EXCHANGE BETTING

THE YEAR OF 2008 was for many the year when the dress rehearsal stopped. They had earned their wings. Having taken the concept of exchange betting for various test flights, during which teething difficulties were adjusted, now was the time for lift-off.

It is a fact that most people who open an account with Befair lose their initial deposit. There are good reasons for this statistic and for those not familiar with the pitfalls, allow me to elucidate.

Faced with the sight of hitherto unheard of generosity as regards prices, the newcomer to exchange betting will feel compelled to bet more often and with greater abandon. Having decided a horse priced in the paper at 9/1 has a chance, the opportunity to back it at 23/1 is too great a temptation. The same applies to the 16/1 shot with a squeak that is 45/1 on the exchange; and a horse that cannot really win but is 33/1 with the books that is available at 72/1. Surely, it is only a matter of time before one of these long shots – that is even longer with Betfair than it should be – obliges. So it is a case of a tenner here, a tenner there, a fiver on that 121/1 chance, another fiver on the silly-priced 202/1 rag and before our man knows it, he is £200 behind and on his way to tendering his card again to top up funds depleted by throwaway wagers. The lesson to learn is that you should not back a horse just because it is a big price. That may sound obvious, but some horses are very big prices indeed on Betfair.

Now, I buy clothes. Too many to tell the truth, and I am a pushover at sales. A girlfriend told me that the price of an item is irrelevant so long as you can afford it. Correctly, she stated that if you would not pay full price for something then you should not buy it at a reduced one.

Sound advice! The same principle, but in reverse, applies to betting. Do not be suckered into backing a horse just because you cannot resist its price.

To keep the clothes analogy alive: it is better to have a small but select wardrobe than to possess so many clothes you forget just what you do have.      Again, it is better to back less and for a bigger stake, than to tinker about all day frittering away small money on big-priced horses in the hope one of them will win. Unless you are lucky, losses will mount and a big-priced winner is not so big when you deduct losses. Betfair encourages constant play. It is similar to a casino where the roulette wheel is forever spinning. Once players start on the merry-go-round that is the wheel, playing sequences and certain numbers, they are frightened that once they leave the table all their numbers will start to bear fruit. Pardon the pun, but one-armed bandits have the same effect on those planted before them. They have to keep playing because the minute they leave, their bad run will turn into someone else’s good one.

A certain amount of adjustment is required with the exchanges and most people pay to find out. Forget the price temptation and pick off Betfair as you would a bookmaker. Remember, unlike a bookmaker, for every winning bet on Betfair there is a losing one. Betfair matches one player against another and unless the winning and losing sequence is maintained on roughly an equal basis, the concept (albeit a brilliant one, and one of those things someone should have thought of years ago) becomes stuck in the slot marked Zero.

When launched, Betfair appeared out of the clear blue water like the iceberg for the Titanic that represented bookmakers. It offered punters a chance – a golden opportunity – to bet on what they wished, whereas the bookmaker has no choice and is compelled to bet on everything. Now punters could shun those races they considered unfathomable, or had no interest in, and lay and bet at their own discretion. Great in theory and at first it worked wonderfully. Then some punters started to get above themselves and actually thought that, with the aid of clever computer programmes, they could make a living fixed in front of a computer just like those clever City boys who retire as millionaires aged thirty-three. Some very sharp, young whizz kids, who probably could have made more money had they applied themselves in a finance house, have made a success of trading on Betfair. Plenty have crashed and burned, sometimes in the space of a frenetic three days during which they kept punching and stabbing at computer keys, only to discover that events on the screen were happening too quickly for them, sending them hurtling from the sky in a financial fireball.

