A Concise Guide to Scalping

According to expert horse racing bettor and trader Caan Berry, a maximum of 9% of punters profit consistently on the Betfair Exchange. Trading the Betfair markets successfully doesn’t require knowledge of any sport. It is purely a numbers game, and once you know what to look for, you can (potentially that is) be added to the Hall of Fame that consists of profitable traders.

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UK horse racing is probably the best market because so much money gets wagered on every single race. Moreover, the market is extremely liquid, so it doesn’t take long for a back or lay bet to get matched.

In general, successful trading requires an inordinate amount of patience. If you are serious about it, I would recommend watching the horse racing markets for approximately 20 hours in total.

According to Berry, that’s the equivalent of a full year’s worth of trading! The best traders watch the markets like hawks. They wait patiently and swoop in to snare a profit before getting back out.

Scalping is a little different. It is the process of making slivers of profit with each trade. The goal is to make between 1 and 3 ticks of profit per trade. Once you find a scalping technique you like, you can perform dozens, if not hundreds, of trades each week. Here’s how.

What is Scalping?

As I mentioned above, the Betfair Exchange boasts high liquidity, which makes it perfect for scalping. It is a quick-fire ‘get in and get out’ trading strategy. For instance, if Lucky Lad were available to back at 3.5 on the Exchange, you would do so, and then set your ‘Lay’ bet at 3.45 or 3.40.

You should NEVER scalp on a race in-play because things change so quickly that your horse could be out of contention, costing you everything. When you scalp pre-race, you should only lose a small percentage of your stake in the worst case scenario rather than everything. For the record, the last 10 minutes before a race are the most active.

The most important thing about scalping is to do so without emotion. If the market goes against you, get out ASAP! It will often lead to lost profits as the price shortens even more than you anticipate. That’s okay! Your goal remains clear: Profit on a high percentage of your trades.

Let’s say you make trades of £100 each. You can aim to lock in £2 or £3 a time. With decent sized stakes, you would only need the market to move a tick or two. For example, a back bet of £100 at odds of 3.25 followed by a lay bet matched at 3.20 would earn a profit of £1.56 or so after the Exchange takes a cut.

This sounds terribly boring, doesn’t it? Imagine doing this 20 times a day. Suddenly, your profit is over £30 tax-free without ever having to risk a full stake. In a month, that is close to £1,000. As it is entirely possible to make 5+ trades per race, making 20 trades in a day is pessimistic since there are usually 20+ UK races every single day.

You can see how successful traders can do it full-time. These guys can make £5,000+ because they wager £200+ a time, and dedicate their lives to scalping. You don’t need to do the same: Reduce the frequency and stakes, but show the same level of skill, and you have a nice second income.

There are a few scalping strategies. Let’s take a look at three.

1: The Basic ‘In & Out’ Scalp

This technique is based solely on entering the market at the right moment.

The goal here is to look for a price where there isn’t much money in the market. Above, we see that only £3 is available to bet on Hard Nut at odds of 3.15. If you make a £100 wager at 3.15, only £3 will be matched, and £97 will be in the queue.

In this case, you want to make a wager of £100 at odds of 3.20. The moment you do that, 3.20 will appear, and £100 will appear below the price. What you want is for the odds to increase to 3.20 and if it doesn’t happen, you cancel the back bet. If the price falls to 3.10, you need to watch and see if the money available at that price is gobbled up.

Let’s say there is £2,000 at 3.10, if it quickly falls to £200 for instance, you can place a lay bet for £100 if the odds are at 3.15. Meanwhile, the moment the back odds hit 3.20, your bet will be matched quickly because your money is at the front of the queue. Now, you have guaranteed cash out profit, or you can let it ride and win slightly more if the horse wins.

It is a relatively low-risk strategy because you can cancel the initial back bet if it doesn’t get matched. If your lay bet is matched and the odds don’t climb that crucial extra tick, you can always get out for a small loss. As scalping involves consistent small profits, you can’t afford to let a bad trade ride for very long.

2: Range Trading

The odds on a horse often trade between an upper and lower level. When the odds regularly bounce off the higher end, this is known as a resistance point. When the odds regularly bounce off the lower end, this is called support. For instance, a horse could be trading between 2.60 and 2.68. 2.60 is support, and 2.68 is the resistance point.

If you notice that a horse’s odds remain in this range, you can make several quick profits. For instance, you can confidently place a back bet at 2.66 or 2.68 in the knowledge that the price is very likely to fall to 2.60. When this happens, you should be able to lay at 2.62. Conversely, when the odds are at 2.60, you can lay at 2.62 knowing that the odds are likely to hit 2.68. Then you can cash out for a profit.

3. Trend Trading

When a horse’s odds are moving either up or down, with the low reversal points decreasing and the high reversal points increasing, the odds are trending. In the world of financial trading, it is said that “the trend is your friend.”

Once you know how to identify these trends, you can get on the bandwagon and make money from the trends regardless of which way they are moving. You’ll only make consistent profits once you figure out when the direction of the trend is likely to change so you can close your trade.

Limit Your Risk

Scalping carries a lower level of risk than other forms of Betfair Exchange trading, but only when you know what you’re doing! One of the biggest mistakes is to add to a scalp trade that is already going wrong. Unmatched money can vanish at any stage!

You must gain an understanding of the weight of money. In the screenshot above, placing a ‘lay’ bet of £100 on Paddy A at 6.8 would not be a good idea for a couple of reasons. First, the price needs to rise 3 ticks for you to make a profit. Secondly, a bet of £100 is disproportionate to how the market is right now. There is only £3 available to back at 6.4, £22 at 6.2 and £10 at £6. Those are poor figures if scalping is the aim.

It is also crucial to control the size of your stakes. You definitely don’t want a situation where your bet is far bigger than market volume. It is best if you create a betting bank and stake a specific percentage. I would recommend betting no more than 10% of your full bank per scalp. As long as you know when to abandon bad trades, you should never come close to losing even one-quarter of your stake in a trade.

Knowledge is power in scalping, so it is best if you spend a few hours analyzing markets without wagering any money. To get the most out of scalping, it is also necessary to invest in software. Geek’s Toy has a lofty reputation and is used by a large number of successful traders.

If you try and scalp using only a computer and your wits, you are already at a huge disadvantage because your rivals in the market have software that can react to changes a LOT faster than you. Having said that, getting in there and watching the markets with this topic in mind is a great way to dip your toes in the water and see these concepts in action for yourself.