In-running Hedging In The Place Markets

I got home from work in time for the evening session, but due to the delays at Folkestone and Kempton, I decided to quit for the night as the markets were pretty messed up. Also, as I have no pictures, and I don't particularly trust Betfair Radio, I didn't want to risk inadvertently going in-running. I made a small amount in the first two races which I'll add to tomorrow's total.

In the meantime, I thought I'd take the opportunity to answer a question that 'The Final Furlong' posted in a comment a couple of days ago.

Before I do, I think it worthwhile to provide some background information which will help to illustrate where I'm coming from.

Way back in the dim and distant past I tried trading the win market - first with using Bet Angel Basic, then a few months later, Bet Angel Pro. I understood the theory and, using minimum stakes, set about conquering the world.... I sucked. I would win consistently on minimum stakes but whenever I increased my stake, by even a small amount, it all went pear-shaped. In the end, disheartened, I gave up.

There were many reasons for this, not least of which was my lack of discipline. I'd frequently let trades go in-running; I'd lapse into gambling mode and be totally incapable of protecting my bank. In essence, my head wasn't in the right place to be able to handle the emotional pressures of trading.

I came back to trading after a very poor year gambling on soccer. Indeed, my 2007 performance made me almost give up on betting altogether, but I thought I'd give trading one last try. I put £250 in my Betfair account in February and promised myself that once it was gone, that was it. In actual fact, I took, £175 back out again after the first bet I placed using BinarySoft BDI left me with a huge liability that I wasn't expecting - but that's another story. Most of the remaining £75 was wasted as I got the gambler out of my system and the rest, as they say, is history.

I was determined to do it properly this time and chose the place markets in the, albeit somewhat simplistic belief, that if I went in-running I'd have three chances of still winning. I know, that sounds rather naive now, but that was my think at the time, based on my previous experience of trading the pre-race horse markets.

I've never been keen on 1 tick scalping. Starting off with £10, I hardly had the bank to make it worthwhile. Now that I've built my bank up, I will not use more than 10% of my bank in any one trade. I'd argue that it still isn't worth my time even though my bank is now over £1000. The reason for this is simply one of protecting the bank. In essence, the most I am prepared to lose at any one time is 10%. This allows me to carry on the fight in the event of something happening outwith my control, such as Betfair going down, connection failure and so on.

Because of my general aversion to 1 tick scalping, it was always my intention to ultimately get into trading in-running for the reasons outlined above - more ticks for less outlay. I should emphasise at this point that I treat pre-race trading and in-running trading as two completely separate disciplines and never the two shall meet.

However, there have been three things holding me back from getting into in-running trading:

1. With any in-running trading, irrespective of the sport, I think it absolutely imperative that one has some knowledge of form. Sadly, as far as the geegees are concerned, I do not know one end of a horse from the other. To be honest, I find it difficult to find the time to learn so I'd have to rely on other sources, which, by definition, would limit any edge I might have.

2. As indicated above, I have no intention of using my bank to gamble. If I wish to do any in-running trading, it will have to be done with money that I earn on that race through trading the pre-race markets. So even if there was a very strong candidate for an in-running play, if I haven't made anything pre-race, I ignore it. As you will have seen, even on a good day, my average profit per pre-race trade is barely £3. Consequently, I haven't been generating the cash needed to trade in-running anyway, particularly this month.

Having said that, I do not exclude sometime in the future, developing a strategy specifically for in-running trading. In that event, I'd have a dedicated bank assigned just for that purpose.

3. As I've discovered, there's no money available in the place markets during the race which obviously restricts trading opportunities. The money doesn't really start coming in until near the end of the race when the places are pretty much settled. In otherwords, one might as well just back the prefered runner to place and be done with it. Actually, that's not entirely true. What you must be confident of is that your chosen runner has a damn good chance of getting placed otherwise you'll never have an opportunity to trade out. What I'm trying to get at is, there's no point in trading out for a 10 tick profit. Instead, it's better to set your trade out point pretty damn low and go for a decent return. If your trade is gonna be successfully closed out at 10 ticks, in all likelihood it would be succesfully closed out at 50 or more.

