99.9% likely that the price is going to move from 1.6 to 1.5.

Imagine this situation occurs every weekend till the end of time.

If a trader bets £100 that the price swing occurs every weekend, and someone else just waits to see if the swing occurs and lays 1.5 for a £53.33 liability if it does, then the person that just lays if the price swing occurs will probably make more money.

Imagine this goes on for 1000 weekends.

The trader is effectively backing the price swing to occur at 1.066, because that's what a 1.6-1.5 price swing equates to. The trader stakes £100 at 1.6 and then lays 1.5 for a £53.33 liability if 1.5 appears, to create equal green on both outcomes.

So if the price swing occurs 99.9% of the time, then

the trader will win 999*£100*0.066 =  £6593.40 through successful trades.

The one time when the price swing doesn't occur, the trader still probably wins his/her bet anyway at 1.6, so will probably win £60 on that bet.

So the trader's expected profit is £6593.40 + £60 = £6653.40

We said the true price was 1.65, which means we expect the 1.5 lay to win 39.4% of the time.

The 1.5 layer makes 999 lays because the 1 time when the price swing doesn't occur, he/she doesn't bet.

We expect the layer to win 0.394*999 = 393 (rounded down) lays and lose 999-393 = 606.

So the layer wins £53.33*2*393 = £41917.38
and loses £53.33*606 = £32317.98

The layer's profit is £41917.38 - £32317.98 = £9599.40

The reason the layer probably does better than the trader is that the layer makes all the same bets as the trader apart from the bad value 1.6 backs.

how would the layer fare out if he had backed the team at 1.6 and doubled his lay stake at 1.5?

If you are 99.9% sure the price will move down to 1.5, and you are equally confident the true price is above 1.6, why would you not do both the trade and the lay?

It does not make sense under that criteria to do one or the other surely?

The traders win, maybe or maybe not as much as the straight layers.
But the biggest source of value are the people that are willing to straight back at poor value, or lay at good value.

A lot of trading has nothing to do with value, it's understanding (or thinking you understand) how the market will move, whether that be based on WOM, previous trends, an opinion on peoples' perception of what will happen etc.

In your example the trader would actually lose when the price moves out to 1.65 because the trader would close out the position to lock in a £3.03 loss. And the example is too good to be true in that you have 99.9% chance of the price moving to 1.5, and the upside is twice the potential downside.

However, the important difference between the trader and the layer is that the trader has closed out the position in a short period of time so can go and make the same trade in ten other markets while the layer's capital is tied up until the end of the race. If you look at the daily profit and loss of the trader it will probably be consistently small but positive whereas the layer will have to ride out the variance and could be sitting on a long losing streak.

Whether it is more difficult to assess the probability of the horse winning the race (i.e. find value) or predict the movement of the market in the short term is the real question.

Rowan86 quick question for you.
Take the Liverpool game you mentioned. Say you had a bank of £1000. How much would you risk on it if a.) you were having a bet, b.) you were trading it?

I'll give you a clue, the answer is not the same and therein lies the problem with your example.

"The one time when the price swing doesn't occur, the trader still probably wins his/her bet anyway at 1.6, so will probably win £60 on that bet."

Don't understand.  Is he/she punting or trading?

I actually agree with the title of this post, traders do create value in some markets with moving prices to a greater or lesser value than the true chance, an I know it's a hypothetical example but it has within it many assumptions that just dont reflect the volatile nature of sports betting markets and ultimately the many random factors that effect the outcomes of the events

Most traders don't understand the importance of value. They think because they're trading that the two bets that will constitute their trade if they successfully complete it, don't need to be good value because they're trading rather than betting.

rowan 86-I remember one guy saying Liverpool were too short at 1.6 at home to Newcastle, but backed them at 1.6 anyway, hoping the price would go shorter so he could green out.

A logical person realises that if 1.6 was poor value for Liverpool, a better approach would be to wait to see if the price goes shorter and then lay Liverpool if it does because obviously it's mathematically impossible for there to be more value in the attempted trade than you would get from simply laying Liverpool at the price that the trader would green up at.

Bad value bets aren't any better if they're part of a trade. It's amazing how few people get that.




i may be completly wrong here but i think it could be me your talking about. i backed liverpool for a pre off trade that day even though i thought they were poor value. got caught out to.

Soccer / Liverpool v Newcastle : Match Odds 04-Nov-12 16:00  04-Nov-12 17:54  -8.58

The majority of traders just place bets based on their assumption of where the markets will move and have no need to assess any possible value within them.  It's amazing how few people get that.

