What factors change the odds on the Betting Exchanges?

In this article we look at the various factors and influences which cause the odds to move on the betting exchanges.

Exchange of opinion

What makes odds move on the Betting Exchanges?

The short answer to the question is:  optimism and pessimism.

• The optimists (backers) think the horse will win, so they bet it to win.
• The pessimists (layers) think the horse will lose, so they bet it to lose.

Naturally backing and laying money pours into the betting exchange. This steady stream is referred to as the Weight of Money (WOM)

And the WOM trends are powered by a volatile, combustible mixture of emotion and logic.

• If there is more money in the blue, backing column, the win price lengthens – the price rises.
• If there is more money in the pink, laying column, the losing price shortens – the price falls.

In some of the very volatile UK horse racing markets the stream is a veritable torrent, especially in the last few minutes as punters’ desperation to bet kicks in.

And it’s this volatile WOM that creates repeated trading opportunities both before and after the race begins. (In-play betting refers to the latter instance.)

Hidden Influences on Odds/Prices

If punters’ optimism or pessimism makes the prices move on the horses in a race then what makes a punter an optimist or a pessimist in the first place, regarding a particular horse?

Several factors come in to play:

• The horse’s form (sex, age, fitness and weight-over-distance ability compared with other runners)
• Jockey’s form (skill and ability reflected in winning strike rates)
• Trainer’s form (skill and ability reflected in winning strike rates)
• Racing media commentators (their comments help shape some punters’ opinions)
• Tipsters’ opinions (a strong influence on casual, recreational punters)
• Track conditions (the going suits some horses but disadvantages others)
• Bookmakers’ opening odds

Odds are also affected by:

• Late non-runner s being declared (odds are subsequently recalculated up or down)
• The type of race (statistical analyses point the way for many punters)
• The amount of prize money on offer (won’t the jockeys try even harder to win if there’s a big purse?)
• A horse’s equipment changes (blinkers on/off, for example, can make a difference)
• The horse’s appearance and ‘feel’ in the parade ring (its gait, sweating, restiveness and so on)

Again, punters form opinions based on these factors. And those optimistic or pessimistic opinions help determine a horse’s odds and market movements.

And let’s not overlook the influence on some of:

• Superstition
• Random choice
• A horse’s name
• The colour of a jockey’s silks

Consulting oracles (The Romans used to ‘read’ chicken’s entrails as an oracle to guide their future. And look where that got them…! Where’s the Roman Empire now?)

All these push-pull, WOM factors help move the prices up and down.

Herd mentality

Baaaa….Baaaaa….

The herd mentality, the sheep factor in some punters, leads them to ‘follow the money’.

In so doing, they add to the WOM on one side or the other. More volatility and movement.

There are two schools of thought about following the money:

1  The denigrators baldly classify it as MUG money, a sort of off-with-his-head-and-on-with-a-pumpkin scenario.

2  Those of a somewhat kinder, more tolerant disposition, ask what’s wrong with regarding the prices as the collective verdict of all the influential factors combined? Surely following them saves re-inventing the wheel? Isn’t there room for the notion of following the smart money? You just little things can just one

The truth, as is so often the case in diametrically opposed views, probably lies somewhere between the extremes!

Betting exchange traders

Betting exchanges such as Betfair encourage traders because of the liquidity they generate within each market. Because traders use much larger stakes than traditional punters they are responsible for pumping hundreds of thousands of pounds into each betting market, ultimately this makes those markets much more competitive.

The influence full-time traders have on market prices just before the start of a horse race cannot be understated. These pro investor’s use betting software to create multiple back and lay trades using large stakes of up to £1000 or more per trade.

Believe it or not this trading money also includes bookie money. Although traditional bookies are unlikely to admit that they use Betfair to hedge their on course bets, they do.

If you look at the price ladder on any race mid-morning; pretty much every day you’ll see the similar amounts being offered at 1.01 on every single race. These amounts are usually thousands. As the odds increase in the graph ladder there are similar amounts being offered.

This is bookmaker or organised betting syndicate money. It’s very unlikely that a single trader would place bets of this size hours in advance of an event taking place. (See example below)

This collective (W.O.M) weight of money activity just before the start of a race has a massive influence on price fluctuations at the top end of the betting markets (1^st and 2^nd favourites)

For example, if more money comes in for another horse other than the favourite, the favourite odds will drift out, whilst the other horses will shorten. This usually happens in very competitive races, it’s a  seesaw effect that the inexperienced betting exchange traders gets caught out by time and time again.

Final Betting Decision

The final decision is whether or not a punter chooses to get involved in a particular race and enter the market.

There are several options available to him or her:

• Manually or using software: Back to win
• Manually or using software: Lay to lose
• Play the exotics (forecasts/exactas, reverse forecasts/quinellas, tricasts/trifectas and so on)
• Manually or using software for trading: Back and lay for a guaranteed profit
• Manually or using software for trading: Back and lay for a free bet

Further reading & Betting exchange tutorials

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