Now, onto TFF's questions...

To recap, he asked the following:

Can I just ask, I presume that from you trading the pre race markets to secure profit for inrunning trading that you stake a lot heavier pre race, than you do when the race is off.
Also are you looking for a much smaller price swing when the race is being run than you do pre-race in order to maintain most of your profit from your pre race trading, as your trading on follow the band would indicate a different method?

In answer to your first question, yes. My staking pre-race currently varies from a liability of £80-120. From that, I'd be looking at getting a profit of at least £5 before I'd think about carrying that over in-running. In actual fact, I wouldn't use all of it so that I'm guaranteed at least a small profit.

Now, one might argue, what's the point in taking such a small amount in-running? Well, and this goes to answer your second question, I'd be looking to at least double that money that I take in-running so that, assuming the play is successful, my overall profit from the race is significantly increased in percentage terms. To do this, I'm looking for a much larger swing in-running than I would be doing pre-race, simply because the stake levels are so much smaller. If I can do this 4 or 5 times a day, that would make a significant difference to my daily total.

Unfortunately, I'm just not consistent enough in making pre-race profit at the moment to do any more than the occasional in-running play.

It's worth pointing out that I am not trading in-running. As I mentioned above, in-running trading is actually quite difficult in the place market due to lack of liquidity. As a result, it is virtually impossible to react to the market.

What I do is hedge - and I make the distinction from in-play trading. Having got my pre-race profit, and chosen my preferred runner, I will back that runner at the current odds before the off. I will then place a closing lay at odds that will guarantee to at least double my money from that opening bet. I configure this as a 'keep' bet that goes in play when the market re-opens after the off. To do this, I never back a horse that is trading less than 2.5 pre-race. Preferrably , it should be better than 3.00.

So, there you have it. By using a proportion of any pre-race profit, I can guarantee a small profit on the race, with the promise of increasing my pre-race trading profit by at least 50% if the in-play hedge is successful.

I hope this answers your question TFF and you didn't fall asleep reading that lot before you got to it.


The final furlong said...

Hi Alistair

Thank you very much for taking the time to post such an informative and honest post to my couple of nosey questions.
I like you have had enough of doing my cash on betfair, i am sure it is a discipline issue with myself and as such i feel that trading will be my way of actually making a decent profit over time once i have finished working on my physicological issues (emotions)that need to be spot on when trading.
I have ideas on how to trade and stake and i like the idea of using 10% liabilites, however i did have it in my head to stake to perhaps and overly cautious 5-6% certainly in the early days, it is good to know that my thoughts on your trading methods made sense so at least i have a reasonably good base to start from.
I intend to start my own blog in the next couple of weeks on sports trading with the aim to make a little secondary income, once i become more experienced i will move onto the racing and certainly take onboard your comments.

All the very best with your trading and i hope you keep going with your blog it makes very good reading.


leonthefixer said...

Not read a blog entry that long for a long time!!! Though I am about to start catching up on 'The Experiment' and there are some pretty long posts there!

Good post and interesting, has got me thinking about taking some of my plays inrunning - but as I have a list the length of my arm at the moment of things to research I think it may be a while, perhaps something for those winter evenings!

Catch you tomorrow no doubt on MSN!

Alistair said...

Thanks guys. Glad I have given you food for thought. Just remember - keep your pre-race trades separate from your in-play stuff. I wouldn't want you to do anything that you might regret.


Scott Ferguson said...

rather than withdrawing money to protect from fat finger syndrome or a mistake, did you know you can 'hide' funds on Betfair by going to another market (eg World Cup 2010) and placing a bet that will never get matched (eg ask to back Brazil at 1000)? Then you can cancel it whenever you need to pull it back..

Alistair said...

Hi Scott,

That's an interesting idea. Not one I'd use though.

The reason I would withdraw money from Betfair, is to either spend it, or stick it in a bank account so that I can earn interest from it rather than Betfair.

Thanks for the comment in any case.