Then it's still value, just in a trading sense.

traders are so smart making money with no risk, we can't
all do that, they find value so easy. its not for everyone,
some pro's like gambling the old school way ;)

traders don't make money without risk, that is totally inaccurate

thought they liked to eat the first slice of the cake, always first in the que.

Thanks for the posts. I'll answer them properly when I'm less busy.

A quick answer to all posts is:

The example proves that you're more likely to make a profit without the 1.6 backs that the trader makes.

The layer can control liability by staking less. The layer is more likely to be a long term winner than the trader because there's more value in the 1.5 lay than the attempted trade.

And that's true even if we assume there's a 99.9% chance of the market swing occuring and that 1.6 is only slightly poor value. I was giving the trader a good chance, but they still lost.

Nov 20, 2012 -- 2:29PM, Baby Jesus wrote:

The majority of traders just place bets based on their assumption of where the markets will move and have no need to assess any possible value within them.

Ah. Didn't work as per usual.

I don't (always) agree that traders just place bets on the assumption of where the markets will move. I'll do quite a bit of trading but do so trying to use value to my benefit. Even if I think a market will move in a certain direction but I don't think the initial position represents value, I won't touch it.

Yes. Trading makes sense when you're not sure if the two bets that constitute the trade are good value, but you think the market will move disproportionately to the significance of whatever causes the market swing from the price at which you make the first bet to the price at which you make the second.

DivideByZeroError Date Joined: 18 Jul 07
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In your example the trader would actually lose when the price moves out to 1.65 because the trader would close out the position to lock in a £3.03 loss.

If you look at the daily profit and loss of the trader it will probably be consistently small but positive whereas the layer will have to ride out the variance and could be sitting on a long losing streak.

U.A. Date Joined: 21 Dec 10
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Rowan86 quick question for you.
Take the Liverpool game you mentioned. Say you had a bank of £1000. How much would you risk on it if a.) you were having a bet, b.) you were trading it?

I'll give you a clue, the answer is not the same and therein lies the problem with your example.

Okay, I was assuming the trader just lets the 1.6 back ride if 1.5 doesn't appear. Lets say the trader always locks out a profit at 1.65, so loses £3.03 on unsuccessful trades, so makes a £6590.37 profit.


The purpose of this example wasn't to show how much the layer should stake relative to a trader, it was to demonstrate how the trader blows 31% of his/her profit backing Liverpool at 1.6. This shows there's more value in the 1.5 lay than the trade.

If we make the layer's liability the same as the trader's on each bet,

the layer wins £3.03*2*393 = £2381.58
and loses £3.03*606 = £1836.18,

and makes a £2381.58 - £1836.18 = £545.40 profit.

The trader wins 12 times as much as the layer, but the layer is more likely to be in profit over time. The trader sacrifices value in attempt to make faster money.

Wait a second. I've got this completely wrong. The trader does actually get better value because they get a 99.9% chance of winning at odds greater than 2/1. Wow! Trading does work if you red up when price swings against you.

Better apologise to CJ!

Was this thread an elaborate troll?!

But we haven't really answered the question of whether or not traders create opportunities for value trades.

I hear a lot of talk of mug punters but perhaps there are just as many mug traders who can't predict price movements any better than the mug punters can spot a value bet. Both types of mugs are creating value for others to take.

I don't think many traders understand the value of what they're doing on a fundamental level. Most greening-up is done compulsively I would say.

You could see the compulsive greening up in the Sevilla match at the weekend in my opinion. After Sevilla scored a first minute goal, and the market reopened, the odds moved at six levels up from its new level and perhaps as many as 10. I'd guess a lot of the reason was because of pre-match Sevilla backers seeing a very quick greening up opportunity.

There are very few actual traders compared to those who green-out at poor value and call themselves traders.

Nov 20, 2012 -- 9:55AM, smithy91 wrote:

Most traders don't understand the importance of value. They think because they're trading that the two bets that will constitute their trade if they successfully complete it, don't need to be good value because they're trading rather than betting.rowan 86-I remember one guy saying Liverpool were too short at 1.6 at home to Newcastle, but backed them at 1.6 anyway, hoping the price would go shorter so he could green out.A logical person realises that if 1.6 was poor value for Liverpool, a better approach would be to wait to see if the price goes shorter and then lay Liverpool if it does because obviously it's mathematically impossible for there to be more value in the attempted trade than you would get from simply laying Liverpool at the price that the trader would green up at.Bad value bets aren't any better if they're part of a trade. It's amazing how few people get that. i may be completly wrong here but i think it could be me your talking about. i backed liverpool for a pre off trade that day even though i thought they were poor value. got caught out to.Soccer / Liverpool v Newcastle : Match Odds 04-Nov-12 16:00  04-Nov-12 17:54  -8.58

No, he's talking about me. I backed Liverpool at 1.6 waiting for the Liverpool money to come in expecting the pre-KO price to reach low 1.50's. Liverpool unexpectedly drifted and I took a red at 1.64.

In fact this whole thread looks to be trying to continue an argument that has spanned the last few weeks. He's even posted me a PM so I can come over and have a look. In essence I got tired of all the made up quotes and unpleasant comments so he's moved over here to try and get support instead of learning how to use the exchange.

It's all very tiresome.

My guess is that 95% of people who see themselves as a trader ,actually show a loss on BF.
Betting on an outcome of an event is all about getting value ,trading is all about predicting market movement.  A trader could back a horse that isn't value but lay it back at an even shorter price that is worse value and
make a profit by just predicting price movement. It's similar to stock's and shares ,traders are betting on movement investers are
betting on what they believe the value of the company is.

I'm not normally a trader but I've dabbled occasionally.

If I'm trading I always like to make sure the first half of my trade is value according to my assessment of the race. That way if I'm not able to green up I have the option of riding out my bet, knowing that it's a value bet (in my opinion)

I agree that traders are a source of value for other punters. Let's say I've done the form and priced a horse at $2.5 ... Let's say that horse is available to back at $4 ... I back the horse. That's a value bet. Let's say the price shortens to the point where it's available to lay at $3 ... I lay the horse ... I've greened up. Successful trade. But in doing so I've let the backer have $3 for a horse that should (in my opinion) be $2.5 ...

So I've taken poor value about the second half of my trade ... but I don't care because I've greened up. And the punter who backed the horse at $3 is happy because (if their opinion is the same as mine) they've got a value bet. A win-win situation.

sort of get your point..if im laying a horse its not a random lay, im laying a horse i truly believe has little chance of winning, however my primary aim is to green up pre race, but if im not able to then i have no qualms about letting the lay go in play as im convinced it wont win anyway

I think that's where most traders probably fail. They get drawn in by the "it doesn't matter who wins angle" and therefore are trading the market rather than have any idea whether their back/lay was good or bad value.

Maybe it's just one of those few and far between scenarios where two wrongs make a right ?
Seriously though I think the key point someone made earlier is that if you open your trading position with a perceived value wager then, if you can't trade out for whatever reason, you still have a good wager to ride out to the bitter end.
That can't be bad in itself.

very good WOM trade entry points generally are value positions even if you let them ride and don't trade out.  But these are not that frequest and in many markets the good entry points are mixed up with many faked moves to tempt the traders.  So it takes many hours staring at the numbers jumping about and a lot of sound judgment to pick up some good value positions that are worth letting ride.  The stock market tricks of pump and dump, take out the stops, short squeeze etc. are well and truly part of BF these days. I'd be a lot less confident on spotting value from WOM today than some years ago.

very good WOM trade entry points generally are value positions even if you let them ride and don't trade out.  But these are not that frequest and in many markets the good entry points are mixed up with many faked moves to tempt the traders.  So it takes many hours staring at the numbers jumping about and a lot of sound judgment to pick up some good value positions that are worth letting ride.  The stock market tricks of pump and dump, take out the stops, short squeeze etc. are well and truly part of BF these days. I'd be a lot less confident on spotting value from WOM today than some years ago.

Traders exaggerate some moves when they jump on board and stifle others when they green up too soon.  Sometimes they stop position takers getting the value they would otherwise have from extreme moves or mistakes by being in front. Other times they are all that is really in some markets and give value to others with an opinion.  Some traders are clever bots, others someone clicking away late at night watching for any little hint of a move trying to make a few pounds.  Hard to generalise as the ecosystem is so complex and fluid.

Traders exaggerate some moves when they jump on board and stifle others when they green up too soon.  Sometimes they stop position takers getting the value they would otherwise have from extreme moves or mistakes by being in front. Other times they are all that is really in some markets and give value to others with an opinion.  Some traders are clever bots, others someone clicking away late at night watching for any little hint of a move trying to make a few pounds.  Hard to generalise as the ecosystem is so complex and fluid.

Traders exaggerate some moves when they jump on board and stifle others when they green up too soon.  Sometimes they stop position takers getting the value they would otherwise have from extreme moves or mistakes by being in front. Other times they are all that is really in some markets and give value to others with an opinion.  Some traders are clever bots, others someone clicking away late at night watching for any little hint of a move trying to make a few pounds.  Hard to generalise as the ecosystem is so complex and fluid.

sorry - slow response on the mouse click