Computer programmes do help and there are commercial firms that offer software that will allow you to trade on a theoretical no-lose, no-risk basis. The idea is to tie up large sums of money with a view to making a guaranteed small profit without incurring a loss. This is known in the trade as arbing, derived from the French word arbitrage, inferring it is possible to trade without risk if one buys and sells at advantageous prices. Such a practise, which involves a different skill to winner-finding, is best handled by those with little or no knowledge of racehorses, but who understand figures. A computer is programmed to trade every horse in a race for a certain amount and will ensure that, although your outlay may in some cases run into thousands, you will make a fixed profit of, say £25. Only £25!  Does that seem ridiculously low? Not if you consider there are likely to be 40 opportunities to repeat this pattern in a day – more if you want to sit in front of your screen until the man on Racing UK says, ‘No more bets.’  £25 times forty is £1,000, which is what you can earn a day if you follow instructions. Seven days a week – that is at least £7,000 or over £350,000 per annum. That is the theory and does explain why unrealistically high prices appear against the names of certain horses. This is just a computer balancing its books so to speak. You didn’t really think someone somewhere thought he would risk losing £750 just to win £3 did you?

So two types of player have emerged as those most likely to stay the Betfair course: those that operate to a pre-scheduled programme and those who make considered opinions about which horses to lay and which to back. But, with the early euphoria of this ground-breaking concept off the ground and in full flight, its pitfalls have become apparent. Because prices on Betfair are greater than those offered by traditional layers, anyone wishing to lay a horse has to provide enhanced odds to become matched. Add the commission due and they have to be darned sure they know what they are doing. And, whilst bookmakers do not allow customers to lay horses, as time has progressed they have narrowed the gap between their odds and those on Betfair without subjecting punters to a surcharge. Bookmakers are fighting back in a big way. And another sort of phenomenon has reared its head. It is because bookmakers play on every race, and more importantly, like banks, they are playing with customer’s money that their risk is far less than ordinary Betfair punters, tying up their own capital each time they punch in a transaction. Suddenly from being impoverished business corporations fighting for survival, bookmakers have found the disposal income to match so-called ‘new customers’ on a pound-for-pound basis up to a maximum figure of a £100 bet. They will pay first past the post and on official result. They will guarantee odds, paying the biggest price ever shown. They will often refund stakes when a horse is unexpectedly taken out of an ante-post event, fails to start, or in National Hunt racing whips round as the tapes fly up. In short, you can more or less make up your own rules just so long as you continue to bet. That is how confident bookmakers are that they will win in the long run. They have become Caesar’s Palace in Vegas where the house always wins!

The big advantage Betfair has over bookmakers is that business with them is anonymous. If Aunt Dolly wants to have £2 on a 50/1 shot you can put the bet on for her without having to make up the amount to a minimum total of £10 per call. No one from Betfair can run round the betting village telling tales of who did their money on what. If the bet is on the screen, anyone can avail themselves and in confidence.

However, Betfair is a drink to be taken with tonic. Prices tend to leap about constantly. You can take what you consider to be a perfectly reasonable 5/2 one minute, for it to be 10/3 two minutes later. I know people who fall into the trap of pressing up when this happens. Don’t! Chances are the odds have only extended to afford a trader the chance to extricate himself from a situation he has misjudged and that he is paying a fine to balance his liability. The price normally levels out and even if it fails to, so long as you took a considered 5/2, your transaction is finished. If you have laid a horse at 6/4 and you can now lay it at 5/4 – don’t. Again, apply the same principle. Do not be influenced by movements on the screen. Others will play games, attempt to manipulate prices, or are just being plain silly. All you need concern yourself with is that you have acted in a calm and reasoned manner and that you know what you are doing.

There are many areas of exchange betting to be considered and doubtless we will return to the subject. One piece of advice I would pass on whether betting with bookmakers or exchanges is this: Before racing make a list – be it large or small – of the bets you intend to strike and the stakes. Do not deviate from this unless you are either winning or losing so much that either prudence or damage-limitation is required. Try to avoid making off the cuff decisions. Invariably they will prove to be poor and poor decisions in gambling cost you hard cash